Seventy-Five Days of Political Campaigns

August 24, 2016

With the Olympics wrapped up, and the Republican and Democratic national conventions behind us, prepare for the most aggressive political campaigns in history to begin saturating our every moment. Television, newspapers, the U.S. mail, the internet and even your cell phone will be deluged with political campaign messages. Why? First, there are lots of races of high importance to the future of our country, state and educational systems. Second, candidates’ getting their names out is the top priority in becoming elected. Third, the current rules for campaign finance assures an almost bottomless pit of money available on both sides of the aisle.

Throughout the country, all eyes will be on the presidential race. Never before have we had two candidates who are viewed by voters so negatively. Republican candidate Donald Trump and Democratic candidate Hillary Clinton, compared with previous elections, have relatively little support within their own parties. Will those non-supporters even show up to vote? What will independents do? Will those who backed Democratic candidate Bernie Sanders in the primaries now vote for Hillary, or will they switch to maverick Donald, or perhaps abstain? Will those staunch Republicans who openly oppose Donald Trump actually vote for a Democrat? If ever there was an opening for a third-party candidate, this seemed to be the year, yet no credible third-party candidate has emerged. The Libertarian party has a slate, but apparently it lacks funding and, thus far, does not have enough support to be invited to presidential debates.

Also at the national level, we have an important election in Indiana for the U.S. Senate, pitting current U.S. Rep. Todd Young against former Indiana Gov. and U.S. Sen. Evan Bayh. Both have access to unprecedented cash to fund their efforts. Both have bona fide credentials qualifying them for this office. Will Republican-leaning Indiana favor Todd Young, or will Indiana’s historic affection for Evan Bayh win the race for him?

Switching to the state races, the race for governor is underway between the relatively unknown Eric Holcomb on the Republican ticket and former Speaker of the Indiana House of Representatives and previous candidate for governor, Democrat John Gregg. At this writing the race appears to be a toss-up, and the debates between them could be the determining factor.

The last race I want to cover is for the office of the superintendent of public instruction. Incumbent Glenda Ritz has earned the Democratic nomination against challenger ‒ and newcomer to politics ‒ Jennifer McCormick, who was selected by Republicans. Ritz has been sparring with Gov. Mike Pence for the past four years over the direction and control of education in Indiana. This has made her loved by some and reviled by others. Either way, she has become a lightning rod within state government, and this election will be more of a referendum on Glenda Ritz ‒ much like four years ago, when she defeated incumbent Tony Bennett. While I believe that this should not be an elected office, but instead should be appointed by the governor, it nevertheless will be a race worth watching. Certainly the state representatives and senators are watching carefully, since education is the largest expense in the state budget.

For the next 75 days, we will all be subject to political campaign overload. Freedom isn’t free, and part of the price today is enduring the process. Yet I wouldn’t trade our system for any other on earth. I hope that Americans exercise their right to vote, and do so thoughtfully.

– S. Joe DeHaven

Illogical Conclusions From a Shoddy Report

August 17, 2016

On Aug. 10, the White House Council of Economic Advisors issued a report citing that the Dodd-Frank Act (DFA) has had no impact on community banks. Really? These guys should be stripped of their economist badges if they expect any of us to believe this self-serving administration whitewash. Read this report for yourself, as I will not do it justice. There are far too many “conclusions” reached with incomplete or poorly analyzed data.

The analysis suggests that new regulatory requirements are not causing the declining numbers of community banks because, since 2010 when DFA was signed, lending growth and geographic reach remain strong. These economists might have considered that the economy has been improving since that time; as the saying goes, a rising tide raises all ships. Assuredly the 1,708 community banks that have disappeared since July 2010 would beg to differ with this view that DFA had no bearing on their sale or failure. I talk with bankers regularly, and they tell me that DFA is having a terribly negative effect. Dodd-Frank has been the primary cause of hundreds, if not thousands, of decisions to sell banks. Not all of these sales decisions have yet been consummated, but most will be.

The report also cites the following as a reason for the decline in de novo banks: “macroeconomic conditions in recent years have also contributed to the lower rate of new entry by small banks.” Allegedly this situation also is a primary factor in the decline of banks under $100 million in assets. However, there is no supporting evidence to support this conclusion. More likely is that the drag of DFA on the economy is one of the causes of this macroeconomic condition.

The report goes on to tout all that the administration has done policy-wise to help community banks. Most of these efforts have been initiated by Congress at the pleading of the banking community. More definitive actions that would really help, beyond rolling back much of the unnecessary regulatory burden, are not even mentioned. These actions include putting banks on a level playing field with credit unions and the Farm Credit System, which could entice investors to start more de novo banks.

