Finer Points Blog

    It’s Not the Trade, It’s Too-Big-To-Fail

    Jun 04, 2012
    Many of us recall the now-famous campaign slogan from the 1992 Clinton campaign—“It’s the economy, stupid.” Bill Clinton used it to great effect. Recently, I was reminded of that slogan when I read a couple of opinion pieces that attempted to downplay and "pooh-pooh" the JPMorgan Chase trading blunder. The pieces were filled with syllogisms and misdirection. If taken at face value, one would conclude that $2 billion is chump change and business as usual in banking. These pieces, written by two state banking executives, were nothing more than smoke screens, apology pieces designed to take the reader's eye off the true issue—the fact that certain financial firms are not only too big to fail, but also too big to manage and too big to regulate effectively.

    As I finished reading these opinion pieces, I wanted to call out to the authors, “It’s not about the trading blunder, it’s about too-big-to-fail!” They trivialize the JPM trade blunder in order to trivialize the real issue of too-big-to–fail! They want to steer the reader away from a serious discussion about systemically dangerous firms and focus attention on a symptom—the trading blunder. In other words, they don't want to examine the disease and treat it.

    The question these association executives should be asking is what caused a firm like JPM, which is one of the best-managed firms in the world, with a whip smart senior executive team, to allow one overconfident trader to extend the firm into such a precarious position? It is not the $2 billion (now estimated at $5 billion) that is the issue here, it is the culture and hubris that allowed the trades to happen in the first place. That kind of culture and hubris only thrive when a firm becomes so large that it knows implicitly that it will not be allowed to fail. And the counterparties that took the trades knew this too, which is why they agreed to the high-risk trades to begin with—because they knew they would not be hurt. It is this too-big-to-fail, too-big-to-manage and too-big-to-regulate-effectively disease that must be cured.

    When one of these apologists for Wall Street offers solid ideas for how to end too-big-to-fail policies and the government’s implicit protections of systemically dangerous firms, then perhaps a real public policy debate can begin. Until then, those who trivialize $2 billion and $5 billion losses don't get it. They don't get that it is not the trade, "it is too-big-to-fail, stupid."

    Small Business is Our Business

    May 23, 2012
    Community bankers have a positive story, and we love to tell it. So it’s always a pleasure when others help us get the word out about how community banks contribute to our communities and help local small businesses thrive. And that’s been the story this week as community banks and other small businesses across the nation celebrate National Small Business Week.

    Slated to run through this Saturday, National Small Business Week recognizes the important role small businesses serve in our economy. Of course, as prolific lenders and small businesses themselves, community banks are a key component of the celebration. As part of the festivities, the Small Business Administration named First American Bank in Artesia, N.M., the 2012 Community/Rural Lender of the Year. The Small 7(a) Lender of the Year award was a tie between Open Bank of Los Angeles and Premier Commercial Bank of Anaheim, Calif.

    Needless to say, it’s been a feel-good week for community banks and other small businesses. Community bankers have been using customizable public relations resources from ICBA to spread the word about National Small Business Week. And the good news doesn’t have to stop on Saturday. ICBA launched its “Go Local” initiative to ensure that the message of banking and shopping locally is out there all year long.

    Community banks have a good story to tell, and we enjoy telling it. So let’s make sure consumers, small businesses and everyone else hears us loud and clear.

    Transaction Account Coverage an Urgent Issue

    May 16, 2012
    At ICBA’s recent Washington Policy Summit, I told community bankers gathered in the nation’s capital that our industry is full of passionate advocates. And I mean it—we’ve had a good year so far. ICBA and community bankers have advanced an important regulatory-relief provision of the Communities First Act that raises the Securities and Exchange Commission registration threshold for financial institutions from 500 shareholders to 2,000. We’ve also temporarily held off the credit union push for expanded business lending.

