DANIEL J. FORTE
‘Busy year’ ahead
After months of soliciting ideas from the banking community in hopes of introducing new legislative initiatives, the Massachusetts Bankers Association last week submitted its proposed agenda for the 2003-2004 legislative session. According to MBA officials, it is going to be a very busy – and perhaps critical – year for the banking industry.
With a Republican majority in the House and Senate and a new governor transitioning into the Beacon Hill power structure, banking legislation – along with many other aspects of politics in the Bay State – will be taking on a new shape.
But the burning question on the minds of bankers, politicians, industry analysts and financial executives around the state is whether Gov.-elect Mitt Romney will keep 20-year veteran Thomas J. Curry as the Commissioner of Banks in Massachusetts.
“The banking industry and the credit union industry and those in the mortgage industry have gotten to know Tom Curry and they all trust him,” said Sen. Andrea F. Nuciforo, D-Pittsfield. “Curry is very responsive and has an institutional memory, which will be useful for a new Governor.”
Also of great import to the banking industry is the issue of privacy and, according to Daniel J. Forte, president of the MBA, financial privacy issues will return full force in time for the federal Fair Credit Reporting Act to expire at the end of the year.
“While the issues will not change, the emphasis will change,” said Forte. “We’re taking a step back to see what’s working and what should be federal preemption in state laws [with respect to] the banking industry … that would be taking a visceral approach to Graham-Leach-Bliley.”
From a policy standpoint, Forte said the federal Graham-Leach-Bliley Financial Modernization Act would remain as is, but it is “unrealistic given the momentum.”
“Resolution needs to be made with respect to this issue: privacy and the role of the state,” said Forte.
In Massachusetts, however, Forte said the privacy bills “hold deference” to federal regulations, and if privacy issues are reexamined at the federal level then the state also will be forced to revamp its policies. Among the federal laws that Congress will revisit is the Fair Credit Reporting Act.
“For [the MBA], one of the concerns is operating the governmental roles of small community banks vs. larger banks,” said Forte. “The small banks need more flexibility to share information with third-party vendors … and if they do not, then they are not getting the same preference as the larger banks.”
Patriot Games
The Senate Banking Committee has continued to move forward with ambitious plans and some industry analysts believe that agenda is going to see a lot more activity in the upcoming session as a presidential race draws nearer.
Morris Reid, managing director for Washington, D.C.-based consulting firm Westin Reinhart, said government and homeownership responsibility is being watched in the Senate Banking Committee.
“You will see a very active committee acting on [the Bush administration] agenda,” said Reid. “But, the Democrats are going to be looking at surcharges on wiring money, bankruptcy and privacy issues to energize their platform base.”
In Massachusetts, banks are facing new and considerable regulatory burden from current banking legislation and the fight for market activity between small and large banks will continue, Forte said.
According to Forte, Deposit Insurance Reform in Massachusetts is unique in that state-chartered banks already have access to deposit insurance, but the biggest issue is that of “free riders,” or non-bank financial institutions that hold deposits but do not contribute to insurance funds.
“Big companies have poured deposits into insured banks,” said Forte. “Those guys should pay more than the banks to compensate the banking industry for having diluted the funds.”
The banking industry also faces an overall challenge with the real estate brokerage community in its continuing battle to be allowed to enter that field. “We are in a fight with the [real estate brokerage] business,” Forte said.
“Most [mortgage] brokers have some sort of line with the bankers and we say, if it’s a financially related business, why shouldn’t banks be in the business,” Forte said. “If there is no room, then bankers need legislation to say that [real estate brokerages] need to be kept out of lending business.”
From a regulatory perspective, Boston is still digesting the merger of the Boston Federal Deposit Insurance Corp. with the New York office.
Forte said he hopes the New York FDIC office will continue its outreach efforts to Massachusetts and work on the regulatory initiatives affecting bankers and the industry, mainly in conjunction with the fiscal effects related to the Sept. 11, 2001, terrorist attacks.
“We are going to hear more about the USA Patriot Act and it can be burdensome [for banks] if interpreted to the extreme,” said Forte. “I know the banks are going to want to comply because we want to catch the money laundering, but at the same time we have to run a business and the regulations still aren’t finalized, so that will be a big regulatory issue for the community banks.”
Forte said the USA Patriot Act, along with the debate on privacy, would have “tremendous implications for the financial services industry.”
But according to Forte, the local banking industry has a positive force in its corner – U.S. Rep. Barney Frank, D-Newton, who will become the ranking minority member to the House Financial Services Committee.
Members of the banking industry say Frank “gives us an edge to be outspoken,” according to Forte, who said there is “no reason to doubt that [Frank] won’t continue to support the banking industry.”
In the Massachusetts Senate, Nuciforo said he will continue to push an act he drafted relative to banks and banking that rewrites the mortgage statute to create an alternative for state-chartered institutions in regards to meeting their Community Reinvestment Act obligations, but warns bankers, credit unions, real estate professionals and industry insiders that next year will be “a bit of wait and see what happens.”
On the sidelines, the MBA is requesting that the commissioner of banks promulgate new “parity’ regulations authorizing state-chartered banks to engage in activities currently permitted for national banks, including allowing state-chartered banks to collect finder fees, provide consulting services and expanding the ability of banks to provide various Internet-based support services.
The most prevalent water-cooler topic, according to Forte, is the Bankruptcy Reform Bill.
“You had to shake your head at the political dynamics,” said Forte. “Liberals getting together with super-conservatives on an issue totally unrelated to bankruptcy.”
The bankruptcy reform bill passed made progress in the House and Senate but ultimately was not passed because language prohibiting abortion protestors from using bankruptcy as a means to avoid fines was added. That amendment was largely unrelated to the bankruptcy reforms being considered, said Forte. However, since the rules of senate allow a lot of flexibility to add amendments, there are plenty of opportunities for opponents to “burden the bill down,” Forte said. “We are going to have a very, very busy year” in trying to finally pass bankruptcy reform.