The report presents five facts “relevant to the debate” (their words, not mine):

  1. Lending by all but the smallest community banks has increased since 2010. The facts to support this ignore that an improving economy has created more loan demand.
  2. Access to bank offices at the county level remains robust. Banks are going to go where people and businesses are, so it will always remain robust.
  3. The average number of bank branches per community bank has increased. Not a brilliant observation. Larger community banks buying smaller community banks has to raise the number of branches per surviving bank, unless those acquiring banks close all of the offices of the acquired bank. Then what would be the purpose of the acquisition?
  4. Over the past two decades, the number and market share of the smallest community banks ‒ those with assets less than $100 million ‒ has been declining. Under this item, the authors cite that the biggest declines occurred before DFA was signed. Actually, there were nearly 20,000 banks and thrifts in 1984, and more than half of them had sold prior to the signing, so there were fewer banks under $100 million to be sold since 2010.
  5. Macroeconomic conditions likely explain a substantial portion of the drop in new bank entry in recent years. The report cites several possible reasons for this trend, but amazingly ignores that the regulatory burden on these potential new entrants might be driving them away.

I have only scratched the surface of this illogical report. I urge you to read it and draw your own conclusions.

– S. Joe DeHaven

‘Fair and Right’ in Sports and in Banking

August 10, 2016

Evansville native, Indiana University student and now Olympic gold medalist Lilly King has grabbed headlines worldwide for her comments describing her Olympic win on Monday as “a victory for clean sport.” Her primary competition in the event, the 100-meter breaststroke, was Russian swimmer Yulia Efimova, who previously had tested positively, twice, for use of performance-enhancing drugs. In fact Efimova was cleared to participate in the Olympics just days prior to Monday’s event. Lilly, who at age 19 shows confidence beyond her years, has stated that she did not believe Efimova should be allowed to compete, given her past offences. Now many are questioning why any known drug cheaters should be allowed into the Olympics.

This question of fairness extends far beyond the sports arena. Bankers, for instance, regularly compete for customers with shadow banking system players who do not have to abide by the same requirements that bankers face. This is not a matter of cheating ‒ the shadow bankers are not officially breaking rules ‒ but instead a question of fairness. Why should shadow banks be allowed to play by an advantaged set of rules? Credit unions, too, enjoy significant regulatory advantages over banks (e.g., no Community Reinvestment Act requirements), plus are exempt from federal and often state taxes. How is that fair and right?

Another example is the Farm Credit System, a quasi-private/public government-sponsored enterprise that pays federal taxes only on a small percentage of its business. Additionally the FCS profits from funding advantages through an implicit federal government guarantee, and it continues to liberalize its lending reach well beyond farming and ranching. How is that fair and right?

There are other examples that I could delve into regarding ATMs, mortgage companies and, more recently, fintech companies. All have regulatory advantages not shared by banks.

Fortunately the banking industry does have its champions, like Lilly King in swimming, who are willing to call out unfair advantages. The Independent Community Bankers of America, American Bankers Association, Indiana Bankers Association and other state bank trade associations ‒ with grassroots support from bankers across the nation ‒ regularly point out to legislators and regulators the inequity of an uneven playing field. Though it can be frustrating to have to continually deliver the same message, the more we speak out, the more our voices are heard.

Back to Lilly King, I applaud her efforts to bring clean competition to sports, and I wish her continued success in pursuit of Olympic medals, earned the fair and right way. My wish for banking is that our continued efforts prevail in bringing parity to competition, ultimately to the benefit of consumers, who deserve the best of products and services delivered in a free market environment. And that would be fair and right for all.

– S. Joe DeHaven

The Scorecard Is Set for 2016 Elections

August 3, 2016

The scorecard is finally set, it seems, for this fall’s elections. This has been a year politically like no other. Starting at the top of the ticket, last week the Democratic National Convention formally elected Hillary Clinton as nominee for president of the United States. History was made, as Ms. Clinton became the first female candidate of a major party for the office of president. She is a former first lady when her husband, Bill Clinton, was president; she later served as a U.S. senator from New York and as secretary of state in the Obama administration. She has selected as her running mate U.S. Sen. Tim Kaine of Virginia, who also is a former Virginia governor. Clinton and Kaine will be pitted this fall against the Republican ticket of Donald Trump and Indiana Gov. Mike Pence. Trump is new to politics, running his first campaign after a successful career in real estate. Pence is a veteran politician who was a U.S. representative before serving in Indiana’s highest office. Whatever your personal leaning ‒ Republican, Democrat, or independent voter ‒ it will, no doubt, be an interesting campaign to watch.

