WASHINGTON - Senator Chuck Grassley today asked the Special Inspector General for TARP to investigate why the Treasury Department did not follow through on the mandate from Congress in last year's stimulus bill to require that all TARP recipients, including AIG, meet appropriate standards for executive compensation.

"Since the Treasury Department failed to do this, we now see the multi-million severance payments going to departing TARP executives, such as the $3.9 million paid in severance to AIG's former general counsel, who left the job voluntarily," Grassley said.

Grassley also asked the TARP watchdog to determine if Treasury Department officials with potential conflicts of interest were permitted to draft the Treasury regulations that govern executive compensation, including severance at bailed out companies such as Bank of America, AIG and others.

Grassley described his request of the Special Inspector General in a statement placed in today's Congressional Record. The floor statement text is below. Click here to read Grassley's letter of request to the Special Inspector General.

Last week, Grassley questioned the Treasury Secretary about the failure of the Department to act on the congressional mandate to impose appropriate standards on executive compensation. "It seems as if the Treasury Department unnecessarily tied the hands of the Special Master for Compensation before he even assumed his duties," Grassley said. Click here to read that news release and letter.

Floor Statement of Senator Chuck Grassley

AIG Severance Payments

March 23, 2010

Mr. President. I recently asked Secretary Geithner why the Treasury Department is allowing AIG to pay millions of dollars of severance pay to executives given the billions of dollars of taxpayer assistance AIG has received.

At one point I even said that AIG has the American taxpayer over a barrel and that AIG has outmaneuvered the Administration.

Mr. Kenneth Feinberg, the Treasury Special Master for executive compensation, insisted he was not outmaneuvered by AIG.

As it turns out, he was not outmaneuvered by AIG.

Instead, he was outmaneuvered by Secretary Geithner. Let me explain what I mean.

In February, 2009, we enacted the Recovery Act. The law required Secretary Geithner to take control of the runaway executive compensation at companies that the American taxpayer bailed-out.

Congress provided Mr. Geithner with several tools to accomplish this critical job.

By far the most important and most flexible tool Congress gave Mr. Geithner was a general mandate to require bailed-out companies like AIG to meet "appropriate standards" for executive compensation.

This rule was applicable to compensation already in place, compensation in the future, and compensation for all executives, not just a handful of the most senior executives.

What happened to this tool?

Well, even before the law was passed the bonuses, retention awards, and incentive compensation were "grandfathered."

That means that while one part of the statute banned them for a handful of senior executives, another part said they had to be paid if the payments were based on a contract that existed in February, 2009.

We all remember the outrage when people learned that this provision was quietly added by the Senate drafters on the other side of the aisle because it required AIG to pay massive bonuses in March 2009 and again earlier this year.

Secretary Geithner was quoted in the press at the time saying that "Treasury staff" worked with the Senate drafters on the grandfather carve-out.  Well, the damage was done.

The grandfather loophole was law. You might say the American taxpayer was outmaneuvered by Treasury staff too.

The President instructed Secretary Geithner to "pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

The next step required Treasury to implement the law and use the tools Congress gave Mr. Geithner to put the brakes on runaway executive compensation at firms where taxpayers are footing the bill.

What did Treasury do?

One thing Treasury apparently did was hire a Wall Street executive compensation lawyer from a firm that specializes in helping highly paid executives maximize their pay, but more about that later.

Despite the public outcry over the loophole, which permitted AIG employees and others to walk away with millions, Treasury wrote a regulation that actually expands the loophole even further.

That's right, in the face of overwhelming public outrage, Treasury quietly worked to expand the loophole. Let me explain how they did that.

The grandfather provision in the law that Congress enacted protected three things: bonuses, retention awards, and incentive compensation. It did not protect severance. Let me repeat: it did not protect severance.

But in what appears to be an effort to protect severance agreements despite the statutory language, the regulations Treasury drafted expanded the term "bonus" beyond its normal meaning.

Unlike bonuses, severance payments are intended to ease someone out the door, not reward them for doing a great job.  Severance is basically the opposite of a retention bonus.

But, after Treasury drafted the regulation, suddenly, severance payments were also protected by the grandfather loophole, just like bonuses.  Treasury must have known exactly what it was doing.

AIG had an executive severance plan that dated back to March 2008. It was just the sort of contract the grandfather provision would protect if Treasury expanded the loophole.

And what was the impact of the Treasury regulation on the bottom line? What did American taxpayers have to pay?

Because of this regulation, AIG recently paid two of its executives $1 million and $3.9 million in severance pay. We don't yet know how many others have received severance or may receive it in the future.

As the law was passed, these payments would not have been protected by the grandfather provision because they were not a bonus, retention, or incentive payment.

But Treasury officials took care of that. Rather than setting appropriate standards for executive severance payments generally, as the law passed by Congress required, the regulation leaves AIG free to pay excessive severance payments to many of its executives. Then, the American taxpayer gets the bill.

The Recovery Act told Mr. Geithner that he "shall" require each bailed-out company to meet appropriate standards for executive compensation. This command covers all types of executive compensation for all executives, not just bonuses for the most senior executives.

It is a command, not a suggestion. And the grandfather provision that protects certain bonuses does not apply to this more general provision.

But the Treasury regulation almost completely ignores this mandate. It does address one form of executive compensation. The regulation bars tax gross-up payments for senior executives.

That is the practice of allowing the company to pay the executive's income taxes for him. Now don't get me wrong -- tax gross-up payments should be banned for companies that were bailed-out, and I am glad to see that this was done.

But Congress gave Mr. Geithner a powerful tool that should have been used to curb other types of inappropriate executive compensation as well.

That includes tax gross-ups, extravagant severance payments, and other goodies Wall Street thinks it's entitled to.

Secretary Geithner should have used the tool as it was intended.  It's like using a big tractor to plow a little flower garden.

There's nothing wrong with banning tax gross-ups or planting flower gardens, but you could have done so much more with the tool you had.

If Secretary Geithner had done what he was directed to do in the law, we would not be witnessing this spectacle.

AIG is paying multimillion dollar severance payments at taxpayer expense to executives who chose to resign rather than work for the maximum salary of $500,000 per year set by the Special Master.

This is a scandal as far as I am concerned. The American taxpayer, as well as Mr. Feinberg, was outmaneuvered by Secretary Geithner and his staff. And it all happened before the Special Master's first day on the job.

There is another troubling matter that I must address. I mentioned earlier that the Treasury Department hired at least one Wall Street executive compensation lawyer from a firm that specializes in helping wealthy executives maximize their pay.

