By Marty Hansen
OBA Chairman

This week Roger Beverage and I spent two days in Washington and met with Senators Inhofe and Coburn about the pending financial regulatory reform bill that was passed by the House (H.R. 4173). We continued to voice our position as clearly and simply as possible:

The OBA supports regulatory reform efforts generally, but it has to be the right reform. The Association opposes H.R. 4173 because it creates the Consumer Financial Protection Agency (CFPA). Our Board believes this new agency will be bad for banks and their customers, and opposition to its creation trumps some good points contained in other parts of the bill.

Three events have occurred since the bill was passed on Dec. 11 (223-202) that are likely to have a significant impact on the bill's ultimate fate:

Senate Banking Committee Chairman Chris Dodd (D-Conn.) has announced he will not seek re-election this November

Scott Brown (R-Mass.) won the special election in that state which will eliminate the Democrat's 60-vote control

President Obama announced Thursday that he wants new trading and capital restrictions imposed on the banking system and, specifically, on the nation's largest banks. This includes the ability to create the authority to dismantle some of these giant entities if their activities threaten the financial system.

The OBA and virtually every other state bankers association will support "reform," but it has to be the right reform – and not a proposal that includes creation of the CFPA. Unfortunately, the Administration insists on creating this massive new bureaucracy. White House Press Secretary Robert Gibbs said Thursday that legislation "has to include a consumer protection agency," calling the new agency "something the President's not willing to give up." As long as that's his position, we must simply and respectfully agree to disagree.

Even Chairman Frank alluded to this reality in his just-released comments on the President's proposal yesterday afternoon:

"I welcome the President's strong support for additional provisions in the financial reform legislation to address the too big to fail problem. The President's initiatives build on provisions that originated in the House Financial Services Committee and were included in the Wall Street Reform and Consumer Protection Act, which passed the House on December 11. By adopting the amendment offered by Rep. Paul Kanjorski, we included provisions in this bill to give the regulators the power to do everything the President has proposed ... While our bill gave the President's appointees the power to do everything that his proposal would do, the advantage of doing them legislatively is that a future administration would not be able to ignore or undo them. I also want to note that the powers that we gave them would be at the discretion of the regulators and go beyond those that the President would mandate. This works well because if the regulators think that circumstances require that more should be done then they will have the power to do so. Paul Volcker has long advocated these measures, and I am delighted that the President agrees with him."

Note that Mr. Frank does not include the CFPA in his statement, which we take as a good sign.

While we were in Washington, we learned that there are meaningful discussions going on in the Senate that may result in dropping the CFPA from the bill, and that's our objective. Once that happens then there is room for creating the regulatory reforms that are necessary.

As noted earlier, our message has been consistent since the idea of reform was first announced last June. The OBA supports the right regulatory reform package: ending "too-big-to-fail" as a matter of national policy; applying needed regulation to non-banks; creating a systemic resolution process that is realistic and effective; preserving the doctrine of 'preemption'; stopping FASB's push to apply mark-to-market principles to bank loans; and preserving the dual banking system.

Progress is being made, in spite of the "bank bashing" that hurts all banks, regardless of size, that seems to flow regularly from the White House and consumer groups. There's a lot of work that remains to be done.
I hope you will join us in Washington on March 16-18 for the ABA's Government Relations Summit. We're working on getting at least 1,000 bankers to attend this meeting that's open to all bankers, not just ABA members. There's no charge for the meeting. Click here to get the information and to register.

Please stay involved and join us in our effort to preserve the strength of your bank's franchise and its profitability. Working together, with the same message, is working and it's turning the tide in favor of this industry. Come and be a part of it with us, and call me (918-642-3221) or send me an e-mail with your thoughts (martyhansen@firsstatebankfairfax.com).

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