Bad news: Crapo/Brown negotiations fail

We have now confirmed the ranking member of the Senate Banking Committee, Sherrod Brown (D-Ohio), has walked away from the negotiations with Committee Chairman Mike Crapo (R-Idaho) on a proposed package for regulatory relief aimed at community banks. He did so in spite of his public statements some three weeks ago that progress was being made on a compromise, bipartisan bill and an announcement was likely to be made in three weeks or so.

“I’m told the negotiations have reached an impasse and will not resume,” said OBA President and CEO Roger Beverage. “I’m guessing the blow-up occurred because of Republican proposals to significantly change the SIFI (systemically important financial institution) ceiling (currently set at $50 billion). I don’t know that for sure, but if I had to bet, I’d bet that’s the problem.

“Democrats generally do not favor changing anything in Dodd-Frank, especially those who voted for it in 2010, like Brown. And in spite of rumors to the contrary, Brown could not possibly care less about banks of any kind or of any size. He just hates the industry for some reason.”

James Ballentine, executive vice president and director of congressional relations and public policy at the American Bankers Association called the break-down “Unfortunate, … but not unexpected as deliberations on how Dodd-Frank and other banking regulations should be altered have all too often hit political road blocks in the Senate, particularly with those like Sen. Brown who supported Dodd-Frank.”

So now what? According to Ballentine, we’re back to Plan “A” – targeting moderate Senate Democrats, both those on and those who are not on the committee. Any regulatory reform proposal that moves forward will need the active involvement of these moderates.

There are four moderate Democrats on the Senate Banking Committee: Senators Jon Tester, (D-Mont.), Mark Warner, (D-Va.), Heidi Heitkamp, (D-N.D.) and Joe Donnelly (D-Ind.). These four senators are clearly sympathetic to the need for regulatory relief for community banks. Each of them has indicated in the past they will support reforms, as long as they are focused on traditional community banks. Recently, these four committee members wrote a letter to Sens. Crapo and Brown asking them to take action … to facilitate a bipartisan legislative breakthrough.

“It’s imperative that we do everything we can to convince these four Senators to support our pleas for regulatory relief,” Beverage said. “We’re not asking for the moon; we’re simply asking for a handful of what we believe are essential changes to the regulatory process for smaller, non-systemic traditional banks:

• ”Tailored’ regulation.
• QM safe harbor status for mortgage loans originated and retained by banks.
• Clarifying that Basel III standards are intended for globally connected financial institutions, not smaller traditional banks located in smaller and rural communities across the United States.

“This political posturing – making certain you get your party’s talking points out there for all to see to support your re-election effort instead of actually doing what you’re supposed to be doing – representing your constituents – simply cannot continue,” Beverage said. “This is nuts. And what we’re asking for on behalf of smaller, traditional banks is not complicated.

“Our constituents were not then, and are not now, even remotely connected to the problem that Senate Democrats think they fixed when Dodd- Frank was passed seven years ago. Now the challenge will be to harness banker frustration and disgust in a positive way in order to convert the four moderates on the committee to our cause. But we still need four more Democrats to get to 60 votes.”

“We look forward to continuing with our plan in working with all state associations on these efforts,” Ballentine said. “(We will turn) with extra attention to (other states).”

Ballentine pointed to the states of Connecticut (Sen. Christopher Murphy); Delaware (Sens. Tom Carper and Chris Coons); Florida (Sen. Bill Nelson); Maine (Sen. Angus King); Michigan (Sens. Debbie Stabenow and Gary Peters); Missouri (Sen. McCaskill); New Mexico (Sen. Martin Heinrich); Pennsylvania (Sen. Bob Casey); Virginia (Sen. Tim Kaine); and West Virginia (Sen. Joe Manchin) as potential votes, in addition to the four committee members.