Thursday, November 6, 2014

Bankers hope Republicans provide regulation relief

Now that Republicans have seized control of Congress, bankers are hoping they might see a loosening of regulations created in the wake of the 2008 financial crisis.

That's certainly the case among some bankers in North Carolina.

This week, I spoke to banking industry officials who told me an easing of regulations ranks high on their wishlist for the new, Republican-controlled Congress.

Among other things, the banking industry is hoping Republicans take aim at the Consumer Financial Protection Bureau, a federal agency created by Congress after the crisis to strengthen protections for consumers.

Thad Woodard, CEO of the North Carolina Bankers Association, said he would like to see more oversight of the bureau.

That's not all that surprising. After all, the banking industry has sought to limit power of the bureau, which has rule-making authority. (One of the bureau's new regulations, which requires mortgage lenders to ensure a borrower can repay the loan, took effect in January.)

Woodard said Democrats have allowed the bureau to function "unencumbered."

“Its lack of oversight and its budgetary process have been of great concern to banks," Woodard said.

Woodard said he is also concerned about "duplicative" post-crisis regulations, which he said are increasing compliance costs for banks and making them less profitable. Regulations, he said, are "sitting like a heavy weight on the banks and inhibiting their ability to do business."

That doesn't mean banks should not be regulated at all, he said.

“Never should the industry not be overseen for the safety of the public and the soundness of the institution," he said.

(You can read more of what Woodard told me here.)

To be sure, banks have seen an increase in regulations since the crisis, the worst economic downturn since the Great Depression. And more regulations are to come: Many of the rules mandated by the Dodd-Frank Act, passed in July in response to the crisis, still have not been written.

What do all those post-crisis regulations cost banks?

Jim Engel, CEO of Cornelius-based Aquesta Bank, told me his bank spends about $200,000 a year to comply with the additional regulations. To put that in perspective, the six-branch, community bank made $1.47 million in profit last year.

Engel said costs to comply with regulations limit the return banks can provide investors, which hurts banks' ability to raise capital and expand.

Any banker hoping for easing of Dodd-Frank regulations in the near future might be in for disappointment, according to Mark Vitner, senior economist for Wells Fargo Securities.

"Reforming Dodd-Frank would really use up a lot of political capital, and it’s just too complex to do” before the next presidential election, he said.

(For more on Vitner's thoughts on the new Congress, click here.)

Engel said regulations are just one issue banks are dealing with. The best thing Congress could do for community banks is pick up the pace of the economic recovery, he said.

Community banks in rural areas are especially struggling from low loan growth, he said. And when banks do make loans, they are at lower rates than in the past, which is hurting their net interest margins, he said.

“No. 1 on most community banks' wishlist is for a continuing improving economy," he said.


Anonymous said...

Our fed govt is $17T in debt. Lets apply these regulations and oversight to government agencies and see what comes up.

EuroCat said...

Oh, great. The banksters CRASHED the US economy just a few years ago, costing American citizens potentially TRILLIONS of dollars in losses...while CEO's and other guilty parties took billions in ill-gotten loot and stashed it offshore.

Then Congress passed a few phony "regulations", where most of the bills were written by the banking industry itself, and consumer protection didn't improve ONE IOTA (naturally).

And now they expect an even BIGGER free-for-all?

American voters, you collectively are the stupidest bunch of organisms on the planet. You voted for these idiots, and they are poised to steal TRILLIONS more from you, give that money to their bankster cronies, and tell you "it's the libruls' fault".

And, stupid as you are, you will believe them. Again.


Anonymous said...

From someone that was in the banking let me inform you that it was Chris and Barney that brought it down. The house and senate was full of those dumocrates when the market fell. Fannie & Freddie is the government. They are the one ( government ) that wanted all the bad loans to sell to wall street. It WAS NOT the banks fault. They were the one that had to take the loss. They had to buy back all the bad loans at a higher interest rate. So before you talk SH*t about the republicans and thank god they won. Do your research. Those stupid dumocrates have messed everything up

Archiguy said...

Actually Anon 6:42, it was the PRIVATE mortgage market that relaxed mortgage standards to such a ridiculous level, birthed and grew the mortgage bubble, and then watched it burst. FHA and VA loans NEVER relaxed their income verification and ratio requirements. Only 14% of all the defaults were those type of loans.

The investors that bought all those toxic private mortgage packages were flush with all the extra loot from the Bush tax cuts just burning holes in their well-tailored pockets. They expected 10% returns on their investments and the only place left where they could get such returns was the American home mortgage market. That begat the Gold Rush that led to the bust.

It became the wild west, a collusion between mortgage brokers, bankers, Realtors, and appraisers. THAT is who blew up the bubble and contributed half of the economic meltdown.

The other half, of course, was the unholy union between banks and investment houses, where firms like Goldman Sachs sold securities to investors in one room while betting against those stocks in another.

And then there were the derivatives, credit default swaps and other "financial instruments" that even the regulators didn't understand. Which, of course, was the whole point.

If you were actually "in the banking" as you put it (what a joke), you'd know that. It was the Republicans that birthed that demon baby and the one thing you can be sure of is now that they're back in power, they'll end up doing it all over again.

You get the government you deserve. After Tuesday's results, it's looking like we deserve another recession. You can be sure the GOP will do its best to give it to us, while further enriching the powerful Wall Street special interests that fund the Party. It's what they do.

Anonymous said...

6:58 you need to do major research. I can tell you think you know everything and don't know much. (must be one of the dum o rats). For starters look up and see what a FHA & VA loan is. And look who gives the bank there money for them. The government. So on those loans the banks DO NOT lose. Another thing look up who sold the loans on wall street. The banks sold loans to Frannie & Freddie per there guidelines. And then they sold to wall street. And the most important thing....THANK GOD FOR THE REPUBLICANS!!!!!!!.

Anonymous said...

As a mortgage industry veteran for 17 years, I find the above statement hilarious: "Congress passed a few phony "regulations", where most of the bills were written by the banking industry itself, and consumer protection didn't improve ONE IOTA (naturally)."

Maybe consumer protection wasn't as strong in years past, but it sure is now. And rightly so. If you don't know much about the CFPB, search for some of the fines and penalties they impose. And ironically, the resulting headaches from SOME of the consumer protections are absurd. The banking industry had very little voice. It's almost as if some of the rules were drafted by dentists (meaning folks that had hardly any working knowledge of the industry). So when you can't close your loan for for an additional 3, 7, or 10 days in the name of consumer protection, or even at all, don't complain to your lender.