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Bankers: Make Your Voices Heard!
With the news yesterday (April 7) that Sen. Richard Shelby (R-Ala.), the Ranking Member on the Senate Banking Committee, is working on a compromise that would allow creation of a stand-alone consumer agency several bankers have asked where things stand. Here's what we know, and thanks to Ed Yingling, Floyd Stoner and James Ballentine for providing this information to us.

First, Shelby is in South America and it's his staff that's focusing on the proposed compromise language, not the Alabama Senator. We're told that the idea is to move the consumer agency to a “free-standing” entity, but with more oversight of its rule writing efforts that gives traditional bank regulators a stronger position. We're told there are other changes to the CFPB's powers as well, but the language is under seal so we can't know for sure.

We understand that the Senate Democratic leadership plans to bring Sen. Dodd's Financial Reform and restructuring bill to the Senate floor during the last week of April. That means that over the next three weeks we're anticipating a lot of anti-bank rhetoric and the outcome of this proposal may well depend on what we do during that time to make our case.

The importance of what lies immediately ahead cannot be overstated. The rest of this month may well be the most important three weeks for your industry that any of us alive today have faced in Washington, and how it comes out will depend on what we do working together.

Here are some possible outcomes:

  1. An agreement on the CFPA and other issues is reached between Chairman Dodd and Sen. Shelby before the bill going to the floor. If that's the case, it won't be necessary to worry about getting “all” Republicans, which won't happen. If the Democrats pick off just one, they have their cloture vote in hand and they can do what they please.
  2. In that regard, even if Shelby doesn't go along and no compromise is reached, the Democrat leadership could force a cloture vote to see who has the strength. They will argue that Republicans are backing “Wall Street” rather than “Main Street” or “the people” which will put pressure on many Republicans to break away from their unity. There's a good chance that at least one of the 41 will do so, and the rest could be history if that happens – assuming all the D's hang together, which is not a given at this point. Depending on when they pull the pin, such a cloture vote could come right away, leaving the bill pretty much in the form it is now.
  3. If there's a push for amendments, Democrats are likely to try and load it up with more anti-banking amendments, making a bad bill much worse. With 60 votes they can pass anything.
  4. There's always the possibility someone will blink. We could get right up to the beginning of a roll call vote and a compromise could pop out, from Shelby, Sen. Corker (R-Tenn.), Sen. Judd Gregg (R-N.H.) or elsewhere. Who knows what that would include?
  5. Then there's the possibility that no one blinks, the Republicans hold firm with no defections and no bill is enacted. Rather than compromise any further the administration thinks it has a winner putting Republicans in the “big Wall Street banker” category and trashing them accordingly as we head to the November elections. We're told that some in the administration believe it would be better to have the issue for the election than compromise on the issue of having someone look out for the “people” – the “Consumer Financial Protection Agency/Bureau” for example.

We're guided closely by the ABA's lobbying team on the ground in Washington and Ed, Floyd and James tell us there's no way to know for sure which way this thing will go. Apparently there's a split among the bill's advocates with some favoring the “forcing cloture” option and some thinking it's better to use it for leverage in the November elections. There is also a sense that negotiating a settlement is a better idea, but those folks are apparently in the minority at this point.

We're going to collectively get our blood pressure boiling over the next three weeks with a lot of “bank bashing” and such. Here at the OBA we'll do our best to be out in front of it and respond quickly when necessary, but we just want to give you a “heads up” at this point.

Our position – as well as the position of the Alliance of State Bankers Associations and the ABA (we don't know where ICBA stands at this point) – is that we favor the “right reform” but oppose the bill that was reported from the Senate Banking committee on a 13-10 party-line vote. If we're going to win this fight, we have to hang together – big banks and small banks and every bank in between them. We need to put the bee on our two senators and make sure they hold fast to support our position.

Our colleagues with Democrat senators are making the case as best they can. If you have banker friends in some of those states (NE, IN, IA, MN, SD, WI, OH, LA, AR, CO,) and elsewhere, please take a minute to encourage them to visit with their senators and ask for their support a bill that works for community banks. Ask them to forcefully tell Chairman Dodd and the Senate Democratic leadership that they oppose trying to force a cloture vote until needed changes are made.

The vote on this bill may well be the most important vote Senators Inhofe and Coburn will ever make as it relates to the state's community banks. As reported, this bill is not acceptable and it hurts all Oklahoma banks – the ones that neither caused nor contributed to the financial and economic crisis. These problems in the bill can be fixed without undermining the reforms that are needed.

Here's why we're asking you to oppose this process:

  1. A consumer bureau that's authorized to impose new reporting requirements and other costly responsibilities on community banks will drive up consumer costs and conflict with prudential regulators.
  2. These new, expensive reporting requirements and many of the rules for enactment that have been discussed, like overdraft charges, have absolutely nothing to do with “fixing” the financial crisis.
  3. Stripping oversight responsibility for state member banks from the Federal Reserve makes no sense. It's like owning a West Virginia coal mine and removing all of the detectors that indicate there's a potential problem in the mine and it's not safe to be there. Why would you do that?
  4. The risk retention requirement is nonsense. It will force community banks out of the mortgage lending business completely and harm consumers.
  5. It's a serious mistake to avoid accounting rule-making oversight. FASB is an island unto itself and its rules have a tremendous impact on safety and soundness issues.

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