Once humbled by the financial crisis, bankers are suddenly feeling emboldened
Packed into a ritzy hotel ballroom, a meeting of nearly 1,500 bankers momentarily turned into a pep rally. Be proud of being a banker and of the industry’s record profits, the speaker implored the assembled. In fact, he urged, it’s time to ask Congress for help so the industry can do even better.
“I don’t want a seat at the table. I want the table,” James Ballentine, chief lobbyist of the American Bankers Association, told the crowd.
After spending years humbled by the fallout from the financial crisis, the banking industry is suddenly feeling emboldened. Attendance at the annual association gathering jumped 50 percent this year as bankers sense a rare opportunity with the election of Donald Trump and Republicans’ control of Congress to upend dozens of regulations put in place after the financial meltdown.
Critics argued banks are doing well enough without the help. But that hasn’t stopped Trump from directing Treasury Secretary Steve Mnuchin to prepare a report this summer outlining which rules should be scrapped. Already the administration has begun replacing some of the industry’s toughest regulators with business-friendly officials.
To keep up the momentum, the visiting bankers descended on Capitol Hill this week to make personal appeals for repealing regulations they say have gone too far and make it difficult to loan money to consumers. Many wore blue “America’s Banks” pins as they recounted their stories of regulatory woe. Some scored meetings with Speaker of the House Paul Ryan and Texas Sen. Ted Cruz and cruised government buildings with pamphlets outlining their concerns. Others signed up for ABA’s first “school” to train bankers to run for public office.
The face of the effort are community bankers such as Robert Jones, the longtime president of United Bank in Atmore, Alabama, a $500 million community bank that specializes in serving the type of poor, rural customers that supported Trump’s election. “I know a lot about cotton and peanut farms,” he said.
“For the last eight years, it didn’t matter what was said, we weren’t going to get things done,” said Jones, adding that “despondency” had set in. “Now there is some optimism.”
The industry’s aggressive lobbying push, though, comes with an inconvenient reality: the banking business has rarely been better.
“They are doing great under the current system,” said Marcus Stanley, policy director for Americans for Financial Reform.
The country’s nearly 6,000 banks — from large players like Bank of America to the small community and regional banks packed into the hotel conference room —pulled in more than $171 billion in profits last year, a record, according to recently released Federal Deposit Insurance Corp. data. Wall Street bonuses rose for the first time in three years in 2016 to an average of $138,210 and big banks such as Goldman Sachs have seen their stock prices surge since Trump’s election, even after a pullback this week.
Ballentine, the lobbyist, told bankers they shouldn’t be embarrassed by that success. “Profit is not a four-letter word, you’re supposed to be profitable,” he said.
Besides, industry officials say, the data don’t tell the full story. The banking industry has been shrinking for years, but the pace accelerated as 2010’s financial reform package, known as Dodd Frank, was implemented, they say. And many of the rules meant to rein in large bankers such as Goldman Sachs and JPMorgan have also been applied to much smaller players that are struggling to comply. Community banks, which typically have $10 billion or less in assets compared with large, global banks such as JPMorgan, which has more than $2 trillion in assets, are facing the same regulatory tests in some cases.
Small banks that struggled to afford the cost of complying with the new rules have been forced to merge with bigger players or go out of business, industry officials say.
Largely absent from this week’s push were the big banks likely to benefit more from any regulatory rollback, in part because they are less likely to curry sympathy.
Any effort to loosen banking regulations are likely to face resistance from many Democrats and advocacy groups that say Dodd Frank has made the financial system safer.
If community banks need more regulatory relief, they will need to better separate their interests from those of their larger competitors, critics say.
“What we’re seeing is big bank bills dressed up in community bank clothing.” said Stanley of Americans for Financial Reform.
Trump has given the industry significant hope. At a recent “listening session” with community bankers — usually those running institutions with less than $10 billion in assets — Trump encouraged Mnuchin, the treasury secretary, and Gary Cohn, another top economic adviser, to address the regulatory burdens mentioned by the bankers within the next six months, according to industry officials who attended but spoke on the condition of anonymity to discuss what was said at the private meeting.