There is nothing wrong, as a general matter, with hiring talented people with expertise in technical legal subjects to draft regulations and administer the law.

But there are some red flags here that need a little sunshine.  We need to be sure that the people working on these issues at Treasury have dealt with any potential conflicts of interest carefully and openly.

Recently I learned that at least one Treasury official previously worked for Wachtell, Lipton, Rosen and Katz, a top Wall Street law firm.  Wachtell, Lipton has represented at least two former AIG executives.

The firm's job was to look-out for the interests of the executives, not the shareholders.  They were paid to make sure the compensation contracts, including severance provisions, were as generous as possible for their clients.

Wachtell, Lipton also represented Bank of America on its controversial Merrill, Lynch acquisition in 2008.  A Wachtell attorney who worked on that deal joined Treasury in the spring of 2009.

He said that he then worked on the Treasury executive compensation regulations.  These are the regulations I have been describing: the regulations that were to govern AIG, Bank of America and all of the other bailed-out companies.

This situation raises a host of questions, for example:

• How many other Treasury officials have similar potential conflict issues?

• Why wasn't the attorney recused from participating in the drafting of a regulation that was going to have a direct effect on Bank of America, his former client, and AIG executives, his firm's former clients?

• Did the attorney comply with the revolving door provision of the President's Executive Order, which prevents appointees from working on matters that relate to their former clients?

• The President has committed to publicly disclosing all the waivers issued to exempt appointees from his ethics executive order.  If this attorney recused himself, as he should have, why was that recusal not also disclosed so that the public would know about the potential conflict?

At a minimum there is the potential for an appearance of impropriety here.

What we know so far raises serious questions and red flags.  But there also are facts we do not know.

Therefore, I am asking that the Special Inspector General for TARP investigate these issues and report his findings to Congress and the public as soon as possible.

Specifically, I am asking the Inspector General to examine why Treasury did not set appropriate compensation standards pursuant to Section 111(b)(2) of the Recovery Act sufficient to prevent severance payments like those AIG recently paid to its former General Counsel and Chief Compliance Officer.

I am also asking him to determine whether Treasury officials working on executive compensation matters have fully complied with the revolving door provision of the President's Ethics Executive Order.

In the meantime, there are still numerous documents that I have requested that have not been provided to me despite assurance that I was going to get them.

There are many questions I have asked that remain unanswered, and I will continue to seek information on these issues.

I call on Secretary Geithner to stop stonewalling.  Oversight is important.  Oversight is necessary to protect the American taxpayer.  I take that duty seriously, and I am not going away.  American taxpayers deserve to know where their money is going.

OMAHA, NE–(March 22, 2010)–Elizabeth Stella has been promoted from Director- Field Operations to State Executive Director of the Heartland States for Farmers Insurance Group of Companies®, announced Deb Settle, Senior Vice President, Northern Zone.

"I am pleased to welcome Elizabeth to the Heartland States.  She brings a wealth of insurance knowledge and experience to her new position, and we all wish her the best."

Ms. Stella joined Farmers in September 1998 as a Personal Lines underwriter in the Carlsbad, Calif. Regional Office. She moved to the Marketing support department in August 2000 as an AIMS representative.  In July 2003, Ms. Stella joined the California state office operation as a Personal Lines Agency Consultant and in August 2005 she became a division Marketing manager.

"I am looking forward to meeting and working with all of the Farmers agents, district managers, employees and customers throughout the Heartland States," notes Ms. Stella.  "It is an exciting move for me, and I am looking forward to the opportunities that lie ahead."

In August 2007, Ms. Stella transferred to the Home Office Sales department in Los Angeles, Calif. as a marketing consultant and she was promoted to Director - Field Operations in December 2008.  In February 2010, she was promoted to State Executive Director of the Heartland states - Iowa, Nebraska, North Dakota, and South Dakota.

Ms. Stella earned a Bachelor of Arts degree in fine arts from the New York University, Manhattan, NY.  She will reside in Omaha, NE where the Farmers Heartland States Office is located.  She will oversee Iowa, Nebraska, North and South Dakota.

Farmers is a trade name and may refer to Farmers Group, Inc. or the Farmers Exchanges, as the case may be.  Farmers Group, Inc., a management and holding company, along with its subsidiaries, is wholly owned by the Zurich Financial Services Group.  The Farmers Exchanges are three reciprocal insurers (Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange), including their subsidiaries and affiliates, owned by their policyholders, and managed by Farmers Group, Inc. and its subsidiaries. For more information about Farmers, visit our Web site at www.farmers.com.

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from Senator Charles Grassley's office:

A new report from the Renewable Fuels Foundation says the expiration of ethanol production tax incentives would result in the loss of more than 112,000 jobs in all sectors of the economy, including those directly involved in ethanol production and all other jobs supported by the industry.  The excise tax credit (the Volumetric Ethanol Excise Tax Credit, or VEETC) and the small ethanol producer tax credit both expire on Dec. 31, 2010.  Sen. Chuck Grassley, ranking member and former chairman of the Committee on Finance, has been instrumental in ensuring the growth and success of ethanol production through tax incentives.  Grassley made the following comment on today's report.

"We hear a lot of talk from the Democratic majority in Congress and the President about green jobs, clean energy, and restoring jobs and income security for the middle-class.  But the kind of policy to support clean energy jobs for the middle-class falls by the wayside under the current leadership.  The Democratic-led Congress easily could have extended the biodiesel tax credit before it expired at the end of 2009.  But the Democratic leaders chose to tangle up the biodiesel tax credit in more controversial debates, at the expense of renewable energy development and production.  As a result, the biodiesel industry has lost 29,000 clean-energy jobs, and 23,000 more jobs will be lost if that tax credit is not extended.  So there's every reason for concern about what could happen with ethanol this year.  That industry supports 400,000 jobs, and more than 112,000 jobs depend on extending the tax incentives.  These jobs are often in rural communities where employment is hard to come by.  And ethanol builds U.S. energy independence from imported oil.  Congress needs to make sure the ethanol tax incentives are extended sooner rather than later."

Dwight, Ill. (March 18, 2010) - Beginning April 3, ALDI will close its Brady Street store location in Davenport.  The select assortment discount grocer will reopen with a replacement store in the same location this fall.  ALDI continues to offer Davenport grocery shoppers a smarter alternative at its other Davenport stores, located at 5266 Elmore Ave. and 2825 Rockingham Road.  Known for its premium ALDI select brands, ALDI is able to offer high quality grocery items at unbeatable prices.

