WASHINGTON – A controversial plan to use bank account data to help fund Biden administration initiatives and the job security of Federal Reserve Chair Jerome Powell took priority as senators grilled Powell and Treasury Secretary Janet Yellen.
Members of the Senate Banking Committee questioned the two officials Tuesday as major economic policies hung in the balance. Congress is preparing to vote on a landmark infrastructure package as well as the administration’s $ 3.5 trillion social policy plan, while lawmakers are also heading for a showdown over the federal debt limit.
The hearing was dominated in part by GOP criticism of a proposal requiring banks to report on customer account flows as means to collect more tax revenue to help pay for the $ 3.5 trillion plan. Financial services firms have staunchly opposed the idea, noting the compliance burden potential privacy risk facing account holders.
“There are obvious privacy concerns for all Americans here, and this represents a dramatic new regulatory burden for community banks and credit unions in Wyoming and elsewhere,” said Sen. Cynthia Lummis, R-Wyo.
But the hearing highlighted the competing priorities of the two parties, with Democrats arguing that the government should focus on helping Americans at the lower end of the economy.
“Americans do not have to settle for another Wall Street-first recovery,” Senate Banking Committee Chair Sherrod Brown, D-Ohio, said in opening remarks. “We have the tools to do things differently – the only question is whether we’re going to use them, for as long as it takes.”
The hearing – originally planned as an update on implementation of the Coronavirus Aid, Relief, and Economic Security Act – came as both Yellen and Powell are facing tests of their leadership.
Powell, for one, is waiting for a decision from President Biden on whether he will be afforded a second term as Fed chair. Yellen has been tasked with shepherding the administration’s proposed budget through a Congress with a razor-thin Democratic majority.
Here are key takeaways from the hearing:
Republicans are defending banks in fight over IRS reporting plan
Two Republican senators, including Lummis, pressed Yellen over the Biden administration proposal – first unveiled last spring – to use bank account data to combat tax evasion.
The measure is a key element of how the administration wants to pay for the $ 3.5 trillion reconciliation bill. Banks and Republicans have charged that the proposal would give the government a glimpse into customers’ private transactions and impose new processing costs on the industry.
“Our banks will have to hire contractors to rat on their customers, implement new computer software [and] deploy resources better used elsewhere in order to collect data for the government, ”said Lummis.
A Senate draft outline of revenue sources would require banks and credit unions to report on accounts with more than $ 600 of annual inflows or outflows to the Internal Revenue Service. However, lawmakers have shown willingness to raise that threshold, which banks say is too low. A House proposal would raise the cutoff to $ 10,000, and House lawmakers are also considering exempting certain payroll transactions, Bloomberg News reported.
The hearing – originally planned as an update on implementation of the Coronavirus Aid, Relief, and Economic Security Act – came as both Treasury Secretary Janet Yellen and Jerome Powell are facing tests of their leadership.
But the industry says it plans to fight the plan regardless of the size of the reporting threshold.