As the House prepared to pass a Republican plan to overhaul Dodd-Frank, Senate Banking Chairman Mike Crapo (R-Id.) said Thursday that his committee won’t produce its bill for at least several months.
And the goal, Crapo said, is to produce a bipartisan package that can garner Democratic support.
During the past several months, Crapo and ranking Democrat Sherrod Brown (D-Ohio) have solicited proposals to foster economic growth. At the same time, Crapo said federal banking agencies have submitted a report on regulatory paperwork reduction and the Treasury Department is working on a set of recommendations on how to overhaul the financial regulatory regime.
“Together, these steps demonstrate a commitment to reviewing our financial regulatory framework to determine what is working and what is not working,” he said.
Interestingly, Crapo did not mention the House proposal, which went to the House floor on Thursday and is a Republican proposal that has received widespread condemnation from Democrats.
As the Banking Committee opened a hearing on community financial institutions, Brown said he is concerned that the regulatory debate will be centered on changes that have little to do with economic problems facing many Americans.
“So, as we discuss the role of financial institutions in local communities, I look forward to hearing new ideas to promote economic growth,” he said. “I’m less interested in hearing old complaints about issues that have little or nothing to do with solving the economic issues plaguing our communities. The evidence from the financial crisis shows that deregulation does not lead to sustainable economic growth, but a breakdown in consumer protections that can lead to a financial crisis.”
Thursday’s hearing featured three credit union officials, two community bankers and a law professor from Georgetown University.
The credit union officials and community bankers said Congress must overhaul Dodd-Frank to encourage economic growth.
“The time to act is now,” said Steve Grooms, president/CEO of 1st Liberty Federal Credit Union, a credit union in Great Falls, Mont., with about $176 million in assets. Grooms represented NAFCU in the hearing.
A CUNA witness said financial regulations currently favor large financial institutions.
“In truth, the current regulatory scheme only serves to benefit the largest banks and predatory lenders that have the resources to game the system,” Dallas Bergl, CEO of INOVA Federal Credit Union located in Elkhart, Ind., said. “This should not be the way the world works.” Bergl’s credit union has more than $336 million in assets.
The witnesses were given three minutes to present their testimony, but they expanded their testimony in written statements submitted to the committee.
Grooms said that because of increased costs and tighter margins, his credit union has had to shut down three branches. Grooms said NAFCU continues to believe credit unions should be exempt from CFPB rulemaking. That authority would be returned to the NCUA, Grooms said.
“[The] NCUA should be the sole regulator for credit unions and work with other regulators on joint rulemaking when appropriate,” Grooms said.
He said the NCUA should have the authority to delay implementation of a CFPB rule if compliance would create an undue hardship. He added the NCUA should have the authority to modify a CFPB rule for credit unions as long as the objectives of the rule continue to be met.
Bergl said his credit union has had to face new regulatory hurdles even though it has attempted to put its members first.
The CFPB has resisted its exemption authority to fully exempt credit unions from any of its rulemakings, he said. That has had a detrimental impact on credit unions, Bergl said.
“The CFPB’s unwillingness to adequately exercise its exemption authority has resulted in credit unions reducing the availability of, or eliminating entirely, safe and affordable financial products from the market,” he said.
Bergl said Congress should enact legislation that exempts credit unions and small banks from all bureau rulemaking unless it can be demonstrated that it is needed. And he added the NCUA should not simply mimic other banking regulators that are designed for large banks.
However, John Bissel, president /CEO of Greylock Federal Credit Union in Pittsfield, Ma., said Congress should not return to the regulatory regime that existed before the 2008 economic crisis.
“While I want smarter regulation as much as anybody, I ask that you please, do not allow a repeat of the excesses and predatory practices that precipitated the crisis in the first place,” he said.
Bissel, whose credit union has more than $1 billion in assets, said, “As the only CDFI credit union in the region, and with our strong $1 billion balance sheet, we at Greylock recognize our responsibility to redeploy deposits back into our local economy, help create jobs, boost consumer purchasing power and expand wealth building opportunities.”
Adam Levitin, a law professor at Georgetown University, said proposals made by the financial industry “have little to do with growth and have nothing to do with improving the economic condition of American families.”
He said he opposes one of the hallmarks of the credit union drive for deregulation.
“There is no reason to exempt credit unions as a class from all CFPB rulemakings,” he said. “Such a [blanket] approach is overbroad. While most credit unions are ‘good actors,’ not all are all the time, unfortunately.”
