Community Bankers Association of Illinois

Brian Kiley, CBAI Chairman
Autonomous Representation Essential to the Future of Community Banking


(Excerpts from address given during CBAI's 33rd annual convention on September 28, 2007)

     During our annual business meeting today, we will briefly review the highlights of the past year for CBAI and community banking in Illinois. We will also hear about successes and challenges at the federal level from fellow Illinoisan and ICBA chairman Jim Ghiglieri. In addition, we will probe into the future of our profession to see what lies ahead.

     Each year CBAI publishes an annual report which was mailed to all members in August. It portrays another highly successful year for CBAI in virtually every aspect, and I encourage you to take the time to read this detailed report about your association and the community banking profession.

     I have now been serving in association leadership for nearly a decade, and my exposure to the inner workings of government and the political process, especially from the perspective of an interest group seeking to influence change, has been a fascinating educational experience.

     I want to share with you today a couple of personal observations based on that experience. First, I believe that the preservation of a vibrant community banking profession has greater relevance today for our towns and neighborhoods than ever before; and second, I believe that maintaining autonomous lobbying representation for community banks is absolutely essential to our survival.

     Why does community banking matter? While community banks have grown and prospered during the past decade, and despite the creation of many new institutions, the banking system has become more concentrated as a result of mega-mergers... the 10 largest banks now control a record 45% of all assets, while the remaining 8,650 banks have 55% of all assets.

     The trend is troubling. The lessons of American history are clear financial concentration, left unchecked, always results in abuses. All of us in this room compete against the large banks in one way or another, and we all know what can happen to the customer when the local bank disappears.

     Why does community banking matter? John Reich, head of the OTS, said recently, "Community banking matters because you provide what no one else can the most personal service to your customers and your communities depend on you to do just that. Community banking matters because of the opportunities you have every day of your life to make a personal and significant difference in the lives of your customers, their families, and your entire community."

     Last spring, Federal Reserve Governor Randall Kroszner said community banks play an important role in the United States economy, noting our importance in small business lending, our tendency to lend locally, and our emphasis on personal service.

     My point here is that small businesses, the number one creator of new jobs in America; farmers, who want to work with people who know them and understand their business; and individuals, who want to be treated with the respect they deserve; are all counting on us to be there for them.

     And we have been fighting the good fight with autonomous lobbying, thanks to CBAI and ICBA. During the past decade, we community bankers have adapted to many changes in laws, regulations, and technology. We've employed flexibility and creativity to maintain profitability. We've also become more politically involved, which has reaped many benefits for our profession.

     But there's so much more that must be done for community banking that can only be accomplished by autonomous lobbying. In addition to the increasing concentration of assets and emergence of trillion dollar mega-banks in recent years, we have also witnessed the ascendance of Wal Mart as the wrecking ball trying to collapse the wall separating banks and commercial firms; we have observed the Farm Credit System rise from the ashes of 20 years ago, thanks to a government bailout with competitive advantages, and now once again seek greater powers; and we have watched credit unions expand with no common bond and no income tax obligations. We have a lot of work to do, and it won't be easy.

     At the state level, we've been engaged in perhaps the most bizarre and perplexing legislative session in CBAI's 33-year history... The longest session in Illinois history has included everything from calls for impeachment, to the Governor suing the democratic Speaker, to assertions of constitutional abuse on the budget bill.

     And, of course, as you know, we had to sue the Governor a couple of years ago to stop him from sweeping money from the state bank exam funds into the general revenue fund. We've met with the Governor's staff on several occasions this session to negotiate a fair and just settlement to provide credits for fees collected and reduce and limit future assessments. But negotiating with the governor's staff has proven frustrating, so it appears we will do battle in court.

     Thomas Jefferson once said, "Politics is such a torment that I would advise everyone I love not to mix with it." Some lawmakers today would readily concur with that statement. But despite this political morass, and perhaps because of it, I now have a more acute awareness of the importance of lobbying with autonomy.

     We've proven this year that, even in a seemingly dysfunctional lawmaking environment, we can still make a difference. CBAI managed to enact into law a provision that impedes the Illinois branching rights of industrial loan companies that might be owned by retail mega-stores like Wal Mart. In a few moments ICBA Chairman Jim Ghiglieri will discuss the more comprehensive solution to the ILC threat now working its way through Congress.

     Then we have the announced merger of Americas Community Bankers into the American Bankers Association, scheduled for completion in December. This ABA takeover magnifies the importance of lobbying with autonomy for community banks.

     We need autonomous lobbying because what is good for WAMU or Bank of America or Citicorp is not necessarily good for community banks. The trillion dollar banks don't suffer from the disproportionate impact of regulatory burden we must endure. They would rather see Fannie Mae and Freddie Mac scaled back or eliminated because they compete with them. But to community banks, they are our lifeblood.

     And it doesn't end there. Mixing banking and commerce, Basel I and II, and Sarbanes Oxley are other major areas where our positions diverge. We must ask ourselves, "Would a mega-bank support tiered regulation for community banks?" "Would a mega-bank eliminate deposit insurance?" I think we know the answers.

     Many times when ABA has had community banks on one side of an issue and the mega-banks on the other, ABA has taken a neutral position, citing no clear consensus. Yet the mega-banks employ their own powerful lobbying clout to make sure their message gets to the Hill.

     Lobbying represents our lifeline to the political process. We must recognize that government does not exist in a vacuum. If a particular interest group does not exercise its rights, then other groups often with opposing agendas will rush in to fill the void.

     President Eisenhower once said, "Politics should be the part-time profession of every citizen." He was right. If we don't push our own agenda, no one else will. If we are not fully engaged in directing our message to government, it is highly improbable that another group can play an effective surrogate role to serve our needs.

     Our towns, neighborhoods, and our nation need community banks; community banks need autonomous government representation, and we need your greater involvement in it.

     Thank you, ladies and gentlemen, for your indulgence. It's truly been an honor serving as your chairman.

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