Common Sense Prevails on Capitol Hill

regulationSometimes common sense really can prevail in Washington. It’s been known to happen before, but the latest example was the House’s recent removal of an onerous amendment that would have drastically increased IRS reporting requirements.

This particular amendment would have required banks to send a 1099-INT form to any depositor who earned any amount of interest in a calendar year, removing the current $10 interest-earned threshold. It also would have required banks to report to the IRS information on all non-interest-bearing accounts. So not only would this amendment set off a tidal wave of new 1099s for even the paltriest of savings account earnings, it would even expand reporting for accounts that earn no interest whatsoever.

Not only that, but this paperwork burden appeared out of nowhere in a piece of legislation primarily focused on supporting economic growth in Haiti and sub-Saharan Africa. No one has claimed credit for including it in the Trade Preferences Extension Act (H.R. 1295).

The good news is that following strong opposition from ICBA and others in the financial industry, the House overwhelmingly passed H.R. 1295 without this amendment. Responding in full force just as quickly as this amendment appeared out of thin air, we were able to get the House to leave it on the cutting room floor. I did say common sense prevailed, didn’t I?

Of course, ICBA remains on high alert. This legislation is expected to come before the Senate as it is currently written, without the 1099 provision. But we’ll continue monitoring the bill and working with lawmakers to ensure the provision does not sneak into H.R. 1295 like it did a couple weeks ago.

That said, I’m confident we’ve put out this fire for the time being. Now we can return to actively working to roll back excessive community bank regulation, rather than warding off new regulatory threats as they crop up. It’s clear by this recent success that logic and reason can indeed win out in Washington. So let’s keep the pressure on and see if we can get our nation’s capital to turn this flash of common sense into a trend.

Record-Setting Fines Still Megabank Pocket Change

Pocket-changeThe recent guilty pleas and fines against five of the world’s largest financial institutions demonstrate not that regulators are finally cracking down on megabank crime, but that it’s still business as usual on Wall Street.

Five global banks pled guilty to conspiring to manipulate interest rates and foreign currency exchange markets and have to pay nearly $6 billion in fines. But compared with the fines and lawsuits awaiting individual community bankers who exercise poor judgment in running their institutions, these megabank penalties are small potatoes.

While JPMorgan Chase, Citigroup and others pled guilty to market manipulation, no single individual from these institutions was called to account. A lengthy digital trail of chat room conversations from traders who called themselves “The Cartel” shows that plenty of individuals knowingly broke the law to line their pockets. Yet, not one of these individuals was held legally responsible for their illegal, anticompetitive and costly activities. Meanwhile, the institutions themselves have been granted waivers from regulators that allow them to continue operating and engaging in securities activities despite their violations.

For community bankers, this just doesn’t compute. In our neck of the financial industry, no one is above the law. Even boards of directors not directly involved in the daily operation of community banks can be hauled into court, publicly humiliated and held liable for poor judgment at their institutions. As I wrote in a recent letter to banking regulators, violations of this magnitude at a community bank would have promulgated the resignations of senior management and possibly the outright closure of the bank.

It’s incomprehensible to this former community banker that not a single Wall Street senior executive or director has been held culpable for violations that brought on the greatest financial crisis since the Great Depression. But Wall Street executives can break the law and suffer no personal consequences at all.

Even the nearly $6 billion in fines don’t register much of a blip on the balance sheets of institutions with a combined $7.9 trillion in assets. The fines represent just 7.3 basis points for these five banks. As Warwick Business School Dean Mark Taylor recently wrote, the $545 million fine on UBS would represent a whopping 15 percent ding on the megabank’s annual bonuses. Oh, the humanity! In fact, the financial markets reacted so positively to news of the fines that the share prices for several of the penalized banks increased. Like I said: just another day on Wall Street.