    But we’re getting into crunch time on one of this year’s top priorities—extending the FDIC’s full coverage of noninterest-bearing transaction accounts. The coverage, known as “TAG” after the original program launched during the financial crisis in 2008, has helped stabilize the banking system and level the playing field with the megabanks. The TAG program helps prevent even greater deposit concentration in a handful of these large institutions and helps keep deposits in local communities to fund small-business lending.

    Problem is, the coverage is scheduled to expire on Dec. 31. And let me tell you, on Capitol Hill, that’s right around the corner. This is an election year, so it’s particularly hard to get Congress’s attention.

    That’s why we need community bankers to dig deep, to get that fire in the belly going, because this issue’s going to take some work. Congress needs to hear from you on why this issue is so important. There are more than $1.4 trillion in transaction-account deposits that would become uninsured overnight if this program is not extended—and the systemically risky banks are going to be the ones to benefit. So keep the passion going and make sure that Congress is listening. We’ve had a pretty good year, but it’s far from over. So let’s continue to fight the good fight—as ICBA Immediate Past Chairman Sal Marranca would say—and make it a great one.

    JPMorgan Redux

    May 14, 2012
    I have gotten hundreds of emails from community bankers commenting on JPMorgan Chase’s $2 billion trading blunder. Below is just one example of an email I received from one of our good member bankers. I think he nailed it.

    As you have said…plain and simple—they are too big to manage and too big to regulate. If management doesn’t know and understand what is going on, how on earth could the regulators know and understand what is going on? These big entities should be treated as venture capital companies funded by expensive capital looking for high risk and high rewards…not as companies insured by the FDIC and ultimately guaranteed by the U.S. government.

    Déjà Vu All Over Again

    May 11, 2012
    As Yogi Berra said, “Its déjà vu all over again.” JPMorgan Chase recently announced that it lost more than $2 billion in trading complex derivatives. The news of reckless trading shook Wall Street and sent the megabank’s stocks tumbling. Where have we heard that before?

    Ironically, the losses were generated in an investment office that had been focused on shielding JPMorgan from risks in its banking business. According to news reports, executives closely monitored the office’s transition to a post for making risky trades on credit default swaps.

    “In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,” CEO Jamie Dimon said.

    Ya think? Risky credit default swaps helped fuel the financial crisis from which we’re still recovering. These dangerous bets led to a financial panic, a recession and a comprehensive restructuring of financial regulation to rein in Wall Street excesses. Dimon and JPMorgan had been among the most vocal opponents of tighter regulations, particularly Volcker Rule restrictions on proprietary trading. Well, so much for that—they’ve just thrown about $2 billion of political capital down the drain.

    At ICBA, our political capital is focused on helping community banks compete. For instance, one of our top priorities is extending the FDIC’s full coverage of noninterest-bearing transaction accounts for another five years, which will prevent deposit concentration in large institutions and help community banks lend to small businesses in their communities. While it might be déjà vu all over again on Wall Street, the mission of ICBA and our nation’s community banks have remained focused on sound banking and smart financial policy.

    A Different Perspective

    May 01, 2012
    I hold no animus toward anyone or any group that defends its members’ best interests. After all, that is the fundamental reason why associations are formed. That is why ICBA was formed. Therefore, it came as no surprise that five very prominent national financial trade groups wrote a 161-page letter to the Federal Reserve Board vigorously defending systemically important financial institutions (aka, SIFIs or too-big-to-fail firms). The five trade groups that signed the letter—the American Bankers Association, the Clearing House Association, the Financial Services Forum, the Financial Services Roundtable and the Securities Industry and Financial Markets Association—have the very largest financial firms in the world as members. Of course they are going to advocate for them. However, when the interests of the very largest banks and financial firms clash with the interests of our nation’s community banks, how is that reconciled? How can one defend and promote the best interests of both groups equally when the best interests of one will hurt the other?

