In its original form, the U.S. Treasury had proposed H.R. 1424 as must-pass legislation to rescue collapsing credit markets stemming from the nation’s housing crisis. However, the bill failed to win approval when it was voted on in the House on September 29 leading to huge declines on Wall Street and renewed calls for congressional action.
Two days later the U.S. Senate approved a revised version of the bill by a vote of 74-25. This version was expanded to include an increase in federal deposit insurance along with a number of tax provisions for businesses, disaster victims, and consumers affected by the alternative minimum tax.
To win votes, the Senate added an alternative minimum tax patch, research and development and renewable energy credits, and state and local sales tax deduction extenders. The addition of “tax extenders” to the Senate bill proved critical to its ultimate passage. Targeted tax credits were added, which the press criticized as pork, in order to win the support of specific Members of Congress who had voted against the rescue package when it first came to a vote.
PCI had urged the House and Senate to enact this vital legislation. PCI obtained input from members, engaged in continuous dialogues with the White House, Treasury Department and Congressional leaders, and sent letters to ranking members of the Senate Banking, Housing, and Urban Affairs Committee and the House Financial Services Committee urging prompt passage of the rescue plan.
In addition, PCI stressed that the rescue plan should be applied fairly to all segments of the financial services industry. The rescue package must ensure equitable treatment so that no companies are put at a severe competitive disadvantage. That’s why PCI also urged Congress and Treasury to avoid imposing a recoupment tax on segments of the financial services industry that are not central to the current rescue plan. Insurers, and consumers who sponsor insurers, should not be unfairly penalized by being forced to subsidize other industries in the financial marketplace that engaged in risky behavior and under-priced their products.
PCI sent letters to Congress leaders and U.S. Department of Treasury Secretary Henry Paulson leaders requesting a clarification to avoid confusion or unintended application of a recoupment tax against insurers in the future.