Bankers meet in D.C., focus on consumer protection, TBTF

Upper Midwest bankers joined colleagues from around the country in Washington, D.C., just days after U.S. Sen. Christopher Dodd introduced financial industry regulatory reform legislation. Nearly 1,000 bankers gathered at the Renaissance Washington Hotel for the American Bankers Association's Government Relations Summit and to visit with members of their congressional delegations March 17-18.. "We had a spirited and healthy conversation with Sen. Kohl," reported Kurt Bauer, president/CEO of the Wisconsin Bankers Association. About 35 Wisconsin bankers participate in the visit. U.S. Sen. Herb Kohl (D-Wis.) is a member of the Senate Banking Committee, which Sen. Dodd chairs. "It was by far the most effective and important meeting we've ever had with a federal official.". Joe Witt, president and CEO of the Minnesota Bankers Association, said he is concerned about the partisan spirit which seems to be driving much of the politics at the Capitol. He noted the bankers' visit coincided with the very divisive health care debate. "The politics have really taken over," he commented.. Witt said the banking industry has a better chance of improving the pending reform legislation if Democrats and Republicans work together. "I left the conference hopeful on regulatory reform," Witt said. "It seemed the prospect for a bipartisan approach was good. Now, however, I am much more concerned. The Dodd bill passed along party vote. The bipartisan discussion went completely out the window.". ABA Chairman Art Johnson told colleagues that unless changes are made to the Senate bill to win support from some Republicans, the bill is unlikely to be taken up by the full Senate. "ABA believes that enacting reform will be difficult without broad, bipartisan support – and the absence of such support leaves it vulnerable to amendments that could result in an incoherent and unworkable regulatory structure," Johnson wrote in a memo to ABA members March 23.. Witt is particularly concerned about the legislation's consumer provisions. He said that without appropriate enforcement mechanisms for non-banks, new consumer rules are likely to put traditional banks at a further disadvantage. . "We have to kill CFPA," Bauer concurred. "As long as the agency is bank-focused, it is going to add burden on smaller banks and widen the divide between banks and non-banks.". Comptroller of the Currency John Dugan told bankers the Dodd bill would make consumer protection a higher priority than safety and soundness. "In every case, consumer protection has the edge and will trump safety and soundness, and I think that's backwards," he said.. Dugan and FDIC Chairman Sheila Bair spoke to bankers at the ABA event in Washington and then traveled to speak to bankers meeting for the annual convention of the Independent Community Bankers of America in Orlando. (Look for coverage of the ICBA convention in the May 1 edition of NorthWestern Financial Review.). House Majority Leader Steny Hoyer (D-Md), told bankers that additional regulation is needed. He compared banking to football. "It's like the player who takes a half a step before the ball is hiked when the referee isn't looking," Hoyer said. "I don't think he is a bad person, but that is why you need a referee on the field to make sure the rules are applied and followed, so both teams are treated fairly; that is what regulation is about." Hoyer added that regulation should not prevent banks from operating effectively and profitably. Hoyer, one of several members of Congress to address bankers, said he expects regulatory reform legislation to pass by Oct. 3. "It is important that you take it as if it is going to pass," he told bankers.. Sen. Richard Shelby (R-Ala) did not sound as confident about the legislation's prospects. "We could support a bill that was a good bill, substantive, far-reaching, good for the economy, good for the consumer and the banking system, but so far we haven't seen that," Shelby said.. The meeting included a panel discussion about media coverage of the banking industry. Former journalist Jeffrey Birnbaum of the BGR Group, a public relations, lobbying and media firm based in Washington, D.C., warned bankers that the environment is likely to become even more difficult for the financial services profession. "You are being demonized and you will continue to be as a calculated political strategy, especially by President Obama," he said. "The president is a populist. He divides the world, takes the largest faction and endears himself to it and attacks a smaller, relatively unpopular alternative, and demonizes it. He has done so with health insurers, with rich people, and he is about to step it up with banks and financial services companies.". Birnbaum said bankers can prepare themselves. "Don't allow the president to divide your industry…His so-called responsibility fee — he is already preparing to carve out community banks and put the burden on larger banks. If you accept that and allow the industry to be divided, it will be your own fault. Soon after the initial fees are imposed on the bigger banks, do not be surprised if you are next. So do not allow yourselves to be divided.". Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, spoke as part of a panel with two other Fed bank presidents. He noted the importance of resolving the too-big-to-fail problem. "We know that too big to fail won't go away without legislation that brings it under rule of law. It causes a tremendous misallocation of recourses; for every banker in this room, it causes a big competitive disadvantage.". In a transcript on the Federal Reserve Bank of Kansas City web site, Hoenig says: "It is only now that we are discussing legislation to address the issue of a special class of the largest firms that we have deemed too big to fail. This is the one item that must be addressed if we are to have any real competitive equity among all financial institutions.". Johnson, chairman and CEO of United Bank of Michigan, Grand Rapids, urged in his memo: "We will be asking all bankers to continue to push against the Consumer Financial Protection Bureau and for an effective resolution to too-big-to-fail."