    ICBA also sent a letter to the Fed. Our letter was seven pages, and our position was clearly stated. We renounce the position taken by the megabanks, and we support the Fed’s proposals for bringing more rigorous financial discipline, higher capital standards and greater transparency to those institutions deemed most dangerous to our nation’s financial system and economy. So yes, we believe the Fed is on the right track, and financial sector luminaries, such as a two former Fed chairmen, several former Fed governors, at least two Fed district bank presidents, an FDIC director and some famous academics, apparently agree with ICBA.

    If you read my previous blog post this week, you know already that community banks are still suffering from the fallout of the nation’s greatest financial calamity since the Great Depression—a calamity triggered in large part by the very financial firms the Fed now seeks to oversee more closely. You already know how unequal the treatment of a community bank and its staff is compared to a SIFI and its staff when stress occurs in those institutions. All one needs to do is watch the “60 Minutes” piece on Lehman Brothers to see it or read how several Wall Street moguls are doing today, even though their banks were given massive amounts of taxpayer dollars to keep them from collapsing.

    Many books and scholarly articles set out in great detail the truth of what happened on Wall Street in this latest crisis. Every community banker has suffered to one extent or another by what happened over the past four years. ICBA understands that and is clear and straightforward in its vigorous defense of the community banking industry. No double standards, no obscure language. We know who we represent and in whose interest we act. Thus our letter to the Federal Reserve on their proposed regulations for controlling the SIFIs stands in stark contrast to those trade groups whose mission is to protect and defend the SIFIs. They do their mission. We do ours.

    Credit Union Debate a Matter of Equity

    Apr 20, 2012
    Regarding the credit union push to more than double their commercial lending authority—TAX FREE—let me offer these examples.

    Two financial institutions sit across the town square from each other—one is a commercial community bank, and one is a credit union. Both make small-business commercial loans. A small-business customer comes in to both institutions seeking a new line of credit. The credit union can automatically undercut the rate that the bank can offer because the CU pays no taxes and the bank pays at least 40 percent of its income in taxes. Oh, and the credit union does not have to comply with the Community Reinvestment Act, making the loan it makes even less costly because it has less compliance burden.

    If the credit union gets the commercial loan because of the lower rate, that means those taxes are lost to the community. None of it will go toward helping local schools and the municipal government build new sidewalks for the safety of the children or improve municipal services. To remedy that situation, why not say that if the credit unions want to make commercial loans, they have to pay taxes on the income they earn from those commercial loans so that both institutions are competing on roughly equal footing? All financial institutions compete for the same commercial loans in the general marketplace—so why shouldn’t all institutions pay taxes on the income from those loans? What rationale is there for allowing one segment of the retail financial sector to make tax-free commercial loans to the same pool of borrowers served by taxpaying financial firms?

    Someone in the press should be looking into questions such as these. An analogy would be if Chrysler and GM were allowed to offer any kind of vehicle to the general public—subcompacts, compacts, sedans, SUVs, etc., but they had to pay taxes on the cars they sell. However, Ford could only make sedans, nothing else, but, in exchange for the restriction, it would not have to pay taxes on the sedans they sell. Everyone accepts this arrangement. Then Congress lets Ford begin to make compact cars and SUVs AND retain their tax exemption. How would the industry react to that? Would that be equitable?

    “Denver Credit-Union CEO David Maus' $11 Million Pay Package Stuns Industry”

    Apr 11, 2012
    The “industry” to which the above headline refers is the credit union industry. Even they are stunned. But we bankers aren’t. We have known for years where credit union “profits” go—outsized salaries and buildings. Just read this report from the Denver Post.

    And credit unions want to increase their member-business-lending authority? Why, so they can pay more credit union CEOs Wall Street–size salaries rather than serve people of modest means? And this is what they will do with the TAX-FREE income from their commercial loans???!! Really?

    This is an outrage, but, sadly, not unusual. Telesis Community Credit Union, which just failed recently because of failed MBLs (as reported in the Credit Union Journal), paid their CEO $2.1 million per year while the credit union was going down. Wake up bankers—rattle the cage in Congress!