"As many loyal Davenport shoppers know, our Brady Street location has been in operation since 1976," said Heather Moore, ALDI Dwight division vice president. "We look forward to giving our customers a new, modern shopping experience.  In the interim, we have two nearby locations that will continue to provide customers with high quality products at unbeatable prices."

Customers can expect to find more than 1,400 of the most frequently purchased items sold under its select brands for prices up to 50 percent less than traditional supermarkets.  A model of efficiency, ALDI eliminates overhead costs by offering smart and efficient practices including a cart deposit system where shoppers insert a quarter to release a cart and get the quarter back upon the cart's return.  Other cost-saving practices include a smaller store footprint, open carton displays and encouraging customers to bring their own shopping bags.

ALDI also saves consumers money by keeping stores open during prime shopping times - typically from 9 a.m. to 8 p.m. Monday through Saturday and 9 a.m. to 6 p.m. on Sunday.

A grocery retailer that has grown without merger or acquisition, ALDI opened 80 new stores across the United States in 2009 and plans to open another 80 U.S. stores in 2010, including 30 new stores in Dallas/Ft. Worth, Texas.

HIRE Act Includes Braley Tax Break to Spur Small Business Job Creation

Washington, DC - President Barack Obama signed the Hiring Incentives to Restore Employment (HIRE) Act into law today, including language from Congressman Bruce Braley's (D-Iowa) Back to Work Act, which will spur small business job creation by creating a payroll tax cut for small business owners who hire previously unemployed workers. The bill includes Braley's measure to exempt small businesses from paying the employer's share of the social security tax for the rest of 2010 if they hire workers who have been unemployed for more than 60 days prior to employment. Braley attended today's White House signing ceremony for the HIRE Act.

"I'm extremely excited that President Obama signed this important tax credit into law," Braley said. "It goes without saying that America's small businesses are the backbone of our economy. As we continue to develop policies to strengthen our economy and put America's middle class families back to work, small business development will be one of the keys to our success.  This payroll tax cut is win-win, giving small business owners the help they need to create good-paying jobs for unemployed workers."

"This tax cut says to employers: if you hire a worker who's unemployed, you won't have to pay payroll taxes on that worker for the rest of the year," Obama said. "And businesses that move quickly to hire today will get a bigger tax credit than businesses that wait until later this year. This tax cut will be particularly helpful for small business owners. Many of them are on the fence right now about whether to bring on that extra worker or two, or whether to hire anyone at all. This jobs bill should help make their decision that much easier."

Braley's language in the HIRE Act provides small business owners with greater incentives to hire workers for long-term positions, providing $1,000 in additional tax incentives for businesses that retain employees for 52 consecutive weeks. The payroll tax cut provides greater incentive for employers to move quickly to hire new workers because the credit expires at the end of the year.  The sooner employees are hired, the more time small business owners have to benefit from the credit.  

The HIRE Act also includes the following provisions:

    • Tax cuts to spur new investment by small businesses to help them expand and hire more workers
    • Extension of the Highway Trust Fund allowing for tens of billions of dollars in infrastructure investment
    • Provisions -- modeled after the Build America Bonds program - to make it easier for states to borrow for infrastructure projects, such as school construction and energy projects

 

# # #

Sen. Chuck Grassley, ranking member of the Committee on Finance, today made the following comment on the Senate's passage of a $17.6 billion bill described by Democratic sponsors as a "jobs" bill.  The Senate's passage clears the measure for the President.

"I voted against this bill because it gives a healthy share of taxpayer dollars to Wall Street bankers instead of Main Street employers.  The Build America Bonds program got richer on every pass through the House and Senate.  Wall Street loves this program, which ought to be a red flag for taxpayers.  And the Democratic majority was so eager to pass this new spending bill that it violated its own spending guidelines and voted against applying its own budget restrictions to the bill.  For billions of dollars, we should see real bang for the buck in job creation, especially among the small businesses that create 70 percent of all net new jobs.  This bill isn't targeted nearly enough for small businesses."   

Floor Speech by Senator Grassley on the Build America Bonds provision in the HIRE Act

Delivered Tuesday, March 16, 2010

One of the few provisions the Democratic leadership decided to put in the HIRE bill is an expansion of Build America Bonds.  Build America Bonds is a very rich spending program disguised as a tax cut.

One Democratic Senator was asked why the Build America Bonds program is viewed differently than appropriations, and she replied, "It has a good name."  Ironically, the Finance Committee is returning to its roots of doing appropriations bills.

When it was established in 1816, the Finance Committee handled the major appropriations bills that came before the Congress.  I ask unanimous consent that a portion of the document outlining the history of the Finance Committee be printed in the record.

Bloomberg News reported that large Wall Street investment banks were charging 37 percent higher underwriting fees on Build America Bonds deals than on tax-exempt bond deals.

Therefore, American taxpayers appear to be funding huge underwriting fees for large Wall Street investment banks as part of the Build America Bonds program.

A Wall Street Journal article dated March 10, 2010, stated that Wall Street investment banks have made over $1 billion in underwriting fees on Build America Bonds in less than one year.

And the Wall Street Journal article, based on data from Thomson Reuters, stated that the underwriting fees on Build America Bonds deals are higher than those for tax-exempt bond deals.  That sounds like a great deal for the fat cats on Wall Street, but how about the taxpayers from Main Street who have to pick up the tab?

The Democratic leadership has said the Build America Bonds program is about creating jobs, but I want to know whether it's about lining the pockets of Wall Street executives.  Recently, I asked the CEO of a large Wall Street investment bank a number of questions about these larger underwriting fees that are subsidized by American taxpayers.

He confirmed that the underwriting fees for Build America Bonds deals are larger than those for tax-exempt bond deals.  The Senate and House have recently passed different versions of the bill we're currently debating, which includes a provision that expands the Build America Bonds program, created in the stimulus bill, to four types of tax-credit bonds.

These four types of tax-credit bonds are Qualified School Construction Bonds, Qualified Zone Academy Bonds, Clean Renewable Energy Bonds, and Qualified Energy Conservation Bonds.  The Build America Bonds program contains an option for the issuer of the bonds, which is a non-taxpaying entity, to receive a check from the Treasury Department based on a percentage of the interest cost incurred by the issuer.

Some refer to this option as the direct-pay option.  The percentage of the interest cost on the four tax-credit bonds subsidized by American taxpayers under the direct-pay option in the Senate bill is 45 percent, and is increased to 65 percent for small issuers.  Small issuers are defined as those issuing less than $30 million in bonds per year.

