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Dear Community Banker:

That whizzing sound you heard was summer passing by much too quickly. It’s been a remarkably successful year thus far. Many of ICBA’s key policy recommendations have been incorporated into both congressional and administration financial reform plans.

Average Americans are beginning to understand the difference between Wall Street and Main Street banks. They understand that community banks didn’t gamble with their assets, their investments and the entire economy. Most Americans understand that community banks shouldn’t be penalized for the reckless and irresponsible behavior of several mega-Wall Street firms and many non-regulated financial firms, especially if it means that community banks will be forced to restrict the products and services they can offer to their customers.

Most policymakers have come to recognize that this financial and economic crisis was not triggered by Main Street. They also recognize that with our close ties to our communities and our solid, common sense banking practices, we are uniquely positioned to play a very strong role in the recovery. Based on our record so far, if ICBA and the community banks we represent were a baseball team, we’d have clinched a playoff spot already.

This kind of success only happens when you have a great team working in harmony — and thousands of member banks working through ICBA do work in harmony. As we gear up for the remainder of this legislative session, I want to thank the thousands of community bankers around the country for your leadership as advocates and educators. Thank you for demonstrating the breadth and depth of our grassroots support by contacting your representatives while they were home for recess. And thank you for speaking out in op-eds and letters to the editors of your local newspapers on behalf of our community banking industry. I know we’re being heard.

Which is why I’m writing to ask you to please redouble your efforts to meet the challenges that are coming up fast this fall. After 25 years of warning about the dangers of systemic risk, ICBA and community bankers now have an unprecedented opportunity to help shape these and other policies that will determine how we regulate our financial system going forward.

Passing legislation to defang institutions that pose a systemic risk must be a top priority for Capitol Hill. Congress must subject these mega-firms to stronger supervision, capital and liquidity requirements, and better protect the taxpayers by establishing a systemic risk fund paid for by those firms. Nonbank lenders that present similar concerns should be assessed a systemic risk premium as well, and all nonbank financial firms, regardless of their size, should face heightened oversight of their lending activities.

It would be wonderful if we could focus on just this one issue — but we can’t. What’s at stake for all community bank franchises is too important to ignore. This congressional session promises to tackle one issue after another that will determine your future and the future of your customers and your communities. We must be at the table. Your voices must be part of the debate.

It is up to all of us to ensure that any new regulatory system does not harm the community banks that help keep our local economies strong. It is up to us to make sure that new regulations will not choke off the one part of the financial system that is still actively lending and stimulating business growth, consumer spending and home ownership.

Here’s just a sampling of what we have on our plate:

Consumer Financial Protection Agency Act of 2009 (H.R. 3126), introduced by Rep. Barney Frank (D-Mass).

This proposed agency would have far-reaching powers over bank products and services provided to customers. Unfortunately, the consumer protection agency as currently envisioned would hurt, not help customers, and it would also cause more harm than good by undermining small community banks.

The agency would separate consumer protection from safety and soundness supervision. That would mean more costs and complications, and that would mean fewer affordable options for consumers for everything from home mortgages to credit cards to installment loans. A better direction would be to streamline overly complicated and ineffective banking regulations and bring the unregulated players under the supervisory tent. Today's long, mandatory disclosures in bureaucratic and lawyer language do more to confuse than inform consumers, and unregulated lenders are responsible for most consumer abuses.

Policymakers also need to understand that the best way for the government to protect consumers against abusive financial practices is by ending the too-big-to-fail concentration risks that have cost Americans over $7 trillion in economic net worth, and not by adding more burdensome regulations on top of already overregulated community banks.

The Bank Accountability and Risk Assessment Act of 2009 (H.R. 2897), introduced by Rep. Luis Gutierrez (D-Ill.).

ICBA strongly supports this bill to require the FDIC to impose an additional fee on federally insured banks affiliated with systemic risk institutions and to expand the assessment base for all FDIC premiums (including the regular premium not just the special assessment). The additional systemic-risk fee would better account for the greater risks the largest institutions pose to the Deposit Insurance Fund. We believe the bill must go further — it should direct systemic risk authorities to develop procedures to downsize the too-big-to-fail institutions in an orderly way.

The Administrative Support and Oversight for Community Financial Institutions Act of 2009 (H.R. 2676), introduced by Rep. Dennis Cardoza (D-Calif.).

ICBA is urging Congress to establish an assistant Treasury secretary for community financial institutions position to provide an internal voice within the department for Main Street concerns.

The Resolution Reform Act of 2009 (S. 1540), introduced by Sens. Bob Corker (R-Tenn.), and Mark R. Warner (D-Va.).

This bill would extend the FDIC’s authority, putting a bank holding company into the hands of the FDIC if the insured depository institution within the holding company structure needs to be resolved. The bank holding company would be moved into receivership, its pieces would be sold off, and the company would no longer exist.

I know it’s asking a lot for you to stand ready to work on these and probably a dozen other urgent issues that are slated for discussion this fall, but at ICBA we will be working even harder to give you the support and the resources you need to make our case.

We will continue to have more materials available online for you to use in contacting your representatives or writing to your local newspapers. Please let us hear from you on how we can continue to better serve your needs.

We must act now to restore confidence in the integrity of our financial system. We must build a new foundation for financial regulation and supervision that is proportional to an institution’s size and risk to our financial system, that protects consumers and investors, that does not impede innovation and that is able to adapt and evolve with changes in the financial markets.

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