The federal finance bill that passed the Senate May 20 is in conference, where a select group of senators and representatives is working to reconcile two versions of the legislation. The Restoring American Financial Stability Act was crafted by Democrats to stabilize Wall Street and diminish the potential of a future fiscal crisis comparable to the 2008 catastrophe that resulted in billions worth of taxpayer dollars being used to bail out big business.

While the bill was touted as being aimed at Wall Street, its influence will be felt here in Kansas within community banks, businesses and by consumers, according to local leaders in the business sector.

“We are strongly opposed to it,” Chuck Stones, president of the Kansas Bankers Association, told Kansas Liberty. “It includes a huge set of regulations, and in the end we don’t think it will help consumers. We think it will probably hurt consumers.”

The Senate bill creates a new regulatory agency that will oversee almost every sector of retail. The Consumer Financial Protection Bureau is being promoted by the Democrats as an agency that will help consumers, but Republicans refute these claims, saying the increased regulation will only stifle economic growth.

Stones said because of the legislation, Kansans could expect credit to become less available and come at a higher price tag. Stones also said areas of the legislation that promote price fixing with debit cards will increase the cost of debit card transactions for consumers.

“The whole premise of the legislation was to eliminate the possibility of another financial crisis, and we don’t think this comes even close to meeting that goal,” Stones said.

Stones said though the bill was aimed at Wall Street, it failed to exempt smaller businesses and banks from its reach, which in turn causes problems. The vast majority of banks in the state are community banks, he said.

“It’s the community banks that bear the brunt of all the additional regulation because they don’t have the manpower to really figure out ways around legislation,” Stones said.

The bill also includes a procedure for businesses defined by the government as “too big to fail.” Under the pending legislation, if these businesses faced financial trouble, their management would be replaced by government officials, and the business would then either be put through the bankruptcy process or liquidated.

Stones said there are no businesses headquartered in Kansas that fall into the “too big to fail” category.

The legislation does not address mortgage giants Fannie Mae and Freddie Mac, which have already received more than $145 billion in taxpayer bailout dollars.

The House version of the bill passed 223-202 in December and the Senate version passed 59-39. The lone Democrat in Kansas' congressional delegation, Third District Rep. Dennis Moore, was the only member to vote in favor of the bill. Moore said the bill will “fully protect consumers, investors and U.S. taxpayers.”

Sen. Pat Roberts, R-Kan., spoke out strongly in opposition to the bill on the Senate floor, and said it would lead to increased interest rates, increased banking costs and decreased access to credit.

The two versions of the bill are very similar, and a compromise is expected to be reached and promoted to President Barack Obama by early July.

Shawn Mitchell, president of Community Bankers Association of Kansas, said although amendments were added onto the bill that make it friendlier the overall product at this time will be harmful to Kansas community banks.

Many of Mitchell’s concerns were rooted within the Consumer Financial Protection Bureau.

“People do not have any idea how far reaching this could be,” Mitchell told Kansas Liberty.

Mitchell said the additional oversight of the Consumer Financial Protection Bureau had the potential to conflict with the many other branches of surveillance community banks are subjected to, including regulation from the Federal Deposit Insurance Corporation, Office of the State Bank Commissioner and the Office of Comptroller of the Currency.

Mitchell said community banks are subjected to “safety and soundness” checks by existing regulators and questioned how these guidelines would interact with consumer protection guidelines established through the Consumer Financial Protection Bureau.

An amendment added to the bill allows community banks to be exempt from regular oversight by the Consumer Financial Protection Bureau, but they would still be subjected to random inspections and would still be required to be in compliance with its guidelines, Mitchell said.

“If you have one set of regulators saying you have to do things one way for safety and soundness, and then another group looking at the consumer guidelines, that could get really ugly,” he said. “It is a bad combination.”

The Community Bankers Association of Kansas is an affiliate of the Independent Community Bankers of America.

The Independent Community Bankers of America successfully promoted an amendment to lower assessment rates for community banks, which is expected to save the nation’s community banks roughly $4.5 billion over the next three years. Other amendments were successfully added onto the bill to scale back some of the additional regulation and paperwork community banks could experience through the legislation.

Dan Murray, state director of the National Federation of Independent Businesses, said the bill had been improved, but he said he still had concerns with how the increased regulation within the bill would affect the state. Murray said the National Federation of Independent Businesses was closely monitoring the bill while it was in the conference committee to try to minimize any damage the legislation could have on small businesses.

“At the end of the day, Kansas small businesses did not create this problem,” Murray told Kansas Liberty. “It was bad actors on Wall Street that created this problem. Our concern is that we do everything we can so that small businesses don’t suffer from the increased regulatory burden the new measure will create.”

Resources:

National Federation of Independent Business

Independent Community Bankers of America

Community Bankers of Kansas

Kansas Bankers Association

The Week in Review