The House version increased the direct-pay subsidy to 100 percent for Qualified School Construction Bonds and Qualified Zone Academy Bonds, and increased the subsidy to 70 percent for Clean Renewable Energy Bonds and Qualified Energy Conservation Bonds.

To put this in context, the Build America Bonds program created in the stimulus bill contains a 35 percent direct-pay subsidy.  And the President has proposed in his fiscal year 2011 budget that it be lowered to 28 percent.

It was reported in a March 11, 2010, Bond Buyer article that a senior House staffer asserted that no issuers would opt to issue direct-pay bonds under the lower Senate rates of 45 percent and 65 percent.  When I read that assertion, I asked Finance Committee Republican staff to reconcile that assertion with the scoring of the Build America Bonds proposal in the Senate-passed bill.

Finance Committee Republican staff reviewed the Joint Committee of Taxation's final estimate of the Senate-passed bill and found that the senior House staffer's assertion was directly contradicted by the estimate provided by the Joint Committee on Taxation, which is the nonpartisan official scorekeeper for Congress on tax matters.

In fact, footnote 2 of the estimate of the Senate Build America Bonds provision states that the Joint Committee's estimate of the Senate direct-pay bonds option includes an increase in outlays of $8.006 billion.  This means that the Joint Committee on Taxation's estimate assumed that a large number of issuers would elect to use the direct-pay option, contrary to the staffer's assertion.

The Bond Buyer also reported that the senior House staffer stated, "There's nobody that I know who does not view the Build America Bonds program as an enormous success with the possible exception of one person."  I assume that staffer was referring to me.  There are many federal taxpayers who do not view the Build America Bonds program as an enormous success.

To understand why, let's see which states benefit the most from Build America Bonds.  In looking at data from Thomson Reuters on the ten-largest Build America Bonds deals, California alone issued 73 percent of those bonds.

Between California and New York together, those two states alone issued 92 percent of the bonds from the ten-largest Build America Bonds deals.

So California and New York are the biggest winners under Build America Bonds, while American taxpayers from the remaining 48 states subsidize these states.

As Senator Kyl pointed out in his Dear Colleague letter on Build America Bonds circulated on March 15, the Build America Bonds program actually rewards states for having a riskier credit rating by giving them more money.

Build America Bonds create a perverse incentive that causes state and local governments to borrow more than they otherwise would.  This is especially true regarding the school tax-credit bonds.  This bill creates incentives where states and local governments should not care what the interest rate is.  The American taxpayers are picking up 100 percent of the interest costs.

And actually, the cost borne by American taxpayers is more than 100 percent.  At least with tax credit bonds, the taxpayer includes the amount of the tax credit in income, and the federal government collects taxes on that income.  The only purchasers of tax credit bonds are those that have tax liabilities.

Otherwise, it makes no sense to buy a tax credit bond.  However, Build America Bonds are technically taxable bonds, but most of the investors do not pay tax on these bonds.  For example, under our tax rules, if a foreign person or a pension fund or a tax-exempt entity buys a Build America Bond, they do not pay tax on the interest they receive.

Thus, the federal government not only cuts a check for 100 percent of the bonds' interest costs, it also loses most of the revenue it would have collected from the tax-credit bonds.

States and local governments can view this federal money as free money, because they don't even have to collect it from their residents.  Therefore, of course state and local governments are big fans of the Build America Bonds program ? they get federal money that they don't have to pay back.  And the large Wall Street investment banks love Build America Bonds ? they're getting richer off of them.

However, we all know there's no such thing as a free lunch.  Federal taxpayers are footing the bill for this big spending program, which only gets bigger every time Congress touches it.  And American taxpayers are the ones I'm looking out for.

And American taxpayers are the ones who, in the words of the senior house staffer, do "not view the Build America Bonds program as an enormous success."

I urge my colleagues to look beyond the fancy, well-funded lobbying campaign for this rich subsidy.  Take a look at who wins.  The winners are the big Wall Street banks.  Maybe a small number of governments will issue bonds they otherwise wouldn't.

The only certainty is that the federal taxpayer is on the hook for the interest costs.  With record budget deficits under this Congress and Administration, we cannot casually look away as new, open-ended subsidies are proposed.

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Floor Statement of Senator Chuck Grassley

Ranking Member of the Committee on Finance

Monday, March 1, 2010

Today the Senate starts debate on expiring tax and health provisions.  They are known around here as "extenders."  I'd like to make a couple of points on the process before I get into the substance of the substitute.

What I find surprising is that we are taking up a package, that like last week's exercise, absolutely belongs to the Senate Democratic Leadership.  That is to say we are not taking up a bipartisan package that I put together with Finance Committee Chairman Baucus.  To be sure, some of the structure reflects the agreement my friend, the chairman, and I reached.  But this package is almost three times the size of the package we agreed on.  Virtually all of the additional cost is due to proposals that I would not have agreed to in representing the Republican Conference.  I was under the impression that the Senate Democratic Leadership was genuine in its desire to work on a bipartisan basis, but clearly I was mistaken.  Although the Senate Democratic Leadership was highly involved in the development of a bipartisan bill, they arbitrarily decided to replace it with a bill that skews toward their liberal wing.

So, my first comment to my colleagues, the media, and the public is, don't let this package be mislabeled as the Baucus-Grassley package.  It is not the package my friend Chairman Baucus and I negotiated.  Again, the package before the Senate dramatically differs in cost, balance, and intent from the Baucus-Grassley deal, announced on February 11.

My second preliminary comment goes to the way in which these expiring tax provisions have been described by many on the other side, including those in the Democratic Leadership.  If you rolled the videotape back a week or so ago, you'd hear a lot of disparaging comments about these routine, bipartisan extenders.  From my perspective, those comments were made in an effort to sully the

If you take a look at newspaper accounts of a week or so ago, you'd come away with the impression that the tax extenders are partisan pork for Republicans.  A representative sample comes from one report, which describes the bipartisan bill as "an extension of soon-to-expire tax breaks that are highly beneficial to major corporations, known as tax extenders, as well as other corporate giveaways that had been designed to win GOP support."  The Washington Post included this attribution to the Senate Democratic Leadership in an article last week.  " "We're pretty close," {the majority leader} said Friday during a television appearance in Nevada, adding that he thought "fat cats" would have benefitted too much from the larger Baucus-Grassley bill."

The portrait that was painted by certain members of the majority, echoed without critical examination, in some press reports was inaccurate.  For one thing the tax extenders include provisions such as the deduction for qualified tuition and related expenses and also the deduction for certain expenses of elementary and secondary school teachers.  If you are going to school or if you are a grade school teacher, the Senate Democratic Leadership apparently viewed you as a fat cat.  If your house was destroyed in a recent natural disaster and you still need any of the temporary disaster relief provisions contained in the extenders package, too bad, because helping you would amount to a corporate giveaway in the eyes of some.

