US scraps $19bn bank levy proposal

30 June 2010

The proposal to introduce a new $19 billion levy on banks and hedge funds in the US has been dropped.

Chris Dodd, the Democratic chairman of the Senate banking committee, agreed to remove the idea from the Wall Street reform bill as the party struggles to get enough support for the legislation to be passed.

It had been planned that banks with assets of more than $50 billion and hedge funds holding over $10 billion would be subject to the fee in order to pay the costs of introducing the new rules.

A new proposal has now been drawn up to make up the costs by ending the Troubled Asset Relief Program early – saving an estimated $11 billion – and increasing the amount of money raised by the Federal Deposit Insurance Corporation, reports the Financial Times.

Other policies mooted in the reform bill include a proprietary trading ban on deposit-taking banks and preventing banks from putting more than three per cent of their tier one capital into hedge funds.

By Gary Cooper

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