    Remember This: A Long History of Credit Union Mission Creep

    Apr 04, 2012
    In case you’d forgotten, the nation’s credit unions have been making the rounds in Washington in recent weeks. There were about 5,000 credit union representatives on Capitol Hill just a couple weeks ago, and they all had the same demand. It goes something like this: (a) double our business-lending authority, and (b) pay no attention to our tax-exempt status.

    As a community banker myself for 20 years, I know all too well the advantages that tax-exempt credit unions have over their taxpaying competitors and how we got where we are today. Credit unions weren’t always the full-service threat they are now. No, their history of mission creep is long.

    The Federal Credit Union Act of 1934 authorized credit unions to serve people of modest means with a common bond. That was all well and good until Congress and the White House reinstated a 1982 regulation drastically expanding the credit union field of membership. This was after the NCUA rule had been overturned by the Supreme Court. Now, multi-billion-dollar credit unions are allowed to have virtually no common bond among members.

    Many of us remember that ordeal. It got me thinking. Credit unions weren’t the first financial institutions to have their tax status reviewed. In 1951, Congress revoked the tax exemption for savings and loans and mutuals. Policymakers ruled that they operated much like commercial banks and should be taxed. The rest is history.

    The same should go for credit unions. They operate like banks, so they should be subject to the same set of tax and regulatory responsibilities. Their tax-exempt status offers a clear competitive advantage, and they’re working to extend that advantage by taking even more community bank small-business customers.

    I’ve said it before: if it looks like a duck and quacks like a duck, it’s a duck. If credit unions want to lend and invest like banks, they should have to meet the same set of standards. Let’s make sure Congress remembers that.

    Heroes

    Mar 28, 2012
    Hero is defined as a person who has performed a heroic act or service and is regarded as a role model.

    On Monday and Tuesday of this week in southern Indiana, I looked into the eyes of and shook hands and spoke with heroes. Of course, they don’t think of themselves as heroes. In fact, they will be embarrassed that I have called them heroes, but that is what they are. And they are all community bankers.

    On March 2, a series of tornadoes touched down in southern Indiana and devastated the small towns of Henryville, Marysville and rural farm areas around Daisy Hill and Borden. Several community banks serve those communities and surrounding farms and villages. One of the banks hardest hit was The New Washington State Bank of Charlestown, Ind. The bank has branches serving Henryville and Borden. The branch at Henryville was heavily damaged as was most of the town (many places totally destroyed). And many of the farms and homesteads surrounding Borden were devastated.

    Pat Glotzbach is president of The New Washington State Bank and this year’s president of the Indiana Bankers Association. Almost immediately after the tornadoes hit, Pat defined what great leadership is by leading his bank’s staff in doing what community bankers always do, helping their towns recover in any way possible. The New Washington State Bank is symbolic of every community bank in this nation that serves their local towns, villages and rural areas.

    In this case, Controller Scott Benner, Operations Officer Judy Shepherd and Loan Officer Adrienne Hill were instrumental in carrying out the bank's recovery plan. They opened the Henryville branch less than 72 hours after the tornadoes hit late Friday afternoon.

    No power and no phone, but they opened, and with only sunlight to see, Branch Manager Jay Stephens and his team cashed checks and handled deposits without any machines or computers. They went “old school,” manually hand writing all transactions. At the end of the day they put smiles on customer’s faces and gave them hope that this was the beginning of bringing the town back.

    Betty Carver, the bank’s board chairman, and Marilyn Walden, a teller at the Henryville branch, lost their homes, and many more employees had damage. But instead of dwelling on their own losses, they extended helping hands, helped others clean up and kept a positive spirit. They talked more about the people who experienced the storm with them. They gave hope to people who saw their life’s work or their homes and keepsakes totally destroyed. They truly cared that everyone made it through the storm. In short, they did what community bankers do every day.

