ABA jockeying on banking bills

Northwestern Financial Review, Jun 1-Jun 14, 2002 by Dullum, Justin

Q: Would you still like to see bankers march on Washington?

Yes I would. Four years ago we had a credit union issue. The credit unions sent 11,000 people to Washington and beat us-beat us bad. Unfortunately, they overwhelmed Congress. I spoke at the ABA community bankers conference about bankers becoming engaged to the point of having a million bankers go to Washington. There was an article, I believe in North*Western Financial Review, that thought I was talking about having a big demonstration. But basically what I'm after is getting bankers to Washington to tell their story. I don't think the bankers do a good enough job of letting everybody know about how involved we are in our communities.

What's the latest on FDIC insurance reform?

The American Bankers Association likes a lot of things in the bill, but we have some concerns. We want to make sure that the bankers understand the overall cost. There is going to be some cost associated with raising the insurance rate. Bankers have to be comfortable with that and understand. We also have concerns about the Maxine Waters amendment that got tagged on, which connects the FDIC premiums with checking accounts for people with lower incomes. Our concern is that tying these deposits to the FDIC fund legislation is social policy. We think the long-term ramifications of tying the fund to social policy is something to be very concerned about. We would like to see the amendment eliminated.

What is the greatest obstacle in the way of reform?

There's a lot of opposition out there. Alan Greenspan has very aggressively testified against raising the insurance level. The Secretary of the Treasury very aggressively testified against raising the insurance level. The OCC is against it. Senator Gramm is against it. How's that going to factor into how this plays out in the House, we just don't know. We think it will be tough to get it through the Senate. But there are a lot of good things in the bill. It provides a cap on the fund and once we reach that level, banks will be eligible to get refunds.

Is a $30,000 increase in the coverage level enough to make a difference?

It depends on which banker you ask. Some bankers want a $200,000 cap. Some want $130,000. Some want $140,000. Some don't want any increase. As I travel around the country, I'm really finding a lot of different opinions. We really don't have a consensus on this in the banking industry and I'm not sure we ever will reach a consensus. Will the benefits be enough to offset the cost?

What's new on the realty brokerage front?

Secretary O'Neill submitted a letter to the Fed stating that he will not rule on it this year, which takes some of the pressure off. The realtors spearheaded a multimillion-dollar ad campaign to put pressure on members of Congress to sponsor the bill. They have generated over 100,000 letters to Congress. They have over 200 cosponsors in the House and about 10 in the Senate. It's not doing very well in the Senate. But the fact that Secretary O'Neill is not going to rule on it this year is helpful. And, I think, legislators would just as soon not have a big brouhaha between the bankers and the realtors in an election year.

What argument is the ABA making against a ban on realty brokerage?

Over half of the financial institutions in America already have real estate brokerage powers. I'm from a state that doesn't grant that power. But, our bank has a trust company and trust companies have agency rights. So since 1984 we've been able to own a real estate agency. Now, credit unions have the power to conduct real estate brokerage as well, and they will continue to have that power since they are not mentioned in this legislation. It just cuts out the bankers. The realtors' argument is that we're going to run them out of business. The fact is, most of us already have this power, and we simply don't want to lose it. Don't take the right away from us.

James Smith, president and CEO of Union State Bank and Trust of Clinton, Mo., is president of the American Bankers Association.