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The Final Shakeout on Financial Reform

Over a year after Congress began working in earnest on the legislation, the Dodd-Frank Wall Street Reform and Consumer Protection Act now heads to President Obama for his signature. It will take many weeks and months before the country fully knows the effect of this far-reaching, 2,300-page bill, which has hundreds of highly technical provisions affecting nearly every product and player in the financial services industry.

From the outset of the long, twisted and hair-raising financial reform debate, ICBA set out to protect community banks and Main Street from the inevitable political and populist backlash to the financial crisis and the Wall Street bailouts. While never supporting the bill, ICBA and community bankers and our state and regional association partners remained at the negotiation table to defend the interests of the nation's community banks. Doing nothing was not a political option for Congress, and as a result ICBA and community bankers had to ensure that our voices and concerns were heard just as loudly as Wall Street's.

Time and again, we made sure lawmakers, by their actions and not just their rhetoric, recognized the real-world differences between community banks and Wall Street banks and nonbank firms. In the process, we worked to ensure that policymakers followed through in addressing too-big-to-fail and reducing longstanding inequities for community banks, particularly the disproportionately lighter regulatory burdens and enforcement oversight for Wall Street banks, nonbanks and the unregulated shadow financial sector.

Most important, at every step of the way we kept up the pressure to make sure that community banks would never again pay for the sins of Wall Street—and we were successful in those efforts.

What results did our nearly around-the-clock efforts on financial reform achieve?

The final legislation includes a number of unique ICBA-advocated successes specifically aimed at avoiding unfair or unintended effects on community banks. Unfortunately, there are also significant disappointments in the bill, particularly the creation of the Consumer Financial Protection Bureau and provisions unrelated to financial reform to impose government controls on debit interchange pricing.

Community bankers have strong credibility with regulators and with Congress, so we have a good shot at having generally favorable regulations written or having harmful provisions removed while furthering the progress we're making toward greater fairness in the regulatory process for community banks. (View ICBA summary of Dodd-Frank Act.)

Even with its enactment into law, financial reform is not over. Because the law will require the federal regulatory agencies to write hundreds of new rules, ICBA and community bankers have a tremendous amount of work ahead to make our views known during the upcoming rule-making process, a process that will take years to play out.

The sheer scope and complexity of the problems the legislation had to tackle pretty much guaranteed that no "perfect" bill would result for anyone. So ICBA and community bankers must be prepared to tell Congress how to fix problems the legislation creates.

Nevertheless, financial reform clearly establishes a strong foundation and starting point for community banks and ICBA to win further concessions on policies and issues that recognize the now more clearly defined differences between community banks and Wall Street financial institutions.

The biggest financial players have always called the shots in Washington on generational financial legislation—any history book will tell you that. For all its faults and benefits, if there is one single defining aspect of the Dodd-Frank Wall Street Reform and Consumer Protection Act, it is that community banks will forever be regarded as equals to Wall Street in Washington's policy circles. Whether you were for or against us, community banks have proven that they can and will stand up to defend their interests and those of Main Street America.

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