As we experience the traditional season for giving, there appears to be a mixed bag on the horizon. Recent economic projections are conflicting with regard to 2009 holiday sales as estimates range from small year-over-year losses to slight gains. Whichever economist you choose to believe, it appears that there will be a limited economic boost from holiday sales and the season for giving will be somewhat subdued.
There is, however, one notable area where the season for giving could be a vitally important one for local community banks and credit unions. From all appearances, lawmakers in our nation’s capital are in a giving mood and their presents will be in the form of additional regulatory and compliance burdens that will at a minimum further challenge our bottom lines and potentially disrupt our business models beyond repair.
Much has been said here and in virtually every other source of trade information about the need for change in the regulatory environment that allowed or maybe even contributed to the financial meltdown that we have experienced. However, it must be noted that the tsunami that has swamped our financial system did not begin with a disruption in community banks and credit unions. Once again our mantra needs to be a verse from the Billy Joel song “We didn’t start the fire.”
Adding Fuel
Our “gift list” is growing on a daily basis. It begins with the creation of the Consumer Financial Protection Agency and its proposed broad reaching rule making and supervision powers. This agency, a key provision in the president’s plan, received its start in the House and through the intervention of Committee Chairman Barney Frank, D-Mass., has a partial carve out for banks under $10 billion and credit unions under $1.5 billion in asset size.
Although I fail to see the equity in the carve out numbers, at least there was a recognition on the part of the House Financial Services Committee that an additional regulatory examination is not necessary for a large number of us.
The legislative generosity continues with Senate Chairman Christopher Dodd’s wide reaching proposal for the reform of banking regulation. Although it does allow for the continuation of state charters and local supervision, it is far reaching. While there is little likelihood of passage in its current form, the proposal provides us with insight into the mind of a key Senator facing a difficult re-election challenge in 2010 and his thoughts of what will help at the polls in his home state of Connecticut.
To round out our list of gifts from our nation’s Capital, we have new restrictions on overdraft from the Federal Reserve as well as serious contemplation of legislative restrictions on this activity which has become a key source of revenue as well as a value added service to many consumers.
Finally, we are all aware that interchange income, in its current form is on the mind of many lawmakers as well. Prompted by the various retail associations, there has been a push to significantly restrict another important source of revenue and potentially disrupt a business model that is truly working.
In summary, Washington is in a giving mode. Regulation and legislation that is thought to be pro-consumer is poised at the top of our chimney and ready to drop with a Santa-like bounce. As community financial institutions we and our trade associations need to maintain a watch on these activities and work like elves to influence our lawmakers. And by the way, Merry Christmas to all.
