Fighting For Community Banking Exemption

Recently Frank and I had the opportunity to attend a FHLBank Pittsburgh regional event in Northeastern Pennsylvania that the bank sponsored along with Congressman Paul Kanjorski (D-PA), Chairman of a key subcommittee of the House Financial Services Committee. While we have a respectful disagreement with the Congressman over his support for the credit unions, we have over the years developed mutual respect and appreciation for issues in which he has championed community banking.

One of those issues involves alleviating reg burdens for community banks. As Frank tells the story, a number of years ago he and Paul Reichart of Columbia County Farmers National Bank vividly demonstrated for the Congressman the paperwork burdens that CRA imposes upon community banks. The conference room table was literally overwhelmed with the paperwork community banks at that time had to file to demonstrate what we know you do without federal requirements and burdens – community service. The Congressman left this demonstration with a determination to champion CRA reg relief for community banks. Eventually, with Kanjorski’s strong advocacy and PACB’s unwavering support, the small bank streamlined examination was born which now stands at $1 billion or less to qualify for this examination. This enshrined in federal regulations an important principle: community banks are unique because of their position in their communities and the relationships and trust that is formed with our customers. Community banking has withstood the test of time with many of our institutions celebrating 75, 100 and 125 year anniversaries. You don’t need a federal law to tell you to serve your customers and communities – it’s inherent in what you do every day, 365 days a year.

Recently, the PACB Executive Committee met with the new Secretary of Banking, Steve Kaplan. We had an excellent exchange with the secretary in which he shared his goals for the department and we shared our concerns and positions on key issues. One of those issues involves the department’s proposed mortgage foreclosure legislation and regulation. We support the overall intents of the legislative package and regulation and that is to crack down on the bad actors in the mortgage business that gives all lenders a black eye. Our position has always been clear that the laws should be enforced and those who engage in predatory lending and abusive loan practices should be prosecuted to the fullest extent of the law. We are continually assured by government regulators that community banking is “not part of the problem” but the solutions usually always impose additional paperwork burdens and requirements on community banks. Several years ago, while doing one of our frequent Washington, D.C. lobbying trips, a Congressional staffer was explaining to our group a new consumer disclosure that would be added to the mortgage process and Tom Bailey of Brentwood Bank asked the staffer whether he knew how many disclosures were now required in the transaction. From the bureaucrats viewpoint, the answer is usually more paper and Tom’s response was right on target – community banks don’t need more paper, you need less paper and need to be able to invest and reinvest in your communities.

In our exchange with the new secretary we articulated for him a concept that we intend to vigorously pursue in Pennsylvania and that is that community banking is special and unique and that Pennsylvania needs to enshrine in public policy a concept similar to the small bank CRA streamlined examination. Banks under a certain threshold (we used the $1 billion CRA threshold) and their subsidiaries and affiliates in mortgage lending should be exempt from the legislation and regulation. PACB believes this is a sound concept and looks forward to further discussion with the secretary and the General Assembly that carves out community banking based on the principles that have been the essence of community banking for decades (in many cases before there were bank regulators and paperwork that threatens to overwhelm you and your staffs everyday).

Stay tuned as this new concept in Pennsylvania is advanced and as you talk and interact with your state legislators don’t be bashful about asking for a community banking exemption from the new Department of Banking regulations and legislation.