State del­e­ga­tion di­vided on bank­ing changes

Stamford Advocate (Sunday) - - Front Page - By Dan Freed­man dan@hearstdc.com

Rep. Jim Himes has de­vel­oped thick skin in nine years on Capi­tol Hill, but the one thing guar­an­teed to get un­der it is any sug­ges­tion that his House vote last week con­trib­uted to the gut­ting of the his­toric Dodd-Frank bank­ing law he helped to cre­ate.

“I’ve spent nine years fend­ing off at­tacks by Repub­li­cans” on Dodd-Frank, said Himes, a Con­necti­cut Demo­crat. “But once in a blue moon, I’m in fa­vor of mod­i­fi­ca­tions. It is uni­ver­sally ac­cepted that any piece of leg­is­la­tion is not a holy writ.”

When it was ap­proved by a Demo­cratic Congress and en­acted in 2010, Dodd-Frank brought un­prece­dented scru­tiny to banks in the wake of the 2007-2008 Great Re­ces­sion. One of the coau­thors was Sen. Chris Dodd, D-Conn., who an­nounced his Se­nate re­tire­ment that same year.

Himes was one of just 33 Democrats (out of 193) to vote last Tues­day in fa­vor of the Eco­nomic Growth, Reg­u­la­tory Re­lief, and Con­sumer Pro­tec­tion Act. The state’s four other House mem­bers — all Democrats — voted against the mea­sure.

The bill was pro­moted by con­ser­va­tive House Repub­li­cans who are frank in their de­sire to see Dodd-Frank gutted, if not re­pealed in its en­tirety.

But one prom­i­nent Repub­li­can, Rep. Jeb Hen­sar­ling, R-Texas, bemoaned the lack of teeth in the bill ap­proved last week.

“I wish it did gut Dod­dFrank,” he said. “It didn’t.’’

Hen­sar­ling is chair­man of the House Fi­nan­cial Ser­vices Com­mit­tee, of which Himes is a mem­ber.

The small-bank ar­gu­ment

The new law’s main fea­ture is ex­empt­ing banks with $10 bil­lion in as­sets or less from many of Dod­dFrank’s reg­u­la­tory pro­vi­sions. But it also lifts the as­set thresh­old for de­ter­min­ing if a bank poses a threat to the fi­nan­cial sys­tem if it fails.

The new level en­acted last week is a five-fold in­crease to $250 bil­lion — ex­empt­ing some ma­jor play­ers such as Amer­i­can Ex­press, Sun Trust and BB&T.

But its back­ers, in­clud­ing Himes, in­sist the bill was writ­ten to an­swer the prayers of small and medium banks and credit unions that were sub­jected to the same reg­u­la­tory reg­i­men as the “too-big-to-fail” banks. The amount of time and pa­per­work re­quired to com­ply with the law was out of sync with their min­i­mal im­pact on the na­tion’s over­all fi­nan­cial health, they ar­gued.

“Dodd-Frank was de­signed to curb the abuses tak­ing place on Wall Street,” said Jill Nowacki, pres­i­dent and CEO of the Meri­den­based Credit Union League of Con­necti­cut, which rep­re­sents about 100 credit unions statewide, in­clud­ing 25 in Himes’ Fair­field County district. “It was never in­tended to trickle down and im­pact credit unions. How­ever, it did.”

Con­necti­cut’s mem­berowned, non­profit credit unions hold $8.5 bil­lion in as­sets and serve about 875,00 con­sumers. They range from small — Faith Tabernacle Bap­tist Church Fed­eral Credit Union in Stam­ford, with $165,000 in as­sets — to large — Shel­ton­based Siko­rsky Credit Union, with just un­der $800 mil­lion.

Nowacki said that un­der pre­vi­ous Dodd-Frank rules, bank ex­am­i­na­tions di­verted thinly staffed credit unions away from cus­tomers stand­ing in line, and forced many out of the mort­gage-lending busi­ness be­cause of com­pli­cated reg­u­la­tory and tech­nol­ogy re­quire­ments.