    Touring the hardest hit areas of southern Indiana with Pat Glotzbach, Joe DeHaven, the outstanding president/CEO of the Indiana Bankers Association, and David Geis, president/CEO of Jackson County Bank of Seymour, Ind., I had the privilege of meeting dedicated and truly caring community bankers like Karen Johnson, head teller at Henryville, Darrel Burton, teller, and Borden Branch Manager Brenda Ooley to name just a few. You could see the courage, dedication and resolve in their eyes. The “never give up” attitude in their demeanor and their words.

    In times of crisis, from Joplin, Mo., (whose bankers, among others, traveled to southern Indiana to help their fellow community bankers) to the Gulf Coast states of Texas, Louisiana, Alabama and Florida, and from the swollen lakes and rivers in North Dakota to the hills of southern California, community bankers help their fellow citizens in the towns, villages and rural areas they serve. They do it not for gain, recognition or a personal agenda, but because they are invested in the communities they serve and, most importantly, because it is the right thing to do. At its core, community banking is people helping people, and there is no better example of that principle than the officers and staff of The New Washington State Bank of Charlestown.

    To all the officers and staff of The New Washington State Bank, thank you for your service to your communities and to your fellow citizens. Your actions again remind us of what it means to be a community banker. In my book, you are all heroes.

    Community Banks Are Financial First Responders

    Mar 23, 2012
    “Community banks remain a critical component of our financial system and our economy. They help keep their local economies vibrant and growing by taking on and managing the risks of local lending, which larger banks may be unwilling or unable to do. They often respond with greater agility to lending requests than their national competitors because of their detailed knowledge of the needs of their customers and their close ties to the communities they serve.”

    Federal Reserve Chairman Ben Bernanke at ICBA National Convention

    I couldn’t have said it better myself. As the nation’s economy and its Main Street communities were wounded by the latest crisis, community banks again responded in full force to help them recover.

    Community banks are the first responders of the financial sector. They are often the first, or only, institutions to work with their customers, to provide credit and to support sustained growth in a financial emergency. They know their communities and how to promote entrepreneurship and small-business success even in times of trouble. And that is why ICBA stands FOR community banks first, foremost and always.

    Diversity? Really?

    Mar 06, 2012
    In recent days there has been some buzz from various quarters about what a "diverse" banking system we have in the United States. In fact, not long ago a writer pointed out that of the 7,500 banks in this country, 6,800 have assets of $1 billion or under. To update those figures and be more precise, according to the FDIC, there were 7,357 FDIC-insured commercial banks and thrifts in this nation at year-end 2011. Of those, 6,700 had assets less than $1 billion. Seems diverse, doesn't it? But does that tell the real story? Well, with apologies to Bill Clinton, it depends on what the definition of "diverse" is.

    If one defines our banking system as "diverse" by simply looking at the sheer number of banks, then the U.S. has a fairly diverse banking system. But even by that definition we are much, much less diverse than we were in 1985, when there were over 18,000 banking and thrift institutions. Today, several countries would claim banking systems more diverse than the United States.

    If one defines our banking system by assets rather than by numbers of banks, then the United States is anything but diverse. In fact, we are a highly concentrated banking system, where the overwhelming total of banking assets are held in but a very few hands. To wit, the 6,700 banks with assets under $1 billion collectively hold just 10 percent of our nation's assets, even though they represent 91 percent of total FDIC institutions. And the 2,426 banks with under $100 million in assets hold just 1 percent of the nation's banking assets, even though they represent 33 percent of all chartered banks! The 107 banks that are greater than $10 billion in assets collectively hold 80 percent of the nation's banking assets, but represent only 1.4 percent of the nation's banks. Boy, that is some "diversity" isn't it? 

    Sadly, these figures were nearly reversed 30 years ago, when we actually did have a truly diverse banking system in the United States. No banking system can call itself "diverse" when a handful of institutions hold $80 of every $100 and are too big to fail. I'm just sayin’.

