American Banking Association- Worth Reading

Topic A: Nothing to Celebrate


By Ed Yingling, ABA President and CEO

Although I have been invited to the signing ceremonies of most major banking bills for the last 25 years, I should not have been invited to the one for the Dodd-Frank Act, and I was not.

The Administration has been more than generous in inviting me to meetings, speeches and bill signings. But, here, ABA opposed the Administration’s proposal throughout the legislative process (although there were parts we supported). A signing ceremony, particularly on a major priority like this, is ultimately a celebration, as a White House spokesperson noted. The White House said only supporters of the bill were invited. Only those who believe there is something to celebrate should attend.

This week ABA had a major meeting in Washington. Our board, Government Relations Administrative Committee, Membership Committee and the leadership of the state associations all discussed this bill. Everyone in attendance opposed it. In fact, I have not talked to a banker who did not oppose it. Core parts of the reform are needed, but -- just as we had feared from the beginning -- this law is loaded up with massive new regulatory requirements and social engineering.
There are so many new regulations -- hundreds -- that lawyers cannot even agree on the number. While not all apply to traditional banks, ABA has a low-ball estimate that more than 5,000 pages of new rules will apply to traditional banks. The new consumer bureau, many believe, is the most powerful bureau ever created in terms of its authority and lack of checks and balances. And then there is the Durbin interchange amendment. The new regulations are so overwhelming that they cannot possibly all be written on time. There will be great uncertainly about the rules for many aspects of our business for years to come, and our litigation risk is huge.

The end result will be massive new costs for all banks, but community banks will suffer the most because they lack the scale to absorb the new costs. Ultimately, the economy will suffer, and consumer and business products, particularly loans, will be less available and cost more. Mortgage lending is a prime example of where extensive new rules will apply that will take years to settle down.

This tsunami of requirements overwhelms the positives of the bill, which include a systemic oversight mechanism, a method for resolving systemically risky institutions, and new regulation of non-bank entities. For years to come, new regulations from the bill itself and from the consumer bureau will remind us of what the law did.