The U.S. Senate is expected to vote this week on the most sweeping rewrite of financial rules since the Great Depression, which was passed by the House June 30.
Mississippi’s community bankers, much like healthcare providers, are nervous about what shape the regulations might take. The Financial Regulatory Reform bill, like the healthcare bill, contains general changes that will only be fleshed out later through specific regulations that will be written by a new agency, the Consumer Financial Protection Bureau, CFPB.
The bill is a reaction to Wall Street abuses that caused the recent economic crisis. The Mississippi Bankers Association is among bill opponents who are angry that the bill, if passed, will punish community banks for the bad behavior of big banks, mortgage brokers and non-bank lenders. The bill will make less credit available and increase bank costs.
Community banks are those with assets of less than $10 billion, which includes most banks in Mississippi.
Mac Deaver, MBA president, said that although most people think the Senate bill will pass, his side has not given up the fight.
“The bill has not passed. We’re still working very hard to defeat it… More people are seeing this as a bad bill,” he said.
The MBA argues that what is bad for banks is bad for the consumer.
The bill’s new CFPB would control the nation’s financial infrastructure from individuals’ debit cards all the way to Wall Street banks’ business practices. The CFPB will be housed in the Federal Reserve.
“The community banks are going to get the brunt of this, and their examiners are going to examine them in a politically charged atmosphere,” Deaver said. Banks will lose money in compliance costs.
Some bill opponents have gone so far as to predict the demise of community banks, saying they won’t be able to afford to stay in business and will have to merge with larger entities.
Deaver doesn’t agree with that fear, but does believe the bill will increase costs to community banks and make it hard or impossible in the long run for them to continue to offer some services – such as checking accounts and debit card transactions – for free.
Debit card transactions, via an electronic payment system, are free to consumers because banks charge retailers a fee to process those payments. These interchange fees are a significant source of revenue for banks. The systems also save retailers time and countless dollars on personnel costs.
“The bill was touted as dealing with Wall Street and those entities that created the financial crisis. Banks of Mississippi didn’t do that but will suffer” from the regulation, Deaver said.
Restricting interchange fees has nothing to do with causing the financial crisis, he said. Big retailers took advantage of the opportunity to advocate for free restrictions, and there is no indication they will pass the savings on to the consumer.
The House version of the bill actually excluded small banks from the interchange fee restriction, but community banks say that won’t help them out. As larger banks offer lower fees to comply with federal regulation, the smaller banks will have to do the same to compete.
Both Senators Thad Cochran and Roger Wicker are expected to vote against the bill. The death June 28 of the Senate’s longest-serving member, Robert Byrd, D-W. Va., raised questions for Democrats about whether the bill will pass the Senate.
The House passed its version of Financial Regulatory Reform with a 237-192 vote along partisan lines.
Only four members of Congress — two Democrats and two Republicans — did not vote on the bill. One of the non-voters was Mississippi Democrat Gene Taylor, who was on the Gulf Coast working with authorities on the oil disaster. Congressmen cannot vote in absentia.
Democrat Bennie Thompson was the only Mississippi congressman to vote for the bill. Travis Childers, a member of the House Financial Services Committee, was one of only 19 democrats to vote against the bill. Mississippi Republican Gregg Harper voted no as well.
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