The tax extenders have been routinely passed repeatedly because they are bipartisan and very popular.  Democrats have consistently voted in favor of extending these tax provisions.  House Speaker Nancy Pelosi released a very strong statement upon House passage of tax extenders in December of 2009, saying this was "good for businesses, good for homeowners, and good for our communities."  December of 2009 was not very long ago.  In 2006, the then-Democratic Leader released a blistering statement "after Bush Republicans in the Senate blocked passage of critical tax extenders" because "American families and businesses are paying the price because this Do Nothing Republican Congress refuses to extend important tax breaks."

Recent bipartisan votes in the Senate on extending expiring tax provisions have come in the Emergency Economic Stabilization Act of 2008, the Tax Relief and Health Care Act of 2006, which passed the Senate by unanimous consent, and the Working Families Tax Relief Act of 2004, which originally passed the Senate by voice vote although the conference report only received 92 votes in favor and a whopping 3 against.  According to the non-partisan Congressional Research Service, extension of several of these provisions goes back even further, including the Tax Relief Extension Act of 1999, which again passed the Senate by unanimous consent but lost 1 vote on the conference report.

One member on the other side said, "Our side isn't sure that the Republicans are real interested in developing good policy and to move forward together.  Instead, they are more inclined to play rope-a-dope again, my own view is, let's test them."  Another member of this large 59 vote majority exclaimed, "It looks more like a tax bill than a jobs bill to me.  What the Democratic Caucus is going to put on the floor is something that's more focused on job creation than on tax breaks."

Reading those comments I found myself scratching my head.  The only explanation for this behavior is that certain senators decided last week that it serves a deeply partisan goal to slander what have been for several years bipartisan and popular tax provisions benefitting many different people.  The Washington Post article I quoted from earlier includes a statement from a Senate Democratic leadership aide saying that, "No decisions have been made, but anyone expecting us immediately to go back to a bill that includes tax extenders will be sorely disappointed."

You can imagine, that today, a little over a week after these comments, I'm really scratching my head.  We have before us the expiring tax and health provisions that were disparaged just a short time ago.  Have they morphed from corporate tax pork?  Have they suddenly re-acquired their bipartisan character?  Are these time-sensitive items, now expired for more than two months, suddenly jobs-related?

Now, as we begin to debate another, quote, jobs bill, I want to focus on the economy, small businesses, and jobs.

We all agree that our nation is currently facing challenging economic times.  While there have been some signs of improvements such as the recent growth in our gross domestic product, job losses continue to mount and many hardworking Americans are struggling to make ends meet.  According the Bureau of labor Statistics, over 8 million jobs have been lost since our economy officially slipped into a recession in December of 2007.  The unemployment rate is currently at 9.7 percent, which is simply an unacceptable level.

The lack of job creation continues despite aggressive actions taken at the federal level in order to stabilize the economy.  This includes the enactment of TARP and the $800 billion dollar stimulus bill.  However, these bills were all missing a critical ingredient for spurring job creation-substantial tax relief targeted at small business.

In October of 2008, Congress enacted the Troubled Asset Relief Program (TARP), a $700 billion dollar financial bailout bill that we were told had to be enacted immediately  in order to deal with so-called toxic assets to prevent credit from drying up, which would have choked off the lifeblood of the American economy.   What we actually got was direct infusions of cash into the largest Wall Street banks, which was 180 degrees different than what we were told by Treasury.

And later came the bailout of GM and Chrysler using TARP money after the Senate had just voted not to bail GM and Chrysler out.  This inconsistent policy by Treasury created uncertainty in the financial markets and business community.  Moreover, exorbitant bonuses were paid to executives and managers of firms that would have been out of a job if not for Congress, Treasury, and the Federal Reserve intervening.

And how effective was the bailout at improving credit markets?  In October 2009, the Government Accountability Office released a report reviewing TARPs first year performance. The GAO report found credit had improved based on certain market indicators.  However, they were not able to determine how much, if any, was attributed to TARP, as compared to general market forces or other federal actions.

While it is unclear to the extent credit has been freed up as a result of TARP, it is clear who has reaped the benefits of the program.  This past year, many financial firms, including Goldman Sachs, J.P. Morgan Chase and others who received TARP funds posted record or near record profits.

While Wall Street executives have clearly benefited from TARP, small businesses and their employees have not been so fortunate.  Small businesses continue to struggle to obtain credit in order to expand their operations, purchase inventory, or even to make payroll.

The so-called stimulus bill enacted almost solely by an overwhelming Democratic majority in Congress last February has not spurred job creation. The massive $800 billion spending bill was hastily rushed to the floor with little time to deliberate its merits.

Lawrence Summers, the Director of President Obama's National Economic Council, said the test for stimulus is whether it is timely, targeted, and temporary.  This stimulus bill hit the tri-fecta; it failed on all three.

Through a report issued in January of 2009 by the current chair of President Obama's Council of Economic Advisors, Christina Romer, the administration predicted that the stimulus would save or create 3.7 million jobs.

We were told by the Obama Administration that if the bill was not passed quickly we would experience unemployment of nine percent.  However, we were also told by the Obama Administration that if the stimulus bill passed, unemployment would not go over 8 percent.

Well, Mr. President, the bill was passed but what did we get for the $800 billion in debt, before interest, that was laid at the feet of our children and grandchildren?  The unemployment rate jumped from 7.7 percent in January -- right before the stimulus was enacted -- to a high of 10.1 percent in October.  While unemployment recently dipped slightly to 9.7 percent, this was not due to job creation, but because millions of individuals have literally given up looking for work.  The Obama Administration also stated that quote "more than 90 percent of the jobs created are likely to be in the private sector."  In all, 3.3 million jobs have been lost since the stimulus bill was enacted, and 3.2 million of those jobs were private sector jobs.  In summary, the Obama Administration was terribly inaccurate regarding its stimulus jobs projection.

At the time the stimulus bill was passed, I raised concerns that the bill was not targeted enough at small businesses and job creation.  However, my point of view lost out and less than one-half of one percent of the bill included tax relief for small businesses.  The money in the stimulus bill to give tax credits to people who buy electric plug-in golf carts, or to pay for rattlesnake husbandry in Oregon, among numerous other ill-advised provisions, would have been better allocated to small business tax relief.   Since the stimulus, small businesses have been bearing the brunt of job losses in our economy.  However, the words of those on the other side regarding the importance of small business to job creation does not match their actions when looking at the paltry amount of small business tax relief that they have provided.  Again, in the jobs bill or stimulus bill or whatever you want to call it that passed the Senate last week, there was only one provision directed solely to small business tax relief.  That was a provision that I support, increased expensing of equipment purchased by small businesses, but it is a very small provision and it only gave small businesses what they've already been getting for the last couple years.

