The Time Is Now

By Evan Sparks

The last time Washington, D.C., was under one-party control was at the beginning of former President Obama’s term. As you might recall, generationally significant legislation made it through in the 111th Congress: the Affordable Care Act, the economic stimulus bill—and, not least for bankers, the Dodd-Frank Act.

A party with solid control of the executive and legislative branches can get a lot done—good and bad. So President Trump’s win on Nov. 8—despite not having nearly the same advantage in the Senate that Obama had—has many bankers optimistic that, with a healthy dose of bipartisan engagement, 2017 might be the year the industry finally sees needed regulatory relief.

During closed-door deliberations this winter, after the election but before Trump took office, banking industry leaders on ABA’s Board and Government Relations Council agreed that the outlook for needed policy changes has improved. They also emphasized the value of the industry taking a larger view about what our communities and customers need to thrive—and not just speak of banking industry-specific concerns. And after a decade of recession followed by persistently sluggish economic gains, the biggest need in America’s hometowns is growth.

To that end, bankers have produced a new ABA Blueprint for Growth that prioritizes the kind of policy changes that will deliver sustained growth, which will in turn help entrepreneurs create more and better jobs, families invest in education, young Americans buy homes and neighbors save more efficiently for retirement. And as real growth occurs in both national and local economies, banks will thrive, too.

Banks fuel growth, especially when certain regulatory shackles of Dodd-Frank and other legislation are removed. Regulatory relief will always be part of a meaningful pro-growth strategy. “But we must always frame the conversation around how the reforms we seek promote growth,” says ABA EVP James Ballentine. “And we need to show that we’re leading the effort on issues that don’t narrowly affect just banks.”

Tax and regulatory reform: front and center

On the economic front, tax reform is one of House Speaker Paul Ryan’s top goals—a white whale he has been pursuing since before he entered Congress. This congressional session is shaping up to be the best shot at overhauling the tax code since it was last accomplished three decades ago under Ronald Reagan.

ABA strongly supports a simpler tax code with lower rates and, under the leadership of ABA VP John Kinsella, has convened a tax reform working group to highlight pro-growth tax strategies for Congress, review proposals from Capitol Hill and identify key concerns and priorities specific to banks. This group will continue to meet and provide feedback and insights as the process moves ahead this year.

The banking industry will also press for Congress to address the status of credit unions and the Farm Credit System in the tax code. “American taxpayers are becoming increasingly aware of the cost of subsidizing large credit unions who have lost sight of their statutory mission of service to people of modest means,” says John Sorensen, president and CEO of the Iowa Bankers Association. The tax effort will complement litigation by ABA and the Independent Community Bankers of America to stop the National Credit Union Administration’s aggressive efforts to loosen congressional limits on credit union activities. “It is gratifying to see the banking industry fight back through litigation,” adds Sorenson. “We’ll need to be just as aggressive in making the case for tax equity.”

On the regulatory front, House Financial Services Committee Chairman Jeb Hensarling is likely to advance a comprehensive financial regulatory reform package this year. The fate of the bill—a version of which was introduced in the previous Congress and included several provisions strongly backed by ABA—will depend on whether it can win moderate Democratic support on the Senate Banking Committee, says Ballentine.

“You can’t pass bills in the Senate on party-line votes,” he explains, since the filibuster remains intact for most legislation and thus 60 votes are required on the floor. Functionally, that requires minority support at the committee level for major bills. However, four Senate Banking Committee Democrats represent states that Trump carried by at least eight percentage points—and all four are up for reelection in 2018, arguably giving them an incentive to work with the Republicans.

“Any legislation we seek to advance will need bipartisan support,” says ABA President and CEO Rob Nichols. “And it will have to compete with a crowded Trump administration agenda, as well as see action in the first nine months, before the 2018 election cycle starts influencing lawmaker positions.”

A customer focus

ABA and banker leaders continue to emphasize the importance of continuing to communicate with Congress in ways that emphasize the value of legislation for customers and hometown businesses and not the banks’ costs or operational efficiency, as important as those are.

For example, instead of complaining about the loss of interchange revenue, bankers can talk about how the Durbin Amendment has led to the decline of customer-friendly and popular free checking accounts. And instead of describing the burdens on banks of excessive Bank Secrecy Act customer due diligence requirements, bankers can explain how the burdensome onboarding process frustrates customers, particularly business clients, with the amount of documentation they must produce.

“Every regulatory cost you handle within the bank has a real-world effect on the customer experience,” says Ballentine. “We focus on the latter when we communicate to Capitol Hill.”

ABA’s Blueprint for Growth includes several areas where regulatory relief can help bank customers, from Durbin and AML to Qualified Mortgages, small-dollar credit, data security and flood insurance. Bankers are also enthusiastic about “advocating policy solutions that are outside banks’ bottom-line interest but that help the economy grow and our customers and communities thrive—such as student debt relief, urban housing solutions and a stronger Small Business Administration,” adds Nichols. “Such big-picture issues align with lawmaker concerns and well reflect the role bankers play as community leaders and economic stewards.”

Engagement needed

Enthusiasm about the political environment is appropriate—and needed, as wins will require a high degree of grassroots energy and engagement. Nichols stresses the importance of embracing policy positions that are positive and forward-looking. “We are for economic growth. We are for job creation. We are for prosperity for our communities,” he says. “Such optimism drives our industry, and it’s what should drive our advocacy, too. It’s far more compelling than an anti-this, anti-that platform.”

He adds that while the year ahead has the potential to be a productive one, the new policy landscape does not guarantee pro-growth legislation will make it to the president’s desk. For any legislation to be enacted, it will need both bipartisan support and active banker engagement. “That said, our industry will be starting 2017 with our advocacy efforts closer to the 50-yard line than our own 5-yard line,” Nichols says. “And that significantly improves our odds of scoring important successes for economic growth.”

Nichols is similarly optimistic about the likelihood of change on the regulatory front. Change of personnel at the independent banking regulators will not be immediate, as the terms of top regulators are somewhat staggered and don’t end when the administration does, but as the Trump team moves ahead with the transition, more pro-growth regulatory agency heads can be expected.

Fueling that optimism is prep work done in 2016 to increase the banking industry’s political capacity for just such a moment as this. “We have bankers who are substantially more engaged in grassroots, a stronger BankPac and a more robust Fund for Economic Growth,” says Nichols. “We’ll continue to increase engagement in all three areas as part of our ongoing Power Up initiative, and I’m hopeful these efforts will bear fruit in the form of enactment of pro-growth policies.”


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