Pumping It Up

By Evan Sparks

December 2015 brought a setback to the banking industry as—after years of advocacy and effort—Congress failed to include meaningful regulatory relief in the omnibus spending bill, an outcome that ABA and the state associations fought hard for.

Despite the outcome, bankers are rallying themselves for whatever gains they can make in 2016 and laying the groundwork for major efforts with a new Congress and president in 2017. That effort begins this month at ABA’s Government Relations Summit in Washington, when 1,000 bankers will take their message to Capitol Hill.

‘Profound disappointment’
Just days before congressional negotiators finalized a 2016 spending bill that did not include regulatory relief, bankers from across the country and representing every part of the industry convened in Washington on Dec. 8 for the fall meeting of ABA’s Government Relations Council. What news had filtered from Capitol Hill by the time of the meeting was not optimistic. While they remained hopeful for a last-minute breakthrough, the GRC members turned their attention to 2016 and beyond.

“We’re profoundly disappointed that lawmakers were unable to enact common-sense reforms in this session of Congress that would help America’s hometown banks better serve their clients, customers and communities and make the loans that drive our economy forward,” said ABA President and CEO Rob Nichols at the time. “Layers upon layers of ill-fitting regulations have been applied to the whole industry, making it much more difficult for customers to buy a home, expand a small business or achieve other important financial goals.”

The failure of regulatory relief provisions—especially those with bipartisan backing and thorough vetting—was compounded the week before by a measure in a federal highway bill cutting the statutory dividend paid to banks with assets of over $10 billion on Federal Reserve Bank stock. Nichols memorably objected to “using banks as an E-ZPass to pay for highways,” but the damage was done and the highway bill passed.

Led by GRC Chairman Paul Willson, chairman of Citizens National Bank in Athens, Tenn., GRC members ruminated on the fact that Congress saw little risk and everything to gain in stiffing the banking industry. They agreed on the importance of telling real-life stories of how banks help customers achieve their dreams as a means of expanding policymaker understanding on the impacts of their policies, and of pushing back against political narratives that have painted the industry in a negative light since the financial crisis.

Strength training
The word of the week on everyone’s lips was “muscularity.” In particular, bankers and ABA leaders focused on the need to strengthen the banking industry’s political muscles so that Congress and the executive branch will not just hear bankers—they will listen.

For example, ABA and the state associations went all-out in the fall of 2015 with the Pass Reg Relief Now campaign. This effort included in-person Hill visits by hundreds of bankers; aggressive advertisements featuring bankers in inside-the-Beltway publications and radio outlets, in key states and even on apps like Pandora and SnapChat; and grassroots outreach via email, phone and Twitter. More than 20,000 bankers signed a petition delivered to Capitol Hill calling for regulatory relief.

Twenty thousand signatures may sound impressive, but as ABA EVP James Ballentine pointed out to GRC members, that accounts for only 1 percent of the banking industry’s 2 million employees. Many banks saw hundreds of employees sign, including customer service reps and tellers, but for most, only the CEO or other top bank officers signed.

Grassroots employee engagement is just one part of building political muscle. Another is encouraging bankers to join BankPac, said Wes Hoskins—president and CEO of First Community Bank, Corpus Christi, Texas, and chairman of BankPac. ABA encourages everyone to join BankPac at either the national or state level. In order to do that, one’s bank must provide prior approval. This year, ABA hopes employees across the country will sign up for small paycheck deductions to go to BankPac. This not only gets more and more bank staff engaged in advocacy, but even small contributions can make a big difference. But this can only happen if a bank provides ABA with prior approval to participate in BankPac.

Ballentine pointed out that the leading credit union PAC raises more money than BankPac. Financial support through BankPac, he said, provides the vital “air support” for banker and ABA efforts on the ground on Capitol Hill. In addition to increasing financial support, Ballentine continued, the industry must work harder to encourage bankers and others with financial services backgrounds to run for political office.

Yet another strategy to build muscle is contributions to the independent 501(c)(4) set up in 2012 by ABA board members. Formerly known as FEAI, the nonprofit organization funds educational and issue campaigns that reinforce the message of bankers in key races.

GRC members collectively committed to building up the industry’s political brawn, a move Rob Nichols has focused on. “We need to assess the effectiveness of our tools, add resources where needed and engage far more bank employees in our grassroots efforts,” he says. “And we need to be much more deliberate in deciding which lawmakers to support with our dollars and manpower. In short, we need to show Congress that America’s hometown bankers mean business.”

These efforts to build muscularity will continue throughout 2016, leading up to November’s election and then being put to good use with the new Congress in January 2017.

Fine-tuning the Agenda
With Congress back in session for only a light schedule in 2016, ABA is focusing on targeted bipartisan opportunities. While ABA has won progress on many items on its Agenda for America’s Hometown Banks, it continues to press ahead. And as the political, regulatory and technological environments have changed, so have some of the emphases in ABA’s agenda.

For example, GRC members urged ABA to elevate its focus on the growth of fintech and marketplace lending platforms that are regulated differently than banks, the effects that differential regulation and technological innovation have on bank commercial and consumer business models and the potential effects of below-market pricing on market stability.

While ABA VP Michael Gullette and others have been closely engaged in the Financial Accounting Standards Board’s rewrite of loan loss accounting rules for years, the forthcoming final release of the Current Expected Credit Loss standard this year has also raised the stakes, and ABA is both advocating with FASB and regulators on CECL implementation and helping bankers navigate the required changes.

GRC members also saw new opportunities to communicate the consequences of mortgage and excessive fair lending rules for customers now that the industry has had time to see just how the rules have worked to constrict credit and prevent banks from meeting customers’ unique needs.

Keeping a sharp focus
“We’re using 2016 to reset expectations—both our expectations of lawmakers and their expectations of us,” said Nichols. “We simply cannot endure another Congress that refuses to do what it takes to provide relief to America’s hometown banks, their customers and their communities.”

And while ABA retools for a stronger political punch, GRC Vice Chairman Tom Petro—president and CEO of Fox Chase Bancorp in Blue Bell, Pa.—reminded bankers to remember why they’re fighting.

“Our financial ecosystem is complex and highly interdependent. It is why America’s financial markets are the deepest, broadest, strongest, most transparent, most liquid and safest capital markets anywhere on the planet,” he said. “It must be protected at all costs. The prosperity of our hometowns and our nation depends on it. The futures of our children and grandchildren depend on it. They depend on us to get this right.”

About Evan Sparks

Evan Sparks
Evan Sparks is editor-in-chief of the ABA Banking Journal and vice president for publications at the American Bankers Association.
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