That provision was only $35 million out of a $62 billion bill?the $15 billion that everyone talks about plus the $47 billion for the highway trust fund that is typically not mentioned.  Last year, I introduced S. 1381, the Small Business Tax Relief Act of 2009.  My bill would double the amount of equipment that a small business could expense, and it would make those higher levels permanent, instead of just for one year as the Reid bill did.  In my negotiations on a "jobs bill", I sought to include provisions from my small business tax relief bill, but there was no agreement to put small business tax relief provisions from my bill in the bipartisan compromise we reached.  Instead, we were asked to defer those provisions.

According to ADP National Employment data, from February of 2009 through January of 2010 small businesses with fewer than 500 employees saw employment decline by 2.67 million, while large businesses with 500 or more employees saw employment decline by 694,000.

While I am sure many of us disagree about the effectiveness of the financial bailout and stimulus spending in getting our economy back on track, I know we all agree that there has been a lack of job creation and too many people continue to be unemployed.

Because the stimulus bill has so clearly failed what it was supposed to do, which is to create jobs, the Administration and Congressional Democratic Leadership are running away from the word stimulus faster than the triple-crown winning horse, Secratariat. Everything proposed now is called a jobs bill, even if it includes proposals that were always labeled stimulus in the past.  Only 6 percent of Americans believe the stimulus bill created jobs.  That is less than the 7 percent of Americans who believe that Elvis is still alive.

Last week the Senate passed a bill that included a provision designed to increase hiring. This includes a payroll tax holiday for business that hire unemployed workers and a tax credit for the retention of newly hired individuals in 2010.

The payroll tax holiday part of this proposal is likely to spark some modest hiring at businesses at the margins, among those that have seen some improvements in their business, but are on the fence about whether to hire somebody now or wait until later.  However, many businesses continue to struggle and won't hire new employees just because it is the stated policy goal of Congress.  Before a business can hire a new employee, they need to know that that the new employee will generate additional revenue that exceeds the cost of the employee.

The latest survey of Small Business Economic Trends by the National Federation of Independent Businesses (NFIB) shows that many small businesses may not be in a place that they could afford to hire new employees, even with the payroll tax holiday.

I have here a chart from NFIB with selected components from their Small Business Optimism Index.  While many components of this index improved slightly from December, it is clear that small businesses continue to struggle.

  • A net negative 1 percent of owners plan to create new jobs in the next three months;

  • A net positive of only 1 percent of businesses owners expect the economy to improve. Only 4% of  business owners said it was a good time to expand

  • A net negative 42 percent of owners reported higher earnings

This last component is especially important for businesses when it comes to hiring new employees.  If earnings are declining there is little a payroll holiday will do to spark hiring since the businesses needs to know that the revenue generated from the additional employee will exceed the cost, not just today but in the future as well.

According to the NFIB survey, when businesses are asked what the single most important problem facing their business is, the answer is lack of sales.  But, this is closely followed by taxes and then government regulations and red tape.

I am glad that my colleagues on the other side have recognized that true job creation comes through the private sector and have thus sought hiring incentives through payroll tax relief.

However, this minor tax relief is a drop in the bucket considering the challenges small businesses are facing due to the economy and proposed increased taxes and red tape included in the President's budget -- whether we are speaking about "cap and trade" that will drastically increase their energy costs, health care reform that would mandate small businesses to offer health benefits that will increase the cost of labor, or the call for tax increases on so-called wealthy taxpayers earning over $200,000 that will largely fall on the backs of small business.

If our intention is to increase long-term employment, the last thing we should be doing in this time of economic uncertainty is increase taxes or place additional burdens on those who are  responsible for creating 70 percent of the jobs in our economy --  namely small businesses.

Providing small businesses a payroll tax holiday while intending to impose increased taxes, regulations and mandates amounts to throwing them a few peanuts while taking away their supper.

In recent months, I have spoken at length about the impact of the tax increases set to kick in 10 months from today.  I've examined the impact of these tax increases on small businesses.  Let's take a close look at this impact.

The President and my colleagues on the other side of the aisle have proposed increasing the top two marginal tax rates from 33 and 35 percent to 36 and 39.6 percent, respectively; increasing the tax rates on capital gains and dividends to 20 percent; fully reinstating the personal exemption phase-out, known as PEP, for those making over $200,000; and fully reinstating the limitation on itemized deductions, which is known as Pease, for those making over $200,000.  With PEP and Pease fully reinstated, individuals in the top two rates could see their marginal tax rate increased over 15 percent or more.

My colleagues on the other side of the aisle respond that these proposals will only hit "wealthy" individuals and only a small percentage of small businesses fall into this category.  What my colleagues fail to understand is that the small businesses that fit into this group are not static, but consist of different businesses over time that go in and out of the top two tax brackets depending on the market.  Data from the Joint Committee on Taxation, which is the nonpartisan official Congressional scorekeeper on tax issues, shows that 44 percent of the flow-through business income will be hit with the increase in the top two tax rates proposed by the President and Democratic Congressional Leadership.  This hits small businesses particularly hard, since most small businesses are organized as flow-through entities.  It will increase taxes on single small business owners that make more than $200,000 per year, even if they plow all of their income back into their small business to keep paying their workers or hire additional workers.

Increasing taxes on this group punishes their success. It limits their ability reinvest in their company. It prevents them from putting away funds for tough economic times to keep their business afloat.

Government is currently creating a climate of uncertainty where the private sector does not know what we will do next, what taxes will be raised, or what regulatory barriers will be put in their way.

We can start to put some certainty back into the business world by declaring we will not increase taxes on businesses one dime by making the 2001 and 2003 bipartisan tax measures permanent.  But let me be clear, businesses do not want to be certain that the government is going to raise their taxes and make them go through more red tape.  They want to be certain that's not going to happen.  Until then, many will simply sit on the sidelines and not hire more workers.

Moreover, we can directly provide targeted relief to small businesses.  Last June, I proposed legislation to do just that.  I introduced the Small Business Tax Relief Act of 2009 to lower taxes on job-creating small businesses.