    Watergate and Regulatory Burden

    Feb 17, 2012
    What do the infamous Watergate scandal and overwhelming regulatory burden on community banks have in common? “Follow the Money.” Many of us remember this quip from the Watergate scandal. It was another way for “Deep Throat,” the most famous source in American history, to say “connect the dots.” So let’s follow the money and see if we can find the answer to why community banks are being crushed by regulatory overkill.

    Today, just five banks, less than 1 percent of total U.S. banks, hold 40 percent of the nation’s deposits. Just 10 banks hold 55 percent. And fewer than 100 banks, or 1.2 percent, hold more than 80 percent of the nation’s total banking assets. In fact, since the crisis began, the very banks that triggered a global financial meltdown have actually gotten bigger!

    Over the past 30 years, as our nation’s banking system became more and more concentrated in fewer and fewer hands, the federal regulatory agencies and Congress moved to protect consumers and curtail abuses that almost naturally come with unbridled growth and sheer size. At some point an institution becomes so large that corporate objectives gain primacy over customer care. That is because at some point an institution’s sheer size or monopoly on a product makes a single individual not count for much. We have all experienced the frustration of dealing with on-line automated “help desks,” gate agents at an airport, or the local DMV. To a business that employs nearly 500,000 worldwide and serves tens of millions of customers around the globe, what is the value of a single individual relationship?

    Contemporaneous with the rapid concentration of banking assets and the creation of too-big-to-fail institutions came the phenomena of the burgeoning “shadow” banking industry, which operated largely outside the reach of bank regulators and had little or no oversight or constraints on the types of products offered to customers or whether the products offered were appropriate for various customer types. Again, the major focus of these unregulated financial firms was growth and investor return. And once again, customers became just a commodity to be churned through the product mill.

    When that happens, businesses get sloppy, executives begin to think they are “bulletproof” and customer abuse begins to creep into the firm’s business practices. When customer abuse becomes widespread, government invariably steps in and acts. And those actions lead to regulations that are not selectively applied just to the banks or shadow financial firms that became insensitive to or abused their customers, but more broadly to all banks—whether they engaged in reckless activities or not.

    As the saying goes, “one bad apple spoils the barrel.” And voila, staggering regulatory burden on the institutions that had nothing to do with the abuses, greed or overreach that caused the problems in the first place. And that is why community banks suffer from regulatory overkill.

    For nearly three decades, abuses by the few have caused regulatory pain for the many. And this is why ICBA has fought hard for a regulatory and examination system that recognizes that community banks are not the abusers and deserve a different regulatory standard—a standard that recognizes that the community bank has a fundamentally different business model than the largest banks and non-bank financial firms. Community banks make and hold loans and stay close to their customers. It is a business model based on relationship banking, not the business model preferred by the largest Wall Street banks, which use a transaction-based business model. Both models are valid and necessary; however, ICBA fundamentally believes that these two very different business models require different examination and regulation schemes.

    So the next time you hear policymakers say that “the financial crisis was not the fault of the community banks down on Main Street,” let’s all hope that they put their words into actions and do NOT reject a two-tier regulatory and examination framework.

    The Courage to Speak Out

    Feb 13, 2012
    The statement below made by the eminent economist J.K. Galbraith refers to the excesses on Wall Street that preceded the Great Depression, but it could have been made in our own time. The statement perfectly encapsulates the culture of Wall Street, as we have all found out, bitterly, once again. I am proud that ICBA and the community banking sector did NOT stay silent.

    "Even in such a time of madness as the late twenties, a great many men in Wall Street remained quite sane. But they also remained very quiet. The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent in a community where the primary concern is making money. One of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them." J.K.Galbraith

    A corollary to Galbraith’s statement above is the famous statement by Edmund Burke: “All that is necessary for evil to triumph is for good men to do nothing.”

    Community Banks Are Our Business, Our Only Business

    Jan 30, 2012
    I was reviewing some legislative and regulatory items the other day, both from the recent past and current, and I noted several issues where ICBA acted alone or is currently acting alone within the financial services sector in advocating and promoting the interests of community banks. And it struck me that being the only national trade group to exclusively advocate for community banks really makes a meaningful difference to a member’s bottom line.

