The second half of March is one of my favorite times of year. Signs of spring begin to unveil, releasing us from the cold, snowy and icy challenges of winter. The NCAA basketball tournament, a.k.a. March Madness, consumes much of our time and energy. Passionate fans across the country cheer on their favorite teams, hoping that this is the year they get to hang the championship banner.
Also, March of odd-numbered years is usually the time when Congress has settled into a routine, with enough bills introduced to give us a sense of what issues will be dealt with. This year is no exception, but will likely be unique. The overriding issue is developing a budget — this year, it will need to win support from a Republican-controlled House, a Democrat-controlled Senate and a lame duck president. Other issues are immigration reform; limitations on the sale and ownership of automatic weapons; jobs creation; and, as is the case for most second-term presidencies, foreign policy.
While all of these issues are important, some specifically impact banks. Those issues include housing; regulatory relief; a leveling of the playing field from a taxation angle; and limitations to size, scope and/or powers of banks.
Regarding housing issues, the focus will be on what to do about the housing government-sponsored entities: Fannie Mae, Freddie Mac, the Fair Housing Act and the Federal Home Loan Bank (FHLB) system. Most immediate is how to structure a fair and equally accessible secondary market for mortgage financing. At the core is the question of whether Fannie and Freddie can be fixed or should be scrapped. There are no clear answers at this point. Whether public, private or a hybrid, community bankers must insist on fair and equal access. Bankers also must fight to protect the FHLB system. It is a primary source of capital that proved its viability during the recent financial crisis.
On the regulatory relief side, bankers must continue to insist that Dodd-Frank Act regulations are drafted appropriately, and that the Consumer Financial Protection Bureau not overstep its bounds. A bill has been introduced to eliminate the requirement that privacy notices be mailed annually. Instead notices would be required only when changes occur.
Federal tax parity does not exist with credit unions or the Farm Credit System. While I am not aware of any bills that have been introduced yet this year, this topic remains an important issue for bankers.
“Size, scope and/or powers of banks” has to do with limiting how big banks can be, or what powers they may possess. This issue also deals with too-big-to-fail banks. Do they exist? Should they exist? Bankers must be deeply involved in this debate.
Regardless, I am going to enjoy this month of March and watch the crowning of the NCAA basketball tournament victor. Basketball March Madness will soon end, but the legislative issues from March are likely to last well into the future.