ABA’s Nichols: Educating lawmakers on issues like ACRE and capital rules takes teamwork

Political advocacy in Washington, D.C., is a team sport that extends well beyond Capitol Hill, American Bankers Association President and CEO Rob Nichols told a gathering in Oklahoma City today for the association’s 71st Agricultural Bankers Conference. Working with state banking associations is just part of that teamwork, Nichols said. “There’s so much impacting our sector right now—from a legislative, regulatory and reputational standpoints,” he explained. “It really is important for you to be engaged. Policymakers are very attentive to bankers from their home state.”

A good example of the need for and success of such teamwork has been with the Access to Credit for our Rural Economy Act—or ACRE—which was introduced earlier this year in the House and Senate. ACRE would give community banks the same tax-exempt status on certain earned interest that applies to Farm Credit institutions, allowing farm real estate borrowers and rural homeowners access to lower interest rates. The exemption would also apply to single-family home mortgage loans in small rural communities and for mortgages less than $750,000. There currently are 45 cosponsors in the House, including 13 Democrats, which is the most Democratic support the legislation has had.

But there remains “some work to do,” said ABA EVP Kirsten Sutton, who joined Nichols for the policy discussion. “We need to advocate for this legislation in a way that puts consumers first and highlights our ag members’ desire to bring much-needed resources to these communities,” she said. Nichols and Sutton urged ag bankers to contact their elected officials—particularly in Democratic areas—and ask them to sign on to ACRE, in addition to asking any of the agricultural associations they belong to, to endorse the legislation so that lawmakers can hear from end-user beneficiaries.

During his remarks, Nichols also explained why ag bankers should care about the Federal Reserve’s so-called “Basel III endgame” proposal. ABA has raised concerns that the proposal would impose unnecessary new capital requirements, limiting credit availability and threatening economic growth and resiliency. As regulators have repeatedly affirmed and recent stress tests have demonstrated, the U.S. banking system is already well capitalized, and regulators have not demonstrated how the proposal would increase safety and soundness, he said.

“This was crafted in 2017 before COVID, before the interest rate environment change, before the spring bank failures,” Nichols explained, adding that the landscape is “totally different” today and that it would have “a very direct effect” on the ag sector. “If you care about capital access, you should care about this rule.” He added that the rule would contribute to the unlevel playing field between banks and the Farm Credit System, curtail some of the derivative transactions the ag sector uses and suppress ag lending.