Last week President Barack Obama delivered his 2014 State of the Union address. It was his first such address in which he did not take any potshots at banks or bankers. I was unavailable to watch the live broadcast, since it conflicted with IBA’s annual Legislative Reception, where member bankers have the opportunity to visit with state legislators and administrators on topics pertaining to banking. However I have since read much about it, and I have some observations.
First, it is a bit unnerving that the president intends to bypass the legislative process as much as he can. Our forefathers created a government replete with checks and balances to guard against this kind of dictatorial abuse of power. It will be interesting to watch the reactions of the legislative and judicial branches of government to see if they recognize that the president is overreaching his authority. These branches represent the majority of our checks and balances and will go to great lengths to protect their powers, thus maintaining what is set in our Constitution.
Second, Obama touched on the topic of housing government sponsored enterprise reform. He did not offer suggestions, but acknowledged that there have been some efforts to ignite a discussion in both the House and the Senate. He did emphasize the importance to consumers and taxpayers that some reform needed to occur to protect the financing of this important segment of our economy, and that taxpayer dollars are at no, or limited, risk to support the mortgage market. While I commend his mentioning this topic, it will need to be handled with care. It remains critical that lenders of all sizes and charters have equal access to secondary mortgage markets, so that consumer choices are not diminished. It is also extremely important that the Federal Home Loan Bank system, which performed exactly as Congress had expected it to during the financial crises, not be harmed. Perhaps its product offerings should be expanded, but certainly not reduced.
Third, President Obama offered a teaser of his “myRA” savings plan, a knockoff of the individual retirement account (IRA) product that has been around since the 1970s. I indicate “teaser,” because there were no details about structure, who can or will offer the program, or whether it is strictly a starter program or an independent program. If the myRA savings plan is a new product that banks and other traditional providers can offer, it might be a good thing. If, on the other hand, it is going to be yet another federal government-administered program that competes with the free marketplace, then it could be a real problem. Oddly enough, a bill was introduced in the Indiana Senate this year that would have set up a similar program at the state level, to be administered by the state treasurer. That bill is dead, thanks in large part to IBA efforts. We attempted to amend it, so that banks and other traditional retirement program providers could offer such a program and use the proposed state tax credit. There is little appetite in the Indiana Statehouse, however, for any new tax credits.
Finally, the president came out in support of legislation that would shut down the spate of patent trolls who threaten businesses with patent violations. This is a serious problem for community banks and other small businesses, which often do not have the resources to fight these undeserving predators.
While we would love to have seen the president admit that businesses of all sizes and stripes are needlessly suffering under the excessive regulatory burden — and then call upon Congress to send him bills to reduce that burden — we did not really expect him to. What we will need, and soon, is an administration to do just that, if we are to remain competitive in the worldwide marketplace.
S. Joe DeHaven, 02/05/14