December 2008
Legislative Front
As New Administration Nears New Opportunities Emerge
-CDFA Looks to 111th Congress for Legislative Success -
With the Presidential election over, attention has now returned to new and continuing business on Capitol Hill. However, the lame duck status of the current administration and Congress means significant, new legislation will have to wait until 2009.
Dominating discussion last month was the implementation of the financial rescue package as hearings by both the House and Senate examined how the Treasury was using the $700 billion it was given to help struggling financial institutions. Talks and hearings concerning a $25 billion package for the Big Three automakers were also a major topic on Capitol Hill last month. Treasury has stated that the automakers are not eligible for Troubled Assets Relief Program (TARP) money. The Big Three have been directed by Congress to submit more concrete business and restructuring plans before continuing with furter hearings.
CDFA Continues Building Contacts on the Hill
Despite all the time and resources the hearings concerning a potential bailout of the automotive industry consumed, CDFA Board members and staff were able to meet with key stakeholder groups and Congressional offices in both the House and Senate during a recent trip to Washington, D.C.
CDFA’s legislative team visited the offices of Senators Barbara Boxer and Dianne Feinstein, CA, Sherrod Brown, OH, Debbie Stabenow, MI, and Arlen Specter and Bob Casey, PA. CDFA also met with the offices of Representatives Mike Thompson and Xavier Becerra, CA.
A meeting with the American Bankers Association was also held to discuss bank qualification for IDBs and other issues.
CDFA is working to solidify support for S. 2885, legislation that would expand what companies would qualify for industrial development bond (IDBs) financing, for reintroduction in early 2009 in the Senate and introduction in the House.
>>>READ MORE ABOUT CDFA’S LEGISLATIVE AGENDA
Obama Names Key Financial/Economic Posts with
-Stimulus Package as First Priority
President-Elect Barack Obama wasted little time getting his economic team in place. In late November, Obama nominated and appointed a number of key positions in the new administration.
Paul Volcker, former chairman of the Federal Reserve, will chair the president-elect’s Economic Recovery Advisory Board. Timothy Geithner, president of the Federal Reserve Bank of New York, is the president-elect’s nominee for Treasury Secretary. Lawrence Summers will head the White House’s National Economic Council. Summers has served in both the Reagan and Clinton administrations and was formerly the president of Harvard University.
Christina Romer, economist from UC-Berkley, has been designated as Chair of the Council of Economic Advisers, and Melody Barnes was chosen to serve as the Director of the Domestic Policy Council. She was previously Executive Vice President for Policy at the Center for American Progress.
The purpose of the earlier than usual announcements is aimed at allowing the new administration to quickly address the current financial and economic challenges. The president-elect has stated on several occasions that an economic stimulus package will be his first priority after taking office on January 20, 2009.
It is not yet clear what form or proposals will be included in the stimulus package. Experts estimate the total package to be between $400 and $700 billion. There is a significant chance that municipal bond provisions will find their way into the final package.
Members and staff will be working to get key parts of the CDFA legislative agenda included in the stimulus package and other potential legislative opportunities in 2009. CDFA will also be publishing its transition white paper as an overview of issues facing the development finance industry.
CDFA-Supported FLHB Legislation Sees First Use
The past month has seen the first use of a Federal Home Loan Bank (FHLB) standby letter of credit (LOC) on a non-housing tax-exempt deal. FHLB San Francisco issued a LOC on an IDB in California for a food processing company to expand and upgrade its facilities.
Legislation to allow FHLBs to issue LOCs on all tax-exempt bonds was passed in July 2008 as part of the housing bill with support from CDFA members and staff.
>>>READ MORE
JTC Creates New Muni Categories, Raises Concerns
The Joint Tax Committee (JTC) has created two new categories for tax-exempt bonds: social spending and business synthetic spending. JTC announced the new categories as part of their new estimation of tax expenditures for 2008 through 2012.
>>>READ THE FULL JOINT TAX REPORT
Social spending includes tax-exempt bonds that primarily to finance government functions or benefit non-profits. Examples are clean renewable energy bonds, qualified zone academy bonds and qualified private-activity bonds for student loans and owner-occupied housing.
Business synthetic spending includes PAB bonds that benefit private, for-profit borrowers. Types of bonds included in this category are PABs for rental housing, highway and water projects and green building,
While the report does not change anything legally concerning tax-exempt bonds, there is concern that such a division would lead to the different types of tax-exempt bonds as being seen as either good (social spending) or bad (business synthetic spending) by lawmakers. The fear is that Congress, looking to reign in federal spending, could eventually look at removing the tax-exempt status of these “bad” bonds.
JTC staff has stated that the new categories are merely an attempt to give committee members more information regarding federal tax expenditures.