Approximately 70 Hoosier bankers descended upon Washington, D.C., last week to assert their right to petition the federal government on issues of mutual concern to bankers throughout the country. We met with executive management of several bank regulatory agencies and conveyed our concerns about the impact of some of the excessive regulations written to fully enact the Dodd-Frank Act. This gross regulatory overreaction to the financial crisis has shifted bank risk management from credit risk to regulatory risk. For decades, bankers have measured credit risk so efficiently and effectively that the United States became the largest, most successful economic entity ever on earth. Yet despite that success, Congress has recently been punishing banks for the financial crisis in 2008 that the country has been recovering from so slowly. Never mind that much of the root cause of the crisis traces back to congressional and regulator policy malfunctions that permitted not only bankers, but many nonbank financial service providers, to make loans that were not appropriately creditworthy – all in the misguided zeal to increase the percentage of citizens who own homes.
Consequently much of our discussion with the Federal Deposit Insurance Corp., the Consumer Financial Protection Bureau and the Office of the Comptroller of Currency centered on the difficulty under which banks currently operate to provide mortgage loans to the consumers of our communities. New rules regarding a consumer’s ability to repay, that assesses hard debt to income ratio requirements, have eliminated the experienced judgment historically provided by local bankers, known as credit risk analysis. Now it is incumbent upon bankers to first heed the hard guidelines, so that the bank is not subject to frivolous suits or civil money penalties, now known as regulatory risk. Bankers hope that common sense prevails at some point, so that they can return to doing what they do best – assessing credit risk and growing the local economies of the communities they serve.
Our mighty band of bankers also called on Indiana’s 11 U.S. senators and representatives, along with House Financial Services Committee Chairman Jeb Hensarling of Texas. We certainly appreciate the time allotted to us by these busy elected officials, and we appreciate their understanding and support of our concerns about the overreaching regulatory environment in which bankers now operate. We spoke about the innate unfairness of the current tax code, by which banks pay very high taxes, yet are saddled with the inequity that competitors – such as credit unions and the Farm Credit System banks – pay little or no federal taxes. No one would design a system with such taxation unfairness, but it has evolved for reasons long since accomplished.
We were especially appreciative of the time provided to us by our national banking associations with whom we frequently work on issues of mutual concern. The Independent Community Bankers of America, the American Bankers Association and the Conference of State Bank Supervisors all met with us to present their respective views of the current atmosphere in Washington, D.C. Their insights always prove to be extremely valuable.
All in all, it was a productive investment of a few good days to carry the banner for the important business of banking and for the businesses, consumers and communities that rely on its services. The camaraderie among the participating bankers was also of importance, as we all work together to foster a stronger economy for Indiana and for the United States. We left for home with a sense of accomplishment and appreciation for the difficult issues faced by Congress each and every day. We thank our congressmen for their service and their consideration of our positions, and we thank our dedicated member bankers, who took the time to travel with us to DC to speak up for the business of banking and the consumers, businesses and communities it serves.
-S. Joe DeHaven