Influence Alley

With the fight over offsets to pay for legislation to freeze student-loan interest rates sucking up all the oxygen in the debate, the financial services industry is left with a mixed outlook that sees large financial institutions faring better than smaller community-based ones.

The biggest threat to community banks is a proposal to pay for the legislation by raising taxes on so-called S corporations, small privately held companies in which earnings and losses can be passed through to shareholders. The roughly 4.5 million of these companies account for about 2,300 community banks but also amount to a hefty chunk of community banks' business customers, whom they also want to protect.

Community bankers are involved with the S Corporation Association in mobilizing a coalition of about 25 business groups, including the U.S. Chamber of Commerce, to oppose the proposed S corporation tax, which Senate Democrats and the White House have agreed to earlier this week. The Independent Community Bankers of America was canvassing Capitol Hill on Thursday to beat back the tax. ...

Other sectors of the financial-services industry are proactively girding against potential alternatives. Mortgage bankers, home builders, and Realtors remain on guard in case lawmakers turn to guarantee fees on mortgages, backed by Fannie Mae and Freddie Mac, as a way to pay for freezing student-loan rates. Lawmakers used those guarantee fees to fund another break last year.