The mood at yesterday’s Day with the Superintendent in West Des Moines, Iowa, was subdued. There was a sense that financial reform is coming and there’s nothing in it for community banks. What I heard from one banker was: “The legislation won’t really do anything to hurt the big Wall Street banks, and it will do a lot to hurt us, and we had nothing to do with creating the problem.” That seemed to sum up the general mood of the meeting.
Someone else commented that the legislation will be another big step toward turning the banking industry into a utility, like the businesses that provide electricity or water.
Neil Milner, the long-time head of the Iowa Bankers Association who now heads the Conference of State Bank Supervisors, talked about some of the specifics in the reform legislation. He said his organization, which promotes the dual banking system, is lobbying to change Senate language which would strip the Federal Reserve of its responsibility to supervise some 800 community banks across the country. He also questioned the wisdom of putting the proposed new consumer financial protection agency in the Federal Reserve. He said Congress can avoid any budget impact by locating it in the Fed, where the independent agency would need to fund it. Milner noted that if the Fed has no authority over the agency, it is not likely to be very interested in funding it.
It appears the legislation will permit de novo branching across state lines for any bank. Milner said he would like to see the national 10 percent deposit cap applied to S&Ls; currently, thrifts are not included in the calculation.
The news on the economic front was subdued as well. Economist Bernie Goss told the 400 bankers that they should prepare for higher interest rates, higher taxes and inflation. He said there are signs the economy is improving but that the question is whether it will last.
Look for complete meeting coverage in the May 15 edition of NorthWestern Financial Review.