Bankers talk regulatory concerns with Rep. Womack

Leaders of Arvest Bank, First Bank Corp., Benefit Bank and reps from the Arkansas Bankers Association gathered Tuesday (Aug. 13) in Fort Smith with U.S. Rep. Steve Womack, R-Rogers, to reinforce their concern that new and expected federal regulations are a threat to community banks.

The bankers – along with Bill Holmes, president and CEO of the Arkansas Bankers Association, and Eric Munson, director of legislation and regulation for the association – met with Womack in the board room at the First National Bank building in downtown Fort Smith. The bankers attending the meeting were Joe Edwards, president of Fort Smith-based Benefit Bank; Keith Hefner, president and CEO of Citizens Bank & Trust in Van Buren; Craig Rivaldo, president of Arvest Bank in the Fort Smith region; Sam T. Sicard, president of First Bank Corp.; and John Womack (no relation to Rep. Womack), president of Arvest Bank in the central Arkansas area.

The specific angst of the gathered bankers is with federal rules promulgated under the Dodd-Frank law. Named after legislative authors U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank, the “Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed into law on July 21, 2010. Dodd and Frank have since retired from Congress.

It was passed in response to the near collapse of several large U.S.-based banking operations in 2007-2008. Democratic leaders in Congress blamed the financial problems on a lack of federal oversight.

Advocates of the law say it will prevent banks and other financial institutions from essentially creating a financial house of cards.

Key provisions of the Act, which are expected to be more fully articulated in 2013 and 2014, include:
• Creation of a consumer interest “independent watchdog” housed at the Federal Reserve;
• Establishes capital requirements designed to end the “too big to fail” possibility among the big banks;
• Creates an “advance warning system” to identify systemic problems before they become big problems;
• Eliminates loopholes that allow the “exotic instruments” that helped fuel the financial meltdown in 2008; and,
• Creates new accountability and transparency rules for credit rating agencies.

The law was designed to increase examination and enforcement of banks and other financial service companies with more than $10 billion in assets. However, regulations will also increase for banks under the $10 billion level.

Community and regional bank operators in the Fort Smith and Northwest Arkansas areas have been on record as saying Dodd-Frank was an overreaction to what happened in 2007-2008. They reiterated that belief during the visit with Womack.

Sicard, president of Fort Smith-based First Bank Corp., said Dodd-Frank is a “one-size-fits-all approach” that is making it difficult for community banks to approve home and other loans.

“We wanted him (Womack) to see the challenges with the regulation that is burying our business,” Sicard said. “This will have a definite impact, a negative impact, on local communities.”

First Bank Corp. operates several banks, including First National Bank of Rogers and Citizens Bank and Trust in Van Buren.

According to Accenture, which recently issued results from a global survey of the financial sector about Dodd-Frank, the legislation is the “most comprehensive set of U.S. regulatory reform measures since the Great Depression.”

But the Accenture report also noted that more regulations are coming.

“Yet, more than two years after the Act was signed by President Barack Obama, only a third of Dodd-Frank’s nearly 400 required rules have been finalized and only a third have been proposed,” noted the Accenture report.

Accenture’s survey results included the following findings:
• Overall, 10% of companies anticipate spending from $100 million to $200 million on Dodd-Frank across the lifetime of the program, and half anticipate spending at least $50 million;
• Many companies see beneficial results from Dodd-Frank; for example, 64% of respondents believe the Act will strengthen their competitive position, especially within the capital markets industry, and a strong majority believe Dodd-Frank will lead to greater profitability across the lifetime of the program; and
• 77% of companies responding believe the proposed regulatory reforms — and their effect on revenue streams — will cause them to revise their long-term business strategies.

The Republican leadership of the U.S. House Committee on Financial Services continues to be a proponent of reversing Dodd-Frank. The U.S. House has passed seven bills that would essentially kill Dodd-Frank.

Rep. Womack likely needed little convincing from the bankers about the impact of Dodd-Frank.

“This creates a terrible regulatory environment … that will put community banks out of business or turn them into glorified ATMs,” Womack said prior to a luncheon with the bankers.

Womack believes a “handful of political victories” are needed to change enough votes in the U.S. Senate if Dodd-Frank is to be reversed.

“But the real question is, ‘Can it be done (reversed) in time to save some of the more vulnerable banks?’” Womack added.

Certainly not all members of Congress oppose Dodd-Frank.

U.S. Sen. Elizabeth Warren, D-Mass., recently said she will push back against any legislation that comes to the Senate attempting to reverse or weaken Dodd-Frank.

"Wall Street’s aggressive determination paid off last week when the House Financial Services Committee reported out several bills to roll back reforms to the derivatives markets included in the Dodd-Frank Act," Warren said in a statement published by the Huffington Post. “I strongly agree with Treasury Secretary Lew’s opposition to the bills. The Dodd-Frank Act put in place a variety of measures that work together as a system to protect consumers, hold big banks accountable, and reduce the risk of future crises. It is dangerous for Congress to amend the derivatives provisions of the Dodd-Frank Act without at the same time taking accompanying steps to strengthen reform and maintain the law’s equilibrium."