    Take the deposit insurance assessment change. ICBA acted alone in developing, introducing and promoting that proposal in the Congress. No other group came to our aid. Look at the billions (yes, billions) in savings that the community banking industry is reaping from that effort. In this extended low-to-no-interest-rate environment, think what those savings mean to your bank, and then think if there had been no ICBA?

    The same goes for increased permanent deposit insurance (no other national group helped us there either), retention of Trust Preferred Securities as tier one capital, no new Consumer Financial Protection Bureau examiners in your banks, and CFPB’s recognition that perhaps community banks should be exempt from many of the consumer rules that just don’t make sense for a local bank.

    If for no other reason, ICBA should exist to keep the rest of the financial services sector honest—keep them on their toes. To make sure that small banks aren’t relegated to the “kiddy” policy table. Because, you see, at ICBA we never forget our reason for existence. We never forget that the interests of community banks are first, foremost and always our business. It reminds me of the old Gerber baby foods slogan when I was a kid, “Babies are our business, our only business.” Likewise, at ICBA, “community banks are our business, our only business.”

    It’s About Community Banks

    Jan 19, 2012
    Do you all recall the now-iconic Bill Clinton 1992 campaign slogan—“It’s the economy, stupid!”? Well, at ICBA, it’s the nation’s community banks, and it always will be.

    There is a lot of noise out there these days. It is an election year—funny how EVERY year seems to be an election year now. Sometimes election years are referred to as the “silly season.” Most days it seems that every member of Congress is at every other member’s throat. The partisanship in Congress is more paralyzing than even the old-timers can remember. Politicians are accusing each other of everything from “class warfare” to socialism to “elitism” and everything in between.

    In this cacophony of noise and distractions, political agendas and passions, it can be hard for some to remember that ICBA is purely a community bank association—not an arm of one political party or the other or some individual’s pet advocacy platform. We have a singular mission—community banks! We are not Democrats or Republicans. We have no grand political platform. We are not advocating one party or the other or their historic political philosophies or issues. We have one platform, one issue, one focus—the well-being of community banks.

    Our focus, our mission, our platform is to ensure that the community banking industry not only survives, but thrives. It is a mission that takes all our energy and 100 percent of our attention, because many in Washington don’t want us to succeed and will do or say anything to thwart our efforts. But ICBA will prevail. ICBA will work every single day for the well-being and future of community banks. We will not rest, we will not waiver, we will not give up. We will work with whoever is willing to help us advance our community bank agenda. And we never forget that our core purpose as an association is the welfare of community banks and their interests. That is the plain and simple truth. No spin.

    Time for a Divorce?

    Jan 09, 2012
    In a recent edition of the American Banker “Bankthink” section, Mr. Robert H. Smith, former chairman and CEO of Security Pacific Corp., wrote an opinion piece titled “Community Banks Should Ask for a Divorce.” In keeping with that theme, let me comment on Mr. Smith’s article in this way.

    This is exactly what ICBA has been doing—or trying to do—asking for a divorce! The problem is that our abusive spouse (Wall Street mega-banks) doesn’t want to let us go. And while we are at it, the small credit unions should ask for a divorce from the mega-credit unions too. Our grounds for divorce are “irreconcilable differences.”

    For the record, ICBA has been campaigning loud and long to dissociate ourselves from the reckless greed and overreach that triggered the 2008 financial crisis (or train wreck). In fact, in many ways, community banks were the victims of the crisis. So yes, Mr. Smith, you have the right idea.

    Fines, Penalties and Settlements—Oh My!

    Dec 13, 2011
    Or, How the Smalls Pay for the Sins of the Bigs

    A quick check of the records reveals that since the financial crisis began in 2008, Bank of America has been assessed at least $23.4 BILLION in fines, penalties and settlements! Not to be outdone, JPMorgan Chase, Citi, Wells Fargo, and Morgan Stanley have been assessed a combined $13 BILLION during the same time frame.  

