Financial Services Regulatory Reform Update - December 10, 2010

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During this past week, the President and Republican leaders in the Senate appeared to agree to a tax-cut package, although it remains unclear whether there will be the requisite Democratic support for the proposal. Despite the fact that the cost of the proposal exceeds the stimulus package enacted by Obama early in his first term (as it currently stands, the entire package will cost $858 billion, $801 billion of which would go to tax breaks), there seems to be little support amongst Democrats, and particularly liberal Democrats for the compromise package. In fact, House Democrats, lead by Peter Welch (D-Vt) and Peter DeFazio (D-OR) pushed a resolution in the Democratic caucus urging the Speaker not to take up the measure. Interestingly, the proposal passed on a voice vote, so that members did not have to publicly disclose their position. House Speaker Nancy Pelosi (D-CA) has stated that she will continue discussions with the President and other legislators in order to “improve the proposal” before it moves to the House for a vote. Congressman Levin (Chairman of the House Ways and Means Committee) has also indicated that he will tinker with the deal before it comes to the floor and we anticipate that at the very least we anticipate that House Democrats will seek to eliminate what they view as one of the most controversial provisions in the Senate tax proposal, setting the estate tax exemption at $5 million per person and a top rate of 35%, will be modified on the chopping block.

At this point, despite all of the rhetoric, it would seem more likely than not that legislation will pass before the end of the year, although there are some who believe that the Republicans would prefer that the tax cuts expire under a Democratic House and Senate, so as to be able to campaign on the issue in 2012.

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