CBAI Meets with Federal Reserve of Chicago President Charles Evans

October 18, 2013

Representatives from CBAI met this week with Federal Reserve Bank of Chicago President and CEO Charles L. Evans.OhlendorfEvansSchroeder13 Participating in the meeting were:  David Schroeder, CBAI’s Vice President Federal Governmental Relations; Greg Ohlendorf, Fed Reserve (and CBAI) bank member, President and CEO  of First Community Bank and Trust in Beecher; and Chairman of the ICBA’s Policy Development Committee; Julie Williams, Fed Reserve SVP (Community Bank  and Consumer Compliance Division / Supervision and Regulation); and Steven Durfey, SVP (Risk Specialist Division / Supervision and Regulation).  A wide range of topics were discussed during the meeting including: the new Fed Chairman nomination, monetary policy, too-big-to-fail, regulatory relief, tiered regulation for community banks, and final observations on Basel III.

Schroeder stated that for the first time CBAI has included in its Federal Policy Priorities opposition to excessive central bank monetary policy intervention. The sustained record-low interest rates are negatively impacting community banks, senior citizens and savers. Admittedly, in a recession, an accommodative monetary policy can assist in an economic recovery. However, continued years of low interest rates are not temporary intervention but long-term manipulation. The longer interest rate normalization is delayed the longer community banks will be harmed by low net interest margins and earnings, negatively impacting their ability to serve their customers and communities.

Ohlendorf said that a priority for Congress and banking regulators should be the continued reform of our financial system to significantly reduce the probability and severity of a future financial crisis. An unfortunate result of the previous financial crisis is that the largest banks have grown larger and remain candidates for future bailouts. The mega banks, not community banks, caused the recent financial crisis, and we must all be protected from a repeat of the massive financial destruction they caused.

Both Schroeder and Ohlendorf highlighted the need for regulatory relief and tiered regulation for community banks. The financial crisis clearly demonstrated that the relationship-based business model of community banks is very different from the Wall Street mega banks and that difference should be reflected in the regulations. Tiered regulation for community banks has recently established a welcomed and necessary beachhead. Now is the time to broaden that beachhead and ensure that every new banking law, rule, and regulation clearly distinguishes and appropriately regulates community banks.

Schroeder and Ohlendorf thanked the Fed Reserve officers for participating in this meeting and promised future opportunities to discuss issues of importance to Illinois community banks.


Bi-partisan Support for the CLEAR Act Grows!

October 14, 2013

Bi-partisan support is growing for the Community Lending Enhancement and Regulatory Relief Act (CLEAR Relief Act of 2013, H.R. 1750) with Illinois Congressman Bill Enyart (D-13th) and Aaron Schock (R-18th) recently cosponsoring this important DavisQuigleyEnyartSchock
legislation. Currently there are 65 cosponsors including Illinois Congressmen Rodney Davis (R-13th) and Mike Quigley (D-5th).

Community banks face a regulatory burden that is completely out of proportion to their size, business model, and risks they pose to the financial system. Regulations disproportionally burden community banks because they cannot spread these costs over a large number of customers. Targeted and sensible regulatory relief will allow community banks to better serve their customers and communities.

This CLEAR Act included the following important provisions.

  • Provides “qualified mortgage” (QM) status under the CFPB’s ability-to-repay rules for any mortgage originated and held in portfolio for at least three years by a lender with less than $10 billion in assets.
  • Exempts from any escrow requirements any first lien mortgage held by a lender with less than $10 billion in assets.
  • Exempts servicers that service 20,000 or fewer mortgages from certain new servicing rules.
  • Provides an exemption from the independent appraisal requirement for mortgages of less than $250,000.
  • Provides that a financial institution is not required to provide an annual privacy notice to its customers if it has not changed its privacy policies.
  • Exempts community banks with assets of less than $10 billion from the Sarbanes-Oxley 404(b) internal-controls assessment mandates. The exemption threshold would be adjusted annually to account for any growth in banking assets.
  • Requires the SEC to conduct a cost-benefit analysis of new or amended accounting principles.
  • Requires the Federal Reserve to revise the Small Bank Holding Company Policy Statement by increasing the qualifying asset threshold from $500 million to $5 billion.

CBAI would like to thank Congressmen Davis, Quigley, Enyart, and Schock for their continued support of Illinois community banks.


CFPB Releases Flowcharts to Navigate New Mortgage Rules

The Consumer Financial Protection Bureau has released several flow charts that offer a way to visualize how the new mortgage rules are likely to impact certain products or transactions in a variety of circumstances. (These charts are not substitutes for the regulation text and official interpretations, but they can provide an idea of where to start.)


FHLB-Chicago and Ginnie Mae Offer New Mortgage Lending Option

September 9, 2013

The FHLB-Chicago recently announced a plan for the Bank to issue securities guaranteed by Ginnie Mae and backed by mortgages originated by member financial institutions. These MPF Government Mortgage-Backed Securities (MBS) will provide smaller institutions in particular a new option when creating mortgage products for their home buying customers. Lenders will be able to choose to retain or release servicing and will have a reliable channel for selling their loans without the low-volume hurdles originators face in today’s competitive market. READ RELEASE


Another Compelling Case for Taxing Credit Unions

September 9, 2013

In a recent article titled, "Tax Exemption for Credit Unions: An Unjustifiable $10 Billion Tax Expenditure," Kenneth Kies and Bert Ely present yet another compelling case credit unions to pay federal corporate income taxes.

Kies and Ely argue that credit unions have grown to control a significant segment of the financial service market and have moved sharply away from their original mission; however, unlike their direct competitors they do not pay corporate income taxes. The authors find no policy or economic justification for the credit union tax break which has been estimated by the Office of Management and Budget (OMG) to cost nearly $10 billion over the next five years. Credit unions have evolved to become financial institutions which provide services identical to taxpaying competitors. In order to level the playing field, all credit unions should pay taxes. READ MORE.