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Executive News: A visit with the chairman ...

Roger Beverage, OBA president and CEO

    As this issue of the Oklahoma Banker goes to press, we just concluded an event hosted by the OBA on behalf of and featuring Sen. James Lankford.  The function was attended by about 60 bankers from across the state. What an incredible public servant is Sen. Lankford! 

    In addition, Lankford invited the chairman of the Senate Banking Committee, Sen. Mike Crapo (R-Idaho). We “Skyped” him in from Boise through the wonders of modern technology, giving bankers the opportunity to speak directly with the chairman about the real impact Dodd-Frank has had, and is having, on bank customers.   

OBA Chairman Guy Sims welcomed Sen. Crapo and thanked him for taking the time to visit with the bankers assembled about regulatory relief prospects. He asked about the potential time table for action by the Senate (late summer is most likely before a hearing will take place, and perhaps Senate action by December);

State Banking Commissioner Mick Thompson emphasized the importance of getting the “right” people in the “right” positions at the Fed, the FDIC and the OCC. The chairman agreed enthusiastically;   

Jane Haskin explained how the rules governing “Qualified Mortgages” are harming consumers. The loan decision itself is simple; the problem, and what hurts customers, is trying to get them to meet the requirements of the “QM” rules that apply across the board to all banks, regardless of their business operating model, risk profile or size.  (That's nuts, by the way.);

    Note: The chairman noted he supports efforts in the Senate to provide QM “Safe Harbor” protection for any mortgage loan originated and retained in portfolio by a bank with less than $10 billion in total consolidated assets. He also told us that Senator Elizabeth Warren (D-Mass.) is thinking more in the neighborhood of $5 billion as an artificial cap. We made certain he understood that an arbitrary cap of any amount is not our first or even second choice.

    Moving on –
•    Larry Briggs asked what more bankers can do to make the case for meaningful relief with Senate Democrats. (Keep the conversation going); 
•    Mark Funke noted the current expansion of HMDA report requirements and the expanded number of fields that are included is a mindless and oppressive requirement for traditional community banks, especially those outside of MSAs;
•    Bill Schonacher emphasized the problems that will occur by expanding HMDA reporting requirements to include a large number of small business reporting fields; and
•    Guy Berry asked what can be done to eliminate the CFPB.

    Overall it was a great exchange and a terrific opportunity for bankers to visit directly with the Senator who controls the agenda that will determine the fate of their business.

    Most of you who have bothered to read this far know that for years I've emphasized the importance of banker involvement in the political process. Most importantly, the key is to talk to the person who controls the process.  Give him or her specific examples of why and how it's difficult to serve his constituents. Show him or her the unintended consequences of well-intentioned legislation. 

    Emphasize the essence of banker concerns: It's the customer, stupid. 

    Even though no one actually said that at the Lankford event, it's what lies at the heart of our collective effort seeking regulatory reform for traditional banks: making specific changes targeting specific issues that get in the way of taking care of your customers. 

    The chairman surprised me when he talked about H.R. 10 – the CHOICE Act – which is ready for consideration by the House of Representatives.  The insight I'd been given was he preferred to deal with specific pieces of legislation rather than one big package. That's not what I understood him to say at the event, although he did acknowledge changes to the CHOICE Act would be required before it could be taken up by his Committee.

    The chairman was familiar with the letter the OBA sent to President Trump earlier this year. The letter outlines specific requests for changes, including the appropriate statutory citations. I just hope the letter got to the right person in the White House. 

    So. Now what?

    The Central States Conference of state bankers' associations (of which we are a member) meets soon to talk about and seek a common direction as we go forward. The Conference is made up of 17 states in the Heartland and originally set up the Graduate School of Banking at the University of  Wisconsin-Madison.

    One of the things I plan to put on the table for discussion reflects some of the chairman's priorities. His priorities mirror the top priorities for the OBA:  tailored regulation for traditional community banks, and clarification that portfolio mortgage loans will have the benefit of the QM's “safe harbor.”

    Here's an aside that helps explain our collective strategy to actually get something done. You may have read about S. 1002 – the CLEAR Act.  It includes several provisions providing regulatory relief for traditional community banks. Specifically, this proposal clarifies that a mortgage loan originated and retained by a bank with less than $10 billion in total consolidated assets for a period of not less than three years automatically qualifies for the QM “safe harbor.”

    The OBA prefers and supports a more meaningful demarcation line, one that looks at the bank's business operating model and risk profile in giving such mortgage loans “safe harbor” protection.  But – at least this is a start.

    What you may not know yet – and why Chairman Sims is so optimistic – is which senators have joined Sen. Jerry Moran (R-Kan.) as co-sponsors of the bill.  Co-introducers include Sen. Thom Tillis (R-S.C.), Jon Tester (D-Mont.) and Heidi Heitkamp (D-N.D.). 

    Co-sponsors of the bill include Sen. Joe Manchin (D-W.V.), Sen. Joe Donnelly (D-Ind.) and Sen. Amy Kloubuchar (D-Minn.). That's five Democrats who are now on record in support of a bill that includes some of the OBA's top priorities in addition to the TAILOR Act (S. 366):

Portfolio lending protection means no litigation or regulatory risk for your bank;

Banks under $1 billion would be exempt from the annual management assessment of internal controls requirement imposed by Sarbanes-Oxley;

Mortgage loans under TILA would be exempt from the escrow requirements for banks with $10 billion or less in total assets;

Banks with less than $10 billion in total assets would be exempt from the Volcker Rule;

No waiting for a second offer of credit with a lower annual percentage rate as is now required under TILA; and
Creates a “safe harbor” for “good-faith compliance” with TILA-RESPA integrated disclosure rules.

    As I said, the OBA does not prefer arbitrary caps such as the ones contained in the CLEAR Act.  But – at least it's a place to begin the discussion. 

    The best news is that five Democrats have gone on record supporting traditional banks. We need eight in total to break a potential filibuster.  Five down and three to go. 

    Thanks to all who have pitched in to help spread the word about the need for traditional community bank regulatory relief – ABA, OBA, ICBA, CBAO, TBA, IBAT – whichever.  Your collective voice has been heard, but we still have some work to do. And, to get it done we need to involve bankers representing all of these trade groups.

    Remember: “Together We Are Stronger!”

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