When you crunch the numbers, it’s obvious that even headline-grabbing guilty pleas and billon-dollar settlements don’t eliminate banking industry inequities. The United States has always held steadfastly to the ancient principle that all are equal before the law. And while that long-held value has applied even to U.S. presidents, it apparently does not apply to Wall Street executives.

If we truly want to rein in market manipulation, policymakers must adopt a fair and consistent enforcement policy that treats community banks and megabanks alike. There should not be one set of enforcement procedures for the largest institutions and another for everyone else.

Community Bankers to Washington: Let’s Work Together To Get the Job Done

800px-US_capitol_domeLast week’s ICBA Washington Policy Summit showed once again that community bankers are not only willing to go the extra mile—they’re even grateful for the privilege. With nearly 1,000 community bankers and industry advocates in the nation’s capital to advocate positive reform in more than 300 meetings with policymakers, there was a feeling of enthusiasm and optimism unique among community bankers.

They rolled up their sleeves to solve problems, support local communities and expand access to credit like it’s their job. (That’s probably because it is.) And just like the hard work that community bankers put into their local communities, their efforts in Washington are already paying off.

As I wrote in Morning Consult before the summit, the industry focused its meetings with Congress and federal regulators on right-sizing regulation, instituting uniform data-security standards, and ending taxpayer subsidies for credit unions and the Farm Credit System.

First, community bankers urged congressional support for the CLEAR Relief Act (H.R. 1233/S. 812) and the Community Bank Access to Capital Act (H.R. 1523) to ease excessive regulation and promote access to capital on Main Street. Second, attendees called on policymakers to impose Gramm-Leach-Bliley Act-like standards on other players in the payments system, including retailers, to ensure meaningful consumer protection. Finally, the industry took on unwarranted tax subsidies for credit unions and the Farm Credit System to ensure a more consistent and less costly approach to taxing financial institutions.

In other words, community bankers came to Washington to support common sense and consistency—an appropriate regulatory structure, a level playing field. By rolling up their sleeves and digging in, community bankers have shown a readiness to put in the work that is needed to advance positive reform. And as I noted—we’re seeing results. H.R. 1233 has added 22 cosponsors since last week to bring its total to 40 in the House, and S. 812 has tacked on eight for 29 total Senate cosponsors.

But we need to continue applying pressure on Congress to ensure passage of these critical reforms. The Washington Policy Summit might be over, but community bankers everywhere can stay in touch with their policymakers via ICBA’s Be Heard grassroots website. Follow up with your congressional delegation and hold their feet to the fire. By advocating positive reforms in letters to Congress, we can all go the extra mile to ensure community banks can continue to support local customers and communities one loan at a time.

April is a Flurry of Community Banking Activity

CBLheader031815Wow. I don’t think there’s much more you can say with the flurry of activity going on at ICBA and throughout the community banking industry right now. Coinciding with last week’s kickoff of Community Banking Month and the final countdown to the ICBA Washington Policy Summit, ICBA also launched Community Banker University.

So at the same time that we’re celebrating community banking in April and gearing up for our annual grassroots advocacy event in Washington, we’ve also transformed and modernized our educational model. No wonder everyone around here has been so busy.

Of course, the beneficiaries are community bankers and the customers they serve. ICBA offers a Community Banking Month toolkit to help members spread the word about community banks, and our Washington Policy Summit allows community bankers to take the industry’s advocacy message directly to policymakers on Capitol Hill. Now with Community Banker University and our new partnership with the Barret School of Banking, community bankers can access a fresh, modern approach to continuing education and professional development.

These initiatives go straight to the heart of the ICBA mission, which is creating and promoting an environment where community banks flourish. That means advocacy and public policy, it means marketing and communication, and it means education and development.

Just like community banks and other small businesses, ICBA is never content with the status quo. We’re going to keep innovating, keep pushing, to ensure we’re doing everything we possibly can to support our beloved industry. So I encourage every community banker out there to check out everything ICBA has to offer this April. It’s enough to make you say “wow.”