Since the Democratic leadership barred any amendments last week, I'm hopeful we'll debate and vote on an amendment offered by Senator Thune.  Many provisions in my bill are contained in the Thune amendment, which I support.

My bill contains a number of provisions that will leave more money in the hands of small businesses so that they can hire more workers, continue to pay the salaries of their current employees, and make additional investments in their business.   This includes allowing flow-through small businesses such as partnerships, S corporations, LLCs, and sole proprietorships to deduct 20 percent of their income, effectively reducing their taxes by 20 percent.  My bill also includes relief for small business owners from the unfair alternative minimum tax.  It takes the general business credits, such as the employer-provided child care credit, out of the alternative minimum tax.  This allows a mom and pop retail store that provides child care for their employees to get the same tax relief that a Fortune 500 company gets when it provides child care for its employees.  My bill would also allow more of the nearly two-million small C corporations to benefit from the lower tax rates for the smallest C corporations.  There are so many small C corporations because they were formed as C corporations before other entities such as LLCs become more widely used.  Among other provisions, my bill would also lower the potential tax burden on small C corporations that convert into S corporations.

The NFIB has written a letter supporting my small business tax relief bill, stating, quote, "To get the small business economy moving again, small businesses need the tools and incentives to expand and grow their business.  S. 1381 provides the kinds of tools and incentives that small businesses need."

I'd now like to talk about an opportunity for true bipartisanship that was killed by the Democratic leadership.  The same day that Chairman Baucus and I released a bipartisan bill that contained significant compromises, behind closed doors Democratic leaders cherry-picked just 4 provisions out of the larger bill that Chairman Baucus and I agreed to.  Those provisions had been agreed to in a meeting of senior members of the other side only while Chairman Baucus and I were negotiating.  I was extremely disappointed to see the Democratic leadership blow up the bipartisan deal that Chairman Baucus and I reached.  To pour a little salt into the wound, the Democratic leadership then prohibited any senator on either side of the aisle from even offering an amendment to improve the bill that he hijacked.

One of the four provisions the Democratic leadership cherry-picked is Build America Bonds.  If it had been just me drafting a bill, I wouldn't have included this provision.  However, in the sake of bipartisanship and compromise in the context of a much larger bill, I reluctantly agreed that putting this provision in the bill would not cause the overall bill to lose my support.  Build America Bonds is a very rich spending program disguised as a tax cut.  Bloomberg reported that large Wall Street investment banks have been charging 37 percent higher underwriting fees on Build America Bonds deals than on other deals.  Therefore, American taxpayers appear to be funding huge underwriting fees for large Wall Street investment banks as part of the Build America Bonds program.

The Democratic leadership has said the Build America Bonds program is about creating jobs, but I want to know whether it's about lining the pockets of Wall Street executives.  Last week, I asked Goldman Sachs CEO a number of questions about these much larger underwriting fees subsidized by American taxpayers.  I expect to have that discussion shortly.

Turning back to the bill being debated this week, the Thune amendment, which incorporates many of the provisions from my small business tax relief bill, provides substantial small business tax relief and should be adopted.

In this bill, I hope that we can all work together toward improving our economy -- not through more government -- but by letting the engine of job creation-small business-keep more of their own money in the form of substantial small business tax relief.

-30-

ALEXANDRIA, Va.-Today, the Community Financial Services Association of America (CFSA), the trade association representing America's responsible, small denomination, short-term payday lenders, questioned the activities of certain large Wall Street financial institutions for promoting their own interests over those of hard-working, middle income consumers.
"Unlike those who are responsisble for the collapse of our financial system, payday lenders provide a fully disclosed, transparent and highly regulated product to working families with the highest customer satisfacion rate of any comparable product," said CFSA Board Chair D. Lynn DeVault.  "We are not an industry trying to hide behind preemption, in fact we are highly regulated in the 34 states we do business in.  The attorneys general, banking commissioners and legislators in those states monitor our neighborhood stores on a daily basis."
DeVault continued, "The same interests who brought complex and costly transactions that created havoc for millions of Americans are now trying to create a system of winners and losers that is stacked unfairly in their favor and is a bad deal for the average consumer."
Facing stricter regulations and tightening credit criteria and recognizing the demand for short-term credit, large financial institutions and credit unions are attempting to offer similar products while lobbying Congress to eliminate the payday lending industry as competition.  Indeed, according to the National Consumer Law Center, some federally chartered credit unions charge fees that drive the effective rate of short-term loans over the APR allowed by law, prompting an admonition from the National Credit Union Administration in August.
"The reason our model works is that it is cost competitive and, unlike banks and credit unions, the payday loan industry issues small dollar, short-term loans on an unsecured basis that people can actually understand," said DeVault.  "Payday loans are well-regulated by the states and adhere to strict industry best practices."
A comparison of credit industries in the U.S. in 2008, which is the most recent year with full data available, reveals the relatively low systemic risk of the payday loan industry.
Total Amount of
Loans Granted
Average Debt per Borrower
Payday Loans
$48 billion[1]
$345[2]
Auto Loans
$80 billion[3]
$12,040[4]
Mortgage Loans
$1.5 trillion[5]
$192,287[6]
Credit Card Loans
$2.1 trillion[7]
$5,729[8]
"We are fully supportive of efforts to address the ever-changing needs of the American consumer; however, these efforts should be focused on  preserving viable financial options for consumers, not protecting special interests and large financial institutions which do not adequately serve all Americans.  The reality is that one size does not fit all for financial services," concluded DeVault.
# # #
About the Community Financial Services Association of America
The Community Financial Services Association of America (CFSA) is the only national organization dedicated solely to promoting responsible regulation of the payday advance industry and consumer protections through CFSA's Best Practices. As such, we are committed to working with policymakers, consumer advocates and CFSA member companies to ensure that the payday advance is a safe and viable credit option for consumers.


[3] Ibid
Wednesday, March 10, 2010

Senator Chuck Grassley today made the following comment about the House "jobs" legislation's expansion of the Build America Bonds provision.  The Senate could take up the House bill this week.  Grassley also released two responses from Goldman Sachs to his inquiries about the fees Goldman Sachs has received from Build America Bonds.

"Build America Bonds were created in the stimulus last year as a temporary program. A recently-passed House bill included an expansion.  The Senate then passed a further expansion and sent the bill back to the House.  The House took the Senate's bill and made it richer.  Now a temporary program is becoming bigger, and Wall Street is seeking to make it permanent.  Wall Street is profiting and cheering the expansion.

