WASHINGTON — The top Republican tax-writer in the Senate yesterday warned colleagues that provisions in the House-passed jobs bill that offer high subsidy rates for Build America Bond-type programs would allow Wall Street banks to pocket more in underwriting fees.

“The taxpayers pay for those lucrative fees to Wall Street,” Sen. Charles Grassley, R-Iowa, said in a memo released as the Senate prepares to take up the House bill this week. He called BABs “a spending program disguised as a tax cut.”

The ranking minority member of the Senate Finance Committee issued the memo as Goldman, Sachs & Co., one of the largest underwriters of BABs, told him that it made a total of $54 million underwriting $34 billion of BABs since the program’s inception. It only served as lead underwriter on $9.6 billion of those issues.

Grassley had been pressing Goldman over the amount of underwriting fees Wall Street firms make from BABs compared to traditional tax-exempt bonds and corporate bonds, which also are taxable.

In a response to Grassley that the lawmaker released yesterday, Goldman said it earned $1.7 million of financial advisory fees on $2.4 billion of BABs. The firm told Grassley it made $149.7 million in underwriting and advisory fees from $154 billion of municipal offerings since the beginning of 2009. The figures include deals for which the firm was not lead underwriter.

“Build America Bonds were created in the stimulus last year as a temporary item,” Grassley told colleagues. “Now a temporary program is becoming larger and Wall Street is seeking to make it permanent. Wall Street is profiting and cheering the expansion.”

Asked whether Grassley is pushing for a termination of BABs or a lower subsidy rate, a spokesperson said he wants to make sure that lawmakers and the public know the money is coming from taxpayers and that some of it is going to Wall Street.

“House members should have to answer for giving yet more taxpayer dollars to Wall Street and foreign investors,” Grassley said in the memo. “Senators should understand the vote they’re about to take.”

Goldman told the lawmaker the different approximate average fees as a percent of borrowed amount for a 30-year bond: 0.875% for investment-grade corporate bonds, 0.600% to 0.875% for BABs, and 0.500% to 0.625% for tax-exempt bonds.

The firm defended its fees, saying it competes for issuers’ business with at least 10 other major underwriters. If fees for BABs are higher than traditional tax-exempt bonds, it is because they are relatively new compared to tax-exempt bonds, which have existed for decades, it said.

The jobs bill, as currently amended, would allow issuers of four tax-credit bonds — qualified school construction bonds, qualified zone academy bonds, new clean renewable energy bonds and qualified energy conservation bonds — to sell them and receive a direct subsidy payment from the federal government instead of offering investors tax credits.

Under the House-approved measure, the payments would be roughly equivalent to the credit rate on the bonds: 100% of interest costs for the school bonds, 70% for the energy bonds. The version of the bill approved earlier by the Senate had offered much lower rates. Small issuers that sold less than $30 million annually of bonds would receive 65% of the credit rate, and large issuers would get just 45% of the rate.

But John Buckley, majority chief counsel for the House Ways and Means Committee, on Monday told state treasurers meeting here that no issuers would opt to issue direct-pay bonds under the lower Senate rates. A Treasury official speaking at the meeting agreed with him.

Buckley yesterday said BABs have spurred taxable issuance. He said also that, in the first year of BABs’ existence, yields on tax-exempt bonds and the ratio of munis to Treasury bonds have improved.

“There’s nobody that I know who does not view the Build America Bonds program as an enormous success with the possible exception of one person,” he said.

Lynn Hume contributed to this story.

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