Lawmakers have been working on a major transportation infrastructure bill, H.R. 22, the DRIVE Act. When the Senate passed the bill in July, road and bridge infrastructure project would have been paid for, in part, by reducing a benefit that big banks receive from the Federal Reserve. Last week the House struck that provision.

The bill had called for lowering the dividend rate that Federal Reserve System member banks with over $1 billion in assets receive on the stock they are required to own in the Federal Reserve System. It would have lowered the rate from 6 percent to 1.5 percent, saving the government about $16 billion over the next ten years and applying those funds towards highway projects.

The provision would have affected 20 or so of the largest U.S. banks, including Goldman Sachs, JP Morgan Chase, and Bank of America.

But on Thursday, Nov. 5, 2015, the House passed an amendment, by a vote of 354–72, to eliminate that language from the bill and keep the 6 percent rate intact for all Federal Reserve member banks.

The sponsors of the amendment

Rep. Randy Neugebauer (R-TX19)

The amendment to keep the 6% payouts was sponsored by Rep. Randy Neugebauer (R-TX19) and co-sponsored by Rep. Bill Huizenga (R-MI2), both of whom have had the commercial banking industry among their top campaign donors. Neugebauer’s campaigns have received more than $650,000 from commercial banks over his House career (his fourth largest donor industry), and Huizenga $217,000 (his third largest donor industry).

How the dividend works

Banks that want to become Federal Reserve members — a precondition to becoming a national bank and being exempt from state usury laws, along with other perks — are required to buy stock in Federal Reserve district banks using a fraction of their capital and surplus. Since the Federal Reserve’s liabilities are secured by the federal government, these stocks are essentially risk-free. But the banks can not sell or trade them.

The 6% payout comes in the form of a dividend on that stock.

Is it the right thing?

It is a matter of debate whether the risk-free 6% payout banks receive on these stocks year after year is at the right level. Furthermore, many of the big banks that hold Fed stocks have recently benefited from the Fed substantially in other ways — through emergency loan programs that were executed following the 2008 financial crisis.

The Senate and the House now have to reconcile their differing versions of the highway bill, including this dividend provision, before it can become law. Highway funding was set to expire on Nov. 20, 2015, but the House has already passed a short-term extension that will keep the funds flowing until Dec. 4, 2015.