NJBankers Goes to Washington
By Robert J. Tartaglia
NJBankers returned to Washington, D.C., for the first time in 11 years for what proved to be a very meaningful visit. For two days a New Jersey delegation of bank presidents were briefed by elected officials, regulators and the leadership of the American Bankers Association regarding developments on “the Hill” affecting banks. The delegation also reflected a number of industry concerns from “back home.”
The Washington, D.C., schedule of events, which took place on June 15 and 16, commenced from the lobby of the historic Hay-Adams Hotel across from the White House. After boarding a shuttle, the bankers arrived at the American Bankers Association (ABA) where ABA Executive Vice President Edward L. Yingling and ABA Senior Economist Keith Leggett gave an insightful presentation on a number of federal issues. Yingling had just been named the successor to Donald G. Ogilvie as ABA president and CEO, and NJBankers would like to congratulate him.
Yingling also detailed ABA’s stepped-up grassroots effort on credit unions and how “Operation Credit Union” is changing the way the state associations can engage the credit unions issue.
“The fact that there is virtually no difference between banks and credit unions in their product offerings and membership, the ABA plainly refers to credit unions as tax-exempt banks,” said Yingling.
The next stop was the Federal Deposit Insurance Corp. (FDIC), where the delegation was updated on pending legislation, interest rate risk and the status of the deposit insurance funds.
A highlight of the visit was the presentation of FDIC Vice Chairman John M. Reich, which reflected his recent testimony on the Economic Growth and Regulatory Reduction Act (EGRPRA) before the House Subcommittee on Financial Institutions and Consumer Credit of the Committee on Financial Services. Reich reported a decline in the number of federally insured banks and savings institutions from 15,101 to 7,842 between 1984 and 2003, which he attributed in part to mergers and acquisitions, population shifts and certain bank failures in the mid-1980s to early 1990s, mostly in the community bank sector among institutions with assets under $1 billion.
However, another factor was cited for consideration as a possible cause behind the national decline in the number of banks. According to the FDIC, beginning with the enactment of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA) in 1989, the banking and thrift regulatory agencies have promulgated 801 final rules. Although there are no cost analyses on the impact of the rules on banks, the findings of a Federal Reserve Board economist in 1998 were very revealing. The national survey found that the total regulatory costs accounted for 13 percent of non-interest expense, or about $36 billion in 2003.
Vice Chairman Reich reflected that the fixed costs of regulatory requirements fell more heavily on community banks than on larger ones and could have a significant effect on future prospects. He underscored the belief that “banks should be devoting more resources to the business of lending to consumers and less to the bureaucratic maze of compliance with outdated and unnecessary regulations.”
After a full first day the delegation traveled that evening to Capitol Hill for a reception with legislators in the Rayburn House Office Building. Congressmen Bob Menendez and Scott Garrett, along with other invited guests, spoke to NJBankers about the current legislative session and important topics that were facing our representatives in Congress.
Later that evening during dinner at a popular Washington, D.C., restaurant, Galileo’s, our bankers were fortunate and surprised to see President George W. Bush’s National Security Advisor, Condoleezza Rice. Despite hopes to get to talk with her, the Secret Service kept her well-protected and isolated.
The next morning it was off to the Federal Reserve Board for a breakfast briefing with Gov. Mark W. Olson. Olson gave a brief presentation followed by questions from the NJBankers.
Association President Stu Cameron raised the issue of Interest on Lawyers Trust Accounts (IOLTA) and gave some background on how many bank presidents in New Jersey were receiving threatening letters from the New Jersey IOLTA Board. Olson seemed genuinely interested regarding the jurisdictional question over rate influencing. He requested NJBankers to provide him more information on the issue. It was a privilege to be in the same board room where Chairman Alan Greenspan and his Board of Governors sit to make their extremely difficult decisions.
The final stop of the visit was at the Office of the Comptroller of the Currency (OCC). Comptroller Jerry Hawke, OCC Chief Counsel Julie Williams and Deputy Comptroller Wayne Rushton gave a presentation on the federal pre-emption rule as it applies to predatory lending. The recent ruling by the OCC had caused quite a controversy among a number of state attorney general offices.
Counsel Williams told NJBankers that the OCC’s jurisdiction over national banks and subsidiaries does not deprive state regulators of a role in protecting consumers in their states.
“Predatory lending is a problem in this country, but national banks and their subsidiaries are not where those practices are festering,” Williams said, noting that national banks are highly regulated and closely supervised.
Hawke was also disturbed by the IOLTA matter and asked counsel to review it.
At the conclusion of the OCC’s presentation, Chairman Jim Hyman spoke briefly thanking everyone for attending, and expressed his delight that NJBankers had restored the Washington visit program. Next year he hopes even more bank CEOs will take advantage of the very worthwhile opportunity. Next year’s Washington visit is tentatively scheduled for June 6-7.