About 2,000 of 8,000 credit unions have closed na­tion­wide since Dod­dFrank be­came law. Con­necti­cut has lost about five credit unions a year since 2014, Nowacki said, adding that “it’s not only Dodd-Frank, but that’s a large part of it.”

Fi­nan­cial per­spec­tive

Some of the now-al­le­vi­ated re­quire­ments im­posed by Dodd-Frank were gran­u­lar, but they added up to a bur­den­some night­mare, Nowacki said. For in­stance, mort­gages for pur­chases of du­plexes were deemed busi­ness rather than com­mer­cial — re­quir­ing much ex­tra pa­per­work.

The switch back to clas­si­fy­ing them as res­i­den­tial could “help un­lock about $4 bil­lion that credit unions can lend to small busi­nesses, help­ing ex­pand the to­tal eco­nomic ca­pac­ity of our com­mu­ni­ties,” she said in an op-ed.

Himes is no stranger to controversy sur­round­ing Dodd-Frank. As a veteran of Goldman Sachs long be­fore com­ing to Congress, Himes ar­guably un­der­stood the Amer­i­can fi­nan­cial-ser­vices sec­tor bet­ter than any other law­maker in Wash­ing­ton.

The bill, which was signed into law by Pres­i­dent Trump last week, is “al­most en­tirely re­lief for small in­sti­tu­tions,” Himes said. “And I would say as one of the orig­i­nal au­thors of Dod­dFrank, I’d never par­tic­i­pate in any ef­fort to gut it.”

Himes co-wrote the sec­tion of the orig­i­nal Dod­dFrank rein­ing in trade in high-fly­ing de­riv­a­tives. But he dis­ap­pointed fel­low Democrats in 2014 when he sup­ported mod­i­fi­ca­tions.

Now Himes finds him­self in op­po­si­tion to the vast ma­jor­ity of mem­bers of his own party over yet an­other such se­ries of re­vi­sions.

House Mi­nor­ity Leader Nancy Pelosi, D-Calif., called the leg­is­la­tion “a bad bill un­der the guise of help­ing com­mu­nity banks.”

She said it would take the U.S. “back to the days of unchecked reck­less­ness.”

Rep. Rosa DeLauro, DConn., was skep­ti­cal of the claim that the new $10 bil­lion thresh­old would free small banks of an un­due reg­u­la­tory bur­den.

“De­spite be­ing sold as a bill fo­cused on help­ing com­mu­nity banks, in re­al­ity, it puts our fi­nan­cial sys­tem at a greater risk of an­other sys­temic fail­ure,” she said. “Th­ese pro­tec­tions were put in place for a good rea­son: to pre­vent an­other Great Re­ces­sion. This new law is noth­ing less than a sys­tem­atic at­tack on those safe­guards.”

And fel­low Con­necti­cut Rep. El­iz­a­beth Esty ar­gued the new law also would un­der­mine pro­tec­tions against dis­crim­i­na­tion in hous­ing and mort­gage lending.

“When af­ford­able hous­ing is such a crit­i­cal is­sue in Con­necti­cut and in light of on­go­ing ev­i­dence of racial dis­crim­i­na­tion in mort­gage lending prac­tices, I am con­cerned that the bill would lead to a re­treat in our ef­forts to en­sure fair hous­ing and lending poli­cies,” she said.

An­tic­i­pat­ing a storm, Himes has built a line of de­fenses. One of them is a let­ter from the orig­i­nal spon­sors, Dodd and for­mer Rep. Bar­ney Frank, D-Mass., who was chair­man of the House Fi­nan­cial Ser­vices Com­mit­tee.

Voices of Con­necti­cut’s pro­gres­sive-lib­eral-ac­tivist com­mu­nity have, for the most part, been muted.

“Reg­u­la­tion is a tricky thing, and I think (Himes is) try­ing to find mid­dle ground here,” said Dou­glas Suther­land, Chair­man of Democ­racy for America — Fair­field County. “Small banks have been scream­ing a long time, so let’s see if this helps them. I don’t see it as gut­ting.”

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