Lately, anyone who isn’t posting from under some rock knows that there’s a huge amount of angst being directed by some at Kaine. The reason for this is cited as his “publicly siding with bank deregulation advocates at the height of Clinton’s veepstakes”. Well, I like to look at the source material for something this important, so in this diary I will present the letters (with links) that started this whole mess, with my comments.
July 18, 2016
The Honorable Richard Cordray
Consumer Financial Protection Bureau (CFPB)
Dear Director Cordray,
In both good economic times and bad, community banks and credit unions serve as pillars of their communities, providing the capital and access to credit that families and small businesses need to grow. That is why Congress and federal regulators have long taken the approach that credit unions and community banks should be treated differently from the largest financial institutions and non-bank lenders. It is our hope that the CFPB also takes this approach and considers the impact of its rulemaking on smaller financial institutions and consumers. We request that the CFPB carefully tailor its regulations to match the unique nature of community banks and credit unions.
*A mega bank is not a neighborhood bank or a credit union. Got it.
As it has now been six years since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), there are many new rules and regulations in place. We must ensure that credit unions and community banks are not unduly burdened by compliance, but rather have the ability to maintain their close relationships and continue to offer a wide variety of consumer financial products and services.
*So rules that apply to mega-banks may not work for smaller institutions. Let’s see.
We agree that it is important for consumers to be empowered to take more control over their economic lives, and that bad actors should be rooted out of the financial marketplace. However, the CFPB must also consider its impact on community-based depository lenders, who are essential to spurring economic growth and prosperity at a local level, and not disrupt the good work of community lenders to help someone start a business, buy a home or car, or put their kids through college. Since we all recognize these community lenders were not the primary cause of the financial crisis, the CFPB must carefully tailor its rulemaking.
*Sounds good, depending on the rules being exempted because of impact.
Dodd-Frank explicitly granted the CFPB the authority to tailor regulations in Section 1022(b)(3)(A) by allowing the CFPB to “exempt any class” of entity from its regulatory requirements. We believe the CFPB has robust tailoring authority and ask that you act accordingly to prevent any unintended consequences that negatively impact community banks and credit unions or unnecessarily limit their ability to serve consumers.
*Ok, so the means to deal with potentially uneven regulation exists.
Thank you for your consideration and we look forward to working with you on this important matter.
This seems relatively straightforward and decent on its face. Without more information on the specific instances and examples, it’s hard to judge at this point. However, I’m not seeing any destructive intent.
I can’t find a text version of this, so I’ll just link to it. The gist of it is that by imposing the same reporting requirements on mega-banks and regional small banks and credit unions, it imposes an undue burden on the small banks and CUs. “We therefore urge you to review whether Advanced Approaches remains an appropriate method of establishing (*derermining) bank capital levels.”
What I’m seeing is the claim that when the same rules needed to regulate a mega bank are applied wholesale to a regional bank or credit union, it makes it difficult for them to do business and represents an undue burden, please use discretion in applying these rules. I’m fine with this, as long as the rules being considered burdensome aren’t something like “FDIC rules don’t apply” or similar.
Kaine signed two letters on Monday urging federal regulators to go easy on banks ― one to help big banks dodge risk management rules, and another to help small banks avoid consumer protection standards.
If someone can show me, based merely on these letters, how they substantiate such claims I’d appreciate it, because I’m not seeing it. HuffPo said:
In a letter to Federal Reserve Chair Janet Yellen, Comptroller of the Currency Thomas Curry and FDIC Chair Martin Gruenberg, Kaine argues that it is unfair for these large banks to be required to calculate and report their liquidity ― a critical measure of risk ― on a daily basis.
The letter says:
“Unfortunately, this distinction is applied unevenly across regional institutions despite similar risk profiles, simply by virtue of an asset threshold,”
So, afais, risk threshold should have as much as or more impact on this rule than asset threshold. Do I agree with this? At this point, I’d need to see more information. How do they define the difference between national and regional financial institutions, what do they calculate the impact to be, and what do they suggest to negate it? What are the potential financial impacts of the current practice? How does either option affect consumer safety? Too much reaction, not enough data.
Which is my biggest problem with this entire thing. I see a lot of projecting and not a lot of fact. Under the circumstances, do I think the statement “publicly siding with bank deregulation advocates at the height of Clinton’s veepstakes” is accurate?
Not really. “Bank deregulation” is far too general a phrase and prone to inspiring emotional reaction. In this case, more hard data and analysis is needed to judge what the actual effect of these letters would be if considered, and judging the intent to be nefarious at this point is highly premature without that information.
Have I helped you all sleep? You’re welcome.