Additionally the U.S. Senate appears to be up for grabs. Currently the Republicans hold a small majority but, since they have more seats on the ballot this year, there is a good chance that the Democrats could end up with a slight majority next year. One key to that outcome is Indiana. Recently, Democratic primary election nominee Baron Hill withdrew his name from consideration so that Evan Bayh, former Indiana governor and U.S. senator, could be selected to replace him. Mr. Bayh will run against current U.S. Rep. Todd Young, who won the Republican nomination for the open U.S. Senate seat. This seat became available when Sen. Dan Coats decided against another election campaign. While this seat previously was regarded as a sure Republican victory, it no longer seems to be. Entrance of the ever-popular Bayh has changed the dynamics completely.

At the state level, Pence had to withdraw from his effort for a second term as governor of Indiana when he accepted Trump’s offer to seek the vice presidency. This development followed, by just a few months, the resignation of Sue Ellspermann as lieutenant governor, who accepted the position of president of Ivy Tech Community College. Her resignation opened the door to long-time GOP insider Eric Holcomb, who was approved by the Indiana Senate to replace Ellspermann as lieutenant governor. Then, when Pence removed himself from the Republican ticket for governor, Holcomb filed to run. Last week the 22 members of the Indiana Republican State Committee met to determine who, among the four candidates who had filed for consideration, should replace Pence on the ballot this fall. They selected Holcomb.

In his first act as candidate for the governorship, Holcomb selected Indiana Auditor Suzanne Crouch as his running mate for lieutenant governor. Crouch, who served as a state representative from Evansville prior to her election as auditor, is known as a prolific fundraiser. Fundraising will certainly be high on the to-do list for the Holcomb/Crouch ticket, as they face their Democratic opponents of John Gregg, former speaker of the Indiana House of Representatives, and Rep. Christina Hale. At this point, it appears to be a close race.

I hope this review helps you update your scorecard for this fall’s biggest contests. Never before have there been so many changes so close to an election. It will be an exciting year politically, as we watch to find out who survives the general election this fall.

– S. Joe DeHaven

Two Conventions, World Olympics and an Upcoming Election: Excitement at all Levels

July 27, 2016

Recently in Hoosier Banker magazine, I wrote about leap year excitement this summer with the Republican National Convention, Democratic National Convention and Summer Olympics all taking place within a span of five weeks. The first of those events, the Republican National Convention (RNC), wrapped up last week in Cleveland. One year ago, no one would have guessed the outcome: Donald Trump, a celebrity businessman, is the Republican candidate for president, and Indiana Gov. Mike Pence is his running mate.

Early in the winnowing process, Donald Trump had been dismissed by political pundits as being incapable of receiving the Republican nomination. Though all agreed that Mr. Trump had name recognition, he was an outsider who had never held public office, challenging a field of 15+ experienced politicians. Yet it was his outsider’s perspective and tell-it-like-it-is commentary that appealed to much of the rank-and-file Republican base, and he is now the GOP candidate for president of the United States.

Watching the RNC last week was particularly exciting for Hoosiers, as we witnessed our own Gov. Pence share the spotlight as Trump’s running mate. Pence’s deep political experience, currently as governor and previously as U.S. representative for 14 years, offers counterbalance to Trump’s newcomer status. Additionally Pence’s personality ‒ gracious and thoughtful ‒ is a counterpoint to Trump’s blunter personal style. Yet another interest point for Hoosiers is that Mr. Pence had to withdraw his name from the running for a second term as governor, in order to accept Trump’s offer as running mate. As a result, yesterday the Indiana Republican State Committee selected Indiana Lt. Gov. Eric Holcomb as the new Republican candidate for governor. Congratulations, Mr. Holcomb!

This week, the Democratic National Convention (DNC) is underway. As of today, it is too soon to comment on final outcome or effect on polls, as the event does not conclude until tomorrow. What is certain, though, is that the 2016 DNC represents an historic milestone, with Hillary Clinton standing as the first female candidate for U.S. president named by a major party. Like Trump, Mrs. Clinton has named an experienced politician as her running mate: U.S. Sen. Tim Kaine of Virginia. While Trump’s running mate is a current governor with prior experience in the U.S. Congress, Mr. Kaine is a current U.S. senator who previously served Virginia as governor.

In a little over a week, with both conventions over, we can mercifully immerse ourselves in the spectacle of the Summer Olympics. This global event will, no doubt, have its own set of challenges, heroes and disappointments, but it will be a nice respite from national politics. It also will be a brief respite, because immediately following will come a barrage of political campaigning, on all levels, that will continue and intensify until Election Day on Nov. 8.