    It is ironic, and a bitter footnote for community bankers, that BofA’s $23.4 billion in various financial punishments alone could have made every undercapitalized community bank in the nation WELL CAPITALIZED at the height of the financial crisis! And it would have knocked hundreds of banks off the FDIC problem list AND saved scores of banks from outright failure.

    So while BofA and the other too-big-to-fail firms were paying relatively light (for their size) penalties and fees, community banks were paying for those megabank sins with their banks! And now the same folks that brought you the financial crisis want community bankers to just forget all about that and act like nothing happened. And, by the way, now that we are all one big kumbaya family, let’s get rid of all those pesky rules that bring the systemic-risk banks to account.

    And that, ladies and gentlemen, is the destructive nature of allowing financial firms (or any firm for that matter) to become so big that the government can’t fail them. And it is something that ICBA will continue to speak out about until policymakers stop allowing a handful of firms to dictate the course of America’s economy to the detriment of all of the rest of us.

    Why Not Get Behind “CFA”?

    Dec 07, 2011
    Why is ICBA the only national banking trade group to push, and push hard, for passage of the Communities First Act regulatory-relief legislation (S. 1600/H.R. 1697)? And why hasn’t every state community banking group signed on?

    This common-sense regulatory-relief bill was developed by community bankers FOR community bankers. And it’s making good progress in Congress. Even House Financial Services Committee Chairman Spencer Bachus (R-Ala.) is cosponsoring the bill—along with more than 60 of his colleagues on both sides of the aisle.

    That’s not the only good news. In addition, sections of the Communities First Act are making their way through the House and over to the Senate. Last month, the House voted 420-2 (what gridlock?) to pass an ICBA-advocated bill that includes SEC shareholder-relief provisions included in CFA. Similar legislation in the Senate was recently modified to promote passage in that chamber.

    That’s the beauty of the CFA bill—it was written so that sections of it can be lifted out and advanced via other legislation moving through Congress. This is the same tactic we used very successfully with our first CFA bill in 2005, and it is working again. ICBA does not just complain about regulatory burden and unfair examination and regulatory treatment—we ACT!

    Napoleon was once asked about his ability to exploit circumstances on the battlefield. “Circumstances—what are circumstances?” the bemused general responded. “I make circumstances.”

    And that is exactly what ICBA is doing—making circumstances! ICBA is changing the dialogue in Congress with our Communities First Act. Please, as a community banker, get behind the Communities First Act. Urge your members of Congress to support it. You have everything to gain and nothing to lose by doing so.

    Outrage

    Dec 01, 2011
    Wall Street Gets the Gold; Main Street Gets the Shaft!

    We all suspected this, and now it is public. More than 1,000 community banks suffered severe damage as a result of their GSE preferred stock being wiped out following the nationalization of Fannie Mae and Freddie Mac. Now, in the latest Bloomberg investigation of the financial crisis, we find out that then-Treasury Secretary Henry Paulson tipped off his Wall Street buddies on the plan. And anyone who thinks that Wall Street did not act on that information is smoking some powerful dope.

    Meanwhile, Paulson was making public statements that Fannie and Freddie were “stable” and that their capital was “adequate.” Why didn’t he tip off the more than 1,000 community bank CEOs whose holdings were about to be wiped out?

    At the time, we had our suspicions, but no proof. Well, it looks like we community bankers were right all along. I guess it’s hard not to know when you’re getting screwed.

    Of course, while this inequity is outrageous, it’s far from the first time community banks have gotten the shaft. Any wonder we want our own voice in Washington? Any wonder why we are fighting for fair treatment for Main Street when Wall Street gets a break after wreaking financial havoc?

    Once again Wall Street gets the gold and Main Street gets the shaft. Crony capitalism is alive and well.