A Different Perspective

I hold no animus toward anyone or any group that defends its members’ best interests. After all, that is the fundamental reason why associations are formed. That is why ICBA was formed. Therefore, it came as no surprise that five very prominent national financial trade groups wrote a 161-page letter to the Federal Reserve Board vigorously defending systemically important financial institutions (aka, SIFIs or too-big-to-fail firms). The five trade groups that signed the letter—the American Bankers Association, the Clearing House Association, the Financial Services Forum, the Financial Services Roundtable and the Securities Industry and Financial Markets Association—have the very largest financial firms in the world as members. Of course they are going to advocate for them. However, when the interests of the very largest banks and financial firms clash with the interests of our nation’s community banks, how is that reconciled? How can one defend and promote the best interests of both groups equally when the best interests of one will hurt the other?

ICBA also sent a letter to the Fed. Our letter was seven pages, and our position was clearly stated. We renounce the position taken by the megabanks, and we support the Fed’s proposals for bringing more rigorous financial discipline, higher capital standards and greater transparency to those institutions deemed most dangerous to our nation’s financial system and economy. So yes, we believe the Fed is on the right track, and financial sector luminaries, such as a two former Fed chairmen, several former Fed governors, at least two Fed district bank presidents, an FDIC director and some famous academics, apparently agree with ICBA.

If you read my previous blog post this week, you know already that community banks are still suffering from the fallout of the nation’s greatest financial calamity since the Great Depression—a calamity triggered in large part by the very financial firms the Fed now seeks to oversee more closely. You already know how unequal the treatment of a community bank and its staff is compared to a SIFI and its staff when stress occurs in those institutions. All one needs to do is watch the “60 Minutes” piece on Lehman Brothers to see it or read how several Wall Street moguls are doing today, even though their banks were given massive amounts of taxpayer dollars to keep them from collapsing.

Many books and scholarly articles set out in great detail the truth of what happened on Wall Street in this latest crisis. Every community banker has suffered to one extent or another by what happened over the past four years. ICBA understands that and is clear and straightforward in its vigorous defense of the community banking industry. No double standards, no obscure language. We know who we represent and in whose interest we act. Thus our letter to the Federal Reserve on their proposed regulations for controlling the SIFIs stands in stark contrast to those trade groups whose mission is to protect and defend the SIFIs. They do their mission. We do ours.

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