Executive News: Frustrated

Earlier this month, some 20 Oklahoma bankers joined me at the ABA Summit in Washington. This year’s summit was the largest Summit ever for ABA – more than 1,300 bankers and state association folks gathered to discuss some of the pressing issues of the day.

We heard from the chairpersons of the respective committees that have jurisdiction over your business and, quite literally control every aspect of your institution: Rep. Maxine Waters (D-Calif.), chairwoman of the House Financial Services Committee (HFSC), and Sen. Mike Crapo (R-Idaho), chairman of the Senate Banking Committee.

It was the first time Chairwoman Waters has ever addressed a large, ABA-sponsored crowd of bankers. She read her entire speech but took no questions from the bankers gathered there.

“Banks were bailed out,” she said. “Banks have been profitable, but what are you doing for your customers? What are your practices?”

Apparently, her staff didn’t brief her on the fact the bankers she was addressing were NOT “bailed out” in any way, shape or form. And it’s still apparent she does not have a firm grasp on the business of traditional banking and how it works.

What are bankers doing for their customers? Oklahoma bankers are “doing” what they’ve been doing for more than 100 years – helping them catch their dreams, helping their communities prosper and succeed.

The chairwoman emphasized the need for more bank capital. I’m guessing (again) she was speaking of the larger Wall Street firms that have historically carried far less capital than the nation’s community banks.

For example, the numbers for Oklahoma banks at the end of last year (in addition to showing another record earnings year) show the industry’s combined leverage ratio of 9.69 percent (banks under $100 million are at 12.27 percent and the rest are at 9.59 percent). Total capital to risk-weighted assets shows the combined total at 13.50 percent, with banks below $100 million at 19.98 percent, and those banks above $100 million are at 13.29 percent.

So. I think we’re pretty good out here in fly-over country.

Then she talked briefly about the new Diversity and Inclusion Subcommittee of the HFSC she created. In case you were wondering what her plans are for that subcommittee (on which Alexandria Ocasio-Cortez serves), they include making certain diversity and inclusion are embedded in the banking system, and are mindful of her objective of finding more minorities and women in management positions across the industry.

Other priorities included creating a path forward to allow financial institutions to deal with the reality of what’s going on in Oklahoma’s evolving marijuana industry, AML/BSA modernization, preserving the 30-year mortgage option as a part of reforming Fannie and Freddie and making sure there is access to affordable housing purchases or rentals for everyone.

And of course, overarching all of these priorities is, in her view, the necessity of establishing a strong consumer protection framework.

Sen. Crapo also outlined his committee’s priorities. Unfortunately, dealing with the marijuana mess in 33 states was not on his list. His list includes GSE reform (a very tough issue he said), data security and privacy, capital formation and governance, FinTech matters that are becoming more disruptive by the day and “right-sizing” regulations.

While all of these issues are important and need to be dealt with, I had hoped he would at least mention the marijuana mess in these states. I had hoped he would take notice of what’s happening on the ground in 33 states with each state’s marijuana business. Idaho is not one of the 33 states that have authorized marijuana use in some form, so he’s getting zero pressure from the folks back home to do something about the mess.

Some bankers “just say no” to customers who are engaged with the commercial side of the marijuana business in any way. Don’t help them; don’t bank them; send them out of your bank even if they are good customers. You do that, and the problem is solved. But – alas – it just isn’t that easy. I truly wish it was. And that’s where the “frustration” comes in that I mentioned in the headline to my column this month.

Normally our congressional delegation is very supportive of the banking industry. Sen. Inhofe, for example, has never missed a vote in favor of your industry. Rarely have I been told that the answer to our “ask” is “absolutely not.” At one of our visits, the disappointing answer was not only “no,” but HELL NO! This response from Rep. Markwayne Mullin (R-Okla.-2) was heard clearly by the 20 or so Oklahoma bankers in the room. It was loud. It was very clear. The message is received and public safety be damned.

Other members of the delegation were aware of and concerned about what’s happening on the ground and the problems that have emerged because SQ 788 is now in the state’s Constitution. We can’t just “tweak” it and limit its applicability.

But for most Oklahoma congressmen and both senators, their answers to the question of supporting H.R. 1595 were non-committal. I will continue to make the case even though Reps. Hern, Lucas and Cole know it’s not going anywhere in the Senate anytime soon.

The lone exception was Rep. Kendra Horn (D-Okla.-5). I’m fairly certain she will sign on as a co-sponsor of this bill and vote to pass it when it gets to the floor.

Neither of our senators are likely to support the bill if it comes over to the Senate. Sen. Lankford said he could support a modification that limited its applicability to the second- and third-tier entities impacted by the legalization of the drug for medical purposes – plumbers, electricians, landlords and others who are currently part of the “collateral damage” caused by SQ 788. But that idea is not going to happen either. I like it, but it’s not gonna happen.

So here we are again. A pressing issue is now before our state and 32 others. It impacts every bank in the country, and it’s especially problematic for smaller, traditional community banks. And, once again, none of those banks had anything to do with causing the problem. Just like the financial collapse of 2008 and the near-meltdown of the global financial system, Oklahoma’s traditional community banks had nothing to do with its creation. But they paid a HUGE price, nevertheless!

Now along comes another real problem for our state’s banks, their customers and the communities they serve. It’s also a problem in 32 other states, but this time it involves possible criminal consequences!

These bankers are just trying to take care of their customers. And then there are the growing concerns about public safety caused by fostering an all-cash business environment. No one’s talking about that yet.

What’s most frustrating to me is there’s an easy answer. This answer doesn’t support or oppose the use of marijuana. Instead its solution deals with reality on the ground, in the real world. Importantly, it takes the element of “public safety” off the table.

It’s similar to our many, many requests for regulatory relief of a different kind as the impact of Dodd-Frank continued to crush the nation’s traditional banks. Here’s the script:

We all go to Congress and tell our delegation the factual story about what’s happening to Oklahoma consumers.
There’s a real problem and, yet, Congress won’t help us fix it and improve our state’s commercial environment;
Everyone understands the problem and is sympathetic to our plight.
There’s a real easy fix that sits right in front of us.
Once again, we come back empty-handed, without a solution in sight.

It’s true we did succeed in getting S. 2155 passed in the last Congress. But – that took 10 years when it should have only taken a few months.

And – as I said – here we are. Again. Color me frustrated.