A Project of The Annenberg Public Policy Center

More Regulatory Rhetoric


A new attack ad targeting three Democratic senators and one Republican criticizes "hidden taxes on … pensions and retirement accounts" in the financial regulation legislation being considered by Congress, and urges the senators to "vote against this phony financial reform."

The ad gives a false impression. The Senate bill doesn’t contain the tax mentioned in the ad.

The ad is the work of a less-than-transparent group calling itself "Stop Too Big To Fail," which says its $1.6 million ad buy is targeting senators in Nevada, Virginia and Missouri (Sens. Harry Reid, Mark Warner, Claire McCaskill and Kit Bond). This group says it’s part of Consumers for Competitive Choice, "a diverse national coalition of Americans who support a strong, vibrant and consumer-focused economy." But the only backers identified as part of this "diverse coalition" are an Indiana lawyer named Robert Johnson and Sam Zamarripa, a former Georgia state senator who founded a private equity firm and United Americas Bank in Atlanta. Johnson previously created groups called Consumers Voice and Consumers for Cable Choice, backed by money from AT&T and Verizon, and advocated for their interests, according to Roll Call. Johnson told us Consumers for Competitive Choice accepts funding from individuals, groups and foundations, but doesn’t disclose its donors.

The ad claims that the legislation could "lead to more big-bank bailouts, paid for by hidden taxes on your pensions and retirement accounts." The only tax mentioned, however, is a "financial transactions tax," which is referenced in an on-screen graphic while the narrator says that "Congress is considering so-called financial reform … paid for by hidden taxes" on pensions and retirement funds. Some lawmakers are indeed considering such a tax on stock trades. But it’s not part of the Senate financial regulatory bill. And it never has been. We called the Senate Banking Committee, and a spokesman confirmed that it isn’t there.

The ad cites a December Wall Street Journal article that reports that some in Congress are in favor of a 0.25 percent tax on certain stock trades, and Sen. Tom Harkin of Iowa, among others, has come out in support of such a tax as a way to reduce the deficit. But it’s unclear whether any such tax would actually affect pensions or retirement accounts. The Journal article detailed a plan that would exempt mutual funds and 401(k) plans, and the first $100,000 of stock trades. The White House is against it. Regardless of what may come of this idea, it isn’t in the Senate bill. The ad misleads viewers about the details of the bill and then encourages them to call their senators to tell them to vote against "this phony financial reform."

Alternative Arguments

On its website, the group says that under the financial bill, "successful retirement fund advisors with over $50 billion of customer assets … will be forced to pay fees into a newly created Resolution Fund (i.e. bailout fund) meant to rescue so-called Too Big To Fail (TBTF) financial institutions." But that is false. As we explained in an early post, this fund is an "orderly liquidation fund" designed to help the Federal Deposit Insurance Corporation put failing firms out of business, not prop them up. The bill says the FDIC would decide how much financial institutions would have to contribute to this fund based on the institution’s risk.

Stop Too Big to Fail’s site further claims that a "fee will be assessed on funds even though they are not considered [too big to fail] and will never be bailed out if they get into trouble." Again, it’s a fund to help dissolve failing companies, not bail them out. And the bill specifically says these would be risk-based assessments by the FDIC that would "take into account the extent to which the financial company or group of financial companies has benefitted, or likely would benefit, from the orderly liquidation of a covered financial company and the use of the Fund under this title."

Robert Johnson, the Indiana lawyer behind Stop Too Big to Fail, argued that any tax or cost laid on banks would be passed along to customers. He sent us articles about President Obama’s proposal to tax big banks receiving bailout money in order to recoup those funds. "These fees/taxes/regulatory assessment (whatever called) will likely be passed on to consumers," he said.

But Johnson’s argument is open to debate. The nonpartisan Congressional Budget Office agrees that the bank tax proposed by Obama would ultimately be paid partly by customers. But it also said "competition from financial institutions not subject to the fee would limit the extent to which the cost could be passed to borrowers."