Carrying the Torch For Community Bank Regulatory Relief
PACB President/CEO Nick DiFrancesco (ND): Congratulations on being elected Vice Chairman of the Subcommittee on Financial Institutions and Consumer Credit on the House Financial Services Committee. It is well deserved as you have been a true leader in this vein. Can you talk a bit about the subcommittee and committee’s agenda for the upcoming months?
US Representative Keith Rothfus (KR): We will be working to ensure small businesses and consumers have access to the credit they need to grow this economy again. Over the last few years, we’ve seen bank closures and consolidations and historically low levels of new bank charters. The regulatory overload following the financial crisis has hit community banks hard. We continue to lose one a day, and we’ve lost over 1,400 over the past five years. Much of that can be traced to Dodd-Frank, which made the problem of too-big-to-fail worse and worsened the problem of “too small to succeed.” This hurts Main Street businesses, entrepreneurs, and American families. Our subcommittee will be looking at regulatory reforms that will allow our community banks to flourish and fulfill the important roles that they play in their communities.
ND: It seems as though all the stars are aligning for community banks to see some real regulatory relief with regard to Dodd-Frank and federal regulators. How do you rate the current appetite for these changes in Congress? Are we likely to see some reform in year one?
KR: President Trump’s positions on financial reform have thus far been very encouraging. We are also noticing that regulatory reform for community banks is becoming a bipartisan cause, as members on both sides of the aisle learn more about the importance of robust financial institutions in their hometowns. For instance, the Federal Savings Association Charter Flexibility Act (H.R. 1660), which I introduced last year and which I plan to reintroduce shortly, earned the support of several of my Democratic colleagues.
ND: House Financial Services Chairman Jeb Hensarling is said to be reissuing a revised Financial CHOICE Act 2.0, a comprehensive package of regulatory relief measures for financial institutions. It is scheduled for markup in the House Financial Services Committee in mid-February. Can you talk a little bit about the legislation, the process and timeline moving forward?
KR: The premise of Financial CHOICE is that we need to have the right type of regulation instead of the misguided mandates brought on by Washington’s financial control law, Dodd-Frank. The CHOICE Act provides regulatory relief for institutions that agree to carry a higher level of capital, it ends too big to fail by ending the orderly liquidation authority and exchanging it for a new provision in the bankruptcy code, and it reforms the CFPB to provide greater accountability and oversight.
ND: Chairman Hensarling’s Financial CHOICE Act has also been incorporated into Speaker Ryan’s A Better Way Plan, a six planked agenda for America, which includes tenets like repealing and replacing Obamacare and tax reform. Can you talk about the significance of this?
KR: Together with the Affordable Care Act, Dodd-Frank has had a very detrimental impact on our economy since its implementation. By tackling these two major issues, we will make huge strides toward revitalizing our economy so that we can have the kind of growth we need to keep the promises we have made to our veterans, seniors, and to future generations.
ND: The House has moved quickly and passed some significant regulatory reform legislation, like the Regulations from the Executive in Need of Scrutiny (REINS) Act and Regulatory Accountability Act this year. Can you give us your views on the legislation and what this means for federal agencies rules and edicts moving forward?
KR: I have been a major proponent of the REINS Act as well as the Regulatory Accountability Act, and the fact that we prioritized these right out of the gate indicates how serious we are about providing the financial services industry and every other industry relief from Washington regulations. This is not the end of regulation, but the beginning of accountability for the regulations coming out of Washington.
For decades, Congress has delegated our governing authority to the executive branch, which today has massive discretion to impose regulatory burdens on American businesses. The REINS Act puts Congress back in control of all major regulations, which in turn gives the American people the ability to hold their representative accountable. The Regulatory Accountability Act included a provision I originally offered in the 113th Congress that targets rules that are projected to have a negative impact on jobs and wages.
ND: Last session you introduced legislation providing for new charter and capital options for mutual banks and you intend to reintroduce it this session. You have also been working closely with PACB member Chuck Leyh, President and CEO of Enterprise Bank on legislation ensuring an independent appeals process for banks who wish to contest examiner findings without fear of retribution. Can you talk a little bit about your bills and their path in this legislative session?
KR: The Federal Savings Association Charter Flexibility Act (H.R. 1660) was included in the Financial CHOICE Act last Congress, and I expect it to be included this Congress as well. As many of your readers know, this bill would allow federal savings associations the option to offer a broader range of services, similar to a national bank, without the burdens associated with applying for a new charter. I plan on reintroducing that bill shortly.
I have also had the pleasure of working closely with Chuck Leyh on crafting a novel reform idea for bank examination appeals. We are very close to a final draft and I suspect that the bill may have been introduced by the time this issue goes to print. Chuck and I want to set up an independent three member panel to provide for the most objective review possible. Ideas like these can help create a more favorable – or at least less adversarial – regulatory environment for community banks.
ND: Congress has taken on an aggressive agenda and one of the first moves was laying the groundwork to repeal and replace Obamacare. Could you give us a brief summary of what lies ahead?
KR: We will be taking a step-by-step approach to providing the American people relief from Obamacare. The House Energy and Commerce Committee and other committees with jurisdiction over this have already begun hearings on several legislative proposals to deliver relief from the health care law. Currently, we are looking to repeal Obamacare by March or April.
ND: What are your priorities for the legislative cycle?
KR: My priorities are tax, regulatory (including financial services), and healthcare reform as well as focusing on constituent services and remaining engaged with the Bipartisan Task Force to Combat the Heroin Epidemic. In order to maintain a strong national defense, provide for our seniors and veterans, and ensure a better future for our kids and grandkids, we need a healthy vibrant economy. The American people are the hardest working people on the planet, and if we are successful in passing serious tax, healthcare, and regulatory reform, our economy will experiences unprecedented growth.