"Build America Bonds result in higher underwriting fees for the Wall Street banks that underwrite the bonds than for traditional tax-exempt bonds. According to Bloomberg News, Build America Bonds provide 37 percent higher underwriting fees to the large Wall Street banks when compared with traditional tax-exempt bonds.  According to an article in today's Wall Street Journal, Wall Street banks have made more than $1 billion in underwriting fees on Build America Bonds deals in less than a year.  The taxpayers pay for those lucrative fees to Wall Street.

"Build America Bonds are portrayed as an easy way to help school kids and green energy.  What's left out is that this is a spending program disguised as a tax cut, getting bigger each year, and Wall Street takes a healthy share.  In an era of bailouts and disgust with government spending, House members should have to answer for giving yet more taxpayer dollars to Wall Street and foreign investors.  Senators should understand the vote they're about to take."

Background on Build America Bonds:

The 2009 stimulus bill created the Build America Bonds program on a temporary basis, and provides a check from the Treasury Department to the state or local government that issues the bonds equal to 35 percent of the interest costs on the bonds.  The President has proposed in his fiscal year 2011 budget to make the Build America Bonds program permanent but at a reduced 28 percent subsidy level.  The House passed a "jobs" bill that would expand the Build America Bonds program created in the 2009 stimulus bill to two tax-credit bonds ? Qualified School Construction Bonds and Qualified Zone Academy Bonds.  The Senate then expanded the House bill to cover two additional tax-credit bonds ? Qualified Energy Conservation Bonds and Clean Renewable Energy Bonds, and set the federal subsidy for interest costs at 45 percent (65 percent for small issuers, defined as those issuing less than $30 million in bonds per year).  Just last week, the House increased the subsidies from the Senate bill to 100 percent for Qualified School Construction Bonds and Qualified Zone Academy Bonds, and 70 percent for Qualified Energy Conservation Bonds and Clean Renewable Energy Bonds.  The increase in the subsidy percentages made by the House increased the cost of the Build America Bonds provision by more than $2 billion.  The subsidy has gone from big, bigger, to biggest.  Under the House bill, the outlays, which are scored as spending by the Congressional Budget Office, from these bonds will be $13.2 billion through 2020, which will be paid for by federal taxpayers.

Build America Bonds have been popular with industry and states because they are uncapped and provide higher subsidies to local governments and foreign investors than traditional tax-exempt bonds. The Congressional Budget Office originally underestimated the popularity and had to issue a revised cost estimate of an additional $26 billion.  The bonds in the Senate and House "jobs" bills are capped, but the subsidy for the interest expense on school projects in the House bill could cost the federal government more than 100 percent of the financing cost in some cases.  This is because unlike with tax credit bonds, where the federal government collects revenue from taxpayers that have to include the tax credits in income, revenue is not collected from investors such as foreigners, pension funds, or other tax-exempt entities that make up the majority of the holders of Build America Bonds.

Attached are Goldman Sach's responses to Senator Grassley's inquiry on Build America Bonds.  Following is his initial inquiry.

For Immediate Release

Wednesday, February 24, 2010

Grassley Asks Goldman Sachs About Underwriting Fees for Build America Bonds

WASHINGTON - Sen. Chuck Grassley, ranking member of the Committee on Finance, today asked Goldman Sachs whether it would collect double-digit underwriting fees for participating in a newly expanded Build America Bonds program, as included in the "jobs" bill promoted by the Senate Democratic leaders and passed by the Senate today.

Grassley's inquiry came after Goldman Sachs published a newspaper ad in support of the Build America Bonds program, identifying itself as "one of the principal underwriters."  Earlier, an analyst was quoted in the media saying that the generous amount of federal money available in the program gives states and cities leeway to spend generously on underwriting fees.

"I'm interested in finding out whether the big Wall Street investment banks being so involved in, and profiting from, the Build America Bonds program siphons off a lot of taxpayer dollars that are meant to help cities and states," Grassley said.

The text of Grassley's letter today follows.   

February 24, 2010

Mr. Lloyd C. Blankfein

Chairman and Chief Executive Officer

The Goldman Sachs Group, Inc.

85 Broad Street

New York, NY 10004

Dear Mr. Blankfein:

I was interested to see your company's full-page advertisement in support of Build America Bonds in yesterday's edition of the Politico newspaper that stated that Goldman Sachs is "one of the principal underwriters..." of Build America Bonds.  The "jobs bill" that passed the Senate today contained an expansion and an increase in the subsidy levels of the Build America Bonds program.  This increased subsidy allows non-taxpaying entities to receive a check from the American taxpayers equal to either 65 percent or 45 percent (depending on the amount of bonds issued) of these non-taxpaying entities' interest costs on Build America Bonds.  The American Recovery and Reinvestment Act of 2009, more commonly known as the stimulus bill, allowed non-taxpaying entities to receive a check from the American taxpayers equal to 35 percent of these non-taxpaying entities' interest costs.  The President has proposed in his most recent budget for non-taxpaying entities to receive a check from the American taxpayers equal to 28 percent of these non-taxpaying entities' interest costs.

A November 27, 2009, Bloomberg article by Jeremy R. Cooke stated that:

"States and municipalities paid an average 37 percent more to investment banks for underwriting Build America Bonds than for handling tax-exempt sales since offerings of the subsidized taxable debt began in April....  'The large subsidy gives them leeway to charge more because the issuer probably cares less about the underwriting fee,'" said Matt Fabian, managing director and senior analyst at Concord, Massachusetts-based independent research firm Municipal Market Advisors.  'They shouldn't care because federal taxpayers will cover the difference.  As a federal taxpayer, I'm highly concerned.'"

I, too, am concerned that American taxpayers are subsidizing larger underwriting fees for Wall Street investment banks, including Goldman Sachs, as a result of the Build America Bonds program.  I have raised concerns about the increased subsidy levels in the Build America Bonds program that passed the Senate today.

As "one of the principal underwriters" of the Build America Bonds program, please answer the following questions:

1. How much in total underwriting fees has Goldman Sachs collected to date on Build America Bonds' issuances?

2. How has Goldman Sachs determined its underwriting fees on Build America Bonds' issuances?

3. Are these underwriting fees larger than the underwriting fees that Goldman Sachs has charged on tax-exempt bond issuances?  If so, how much larger are these underwriting fees?

4. Has Goldman Sachs received any money, in addition to the underwriting fees, in connection with the Build America Bonds program?

5. Does Goldman Sachs expect to receive additional underwriting fees if the Build American Bonds expansion and subsidy increase that passed the Senate today is enacted into law?

Thank you in advance for your prompt response to these questions.

Sincerely,

Charles E. Grassley

Ranking Member

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