– S. Joe DeHaven

Yet More Political Changes in Indiana

July 20, 2016

Last week Indiana was the epicenter of U.S. politics, to a degree that I have never before witnessed. As referenced in the July 13 IBA Desktop blog, early in the week there was much excitement, while Indiana Gov. Mike Pence was being considered for nomination as candidate for vice president on the Republican ticket. That position was offered to him late in the week, and Pence’s acceptance gave Hoosier significance to the Republican ticket for U.S. president and vice president.

Other news last week was that Baron Hill, Democrat nominee for the U.S. Senate seat being vacated by Dan Coats, had dropped out of the race. Speculation swirled that Evan Bayh, former Indiana governor and U.S. senator, would take Hill’s place; confirmation of Bayh’s intent was announced later in the day on July 13. As if that news were not enough to shine a light on Indiana, on Tuesday last week Donald Trump held a fundraiser and delivered a speech in central Indiana. His Indiana visit was unexpectedly extended, when his departure plane experienced mechanical issues. As a result of the schedule change, political dignitaries, including former Speaker of the U.S. House of Representatives Newt Gingrich, flew in to meet Trump for VP running mate conversations, placing Indiana in the middle of every news cycle.

The events surrounding Gov. Pence’s move to the vice president candidacy set off a series of movements within Indiana politics. Pence had to drop out of the race for governor in order to enter the race for vice president this fall. Several individuals have expressed interest in replacing Gov. Pence on the Republican ballot for governor for the next four years, with three emerging as likely contenders: recently appointed Lt. Gov. Eric Holcomb, U.S. Rep. Susan Brooks and U.S. Rep. Todd Rokita. Other individuals could still seek the nomination, if not already on the ballot for another office.

The winner for Republican nominee for governor will be determined by a process that must be completed within 30 days of Pence’s removal from the ticket. The 22 members from across the state who make up the Indiana Republican State Committee are scheduled to meet on July 26 to make a selection. Whomever the committee chooses as the Republican nominee will change Indiana’s gubernatorial race significantly. To date, Democrat candidate John Gregg’s campaign has focused on Pence’s record. Since none of the contenders is tied to Pence’s record, Gregg will have to pivot his campaign in a new direction.

Though I am sure your scorecard is pretty marked up by now, more action may be forthcoming, as others toss their hats into the ring for an open House seat, should Brooks or Rokita be the nominee selected by the Central Committee. Thus Indiana may remain in the political spotlight a little longer. Regardless, 2016 is proving to be an exceptionally exciting year for Indiana politics!

– S. Joe DeHaven

Political Changes in Indiana

July 13, 2016

It’s been an interesting week politically in Indiana, with national ramifications. On Monday the news came out that Baron Hill, Democratic candidate for the U.S. Senate seat being vacated by Dan Coats, would drop out, to be replaced by Evan Bayh. Bayh is a past Indiana governor for eight years, past U.S. senator for 12 years, and the son of Birch Bayh, longtime former U.S. senator.

The significance of this change in candidates for this coveted seat in the Senate cannot be overstated. Until this bombshell news hit, Republican candidate Todd Young, who has been serving admirably as a member of the U.S. House of Representatives for the past six years, was heavily favored to defeat Mr. Hill. Now that Mr. Bayh ‒ a darling of Indiana voters ‒ is in the race, political insiders everywhere have changed this race from likely Republican to toss up.

Fortunately both Todd Young and Evan Bayh have been receptive to and supportive of banking issues. Young currently serves on the powerful House Ways and Means Committee and has been particularly helpful on issues related to taxation. Bayh previously served on the Senate Committee on Banking, Housing, & Urban Affairs when he represented Indiana in the Senate. Though he did vote for the Dodd-Frank Act, he was very supportive of many other issues related to banking.

Monday’s news was big, and we may be hearing more big news shortly. There is speculation that Donald Trump, presumptive Republican candidate for president, will be announcing as soon as tomorrow his choice for vice presidential running mate. Indiana Gov. Mike Pence is a strong contender; if named, Pence would have to drop out of the race for another four years as governor. Whether you are a Republican or Democrat, Trump supporter or critic, it should make all Hoosiers proud to have one of our own on a ticket for vice president of the United States.

Of course Mr. Trump may name someone else as his running mate, or may wait until next week’s Republican National Convention to make an announcement. A decision to wait would essentially be a decision to name someone other than Gov. Pence, because Pence has a deadline of July 15 to withdraw his name from the gubernatorial race. One way or another, we’ll know where we stand by week’s end. And whatever the outcome of this and other big news items, your Indiana Bankers Association will continue to work with you and for you on behalf of the industry.

– S. Joe DeHaven


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