February 10 – The American Bankers Association and Seattle-based Washington Federal have filed a class-action lawsuit on behalf of Federal Reserve member banks whose dividends were cut by policymakers in late 2015 as part of a highway-funding bill.Fixing America’s Surface Transportation Act law slashed the dividend payment for banks with over $10 billion in assets from 6 percent to 2 percent. The provision was estimated to raise $6.9 billion over a decade to help cover costs for the highway bill.
“The change to the statutory dividend rate upended Federal Reserve System policy that has been in place for more than 100 years,” said Rob Nichols, ABA president and CEO. “The FAST Act set a troubling precedent to target specific segments of the business community to meet broad public obligations like highway infrastructure. Every industry in this country is vulnerable if this is allowed to stand.”
“While legal action against the government is always a last resort, it’s one that we must turn to when alternatives are unavailable and matters of principle are at stake,” Nichols said. “This action undercuts the work banks do every day to help drive economic growth and meet the needs of America’s businesses and communities.”
Nichols said that the government’s move was “particularly damaging for affected community banks, which have had a much more difficult time replacing the lost income,” although the lawsuit itself noted that the FAST Act targeted financial institutions with more than $10 billion in assets — a group consisting of 72 of the nation’s 5,980 banks.