Much of Washington is anticipating a sea change after the 2018 midterm elections produced a Democratic majority in the House of Representatives. The divided Congress is expected to bring greater conflict and gridlock to the legislative process following two years of unified Republican control. But the nation’s community banks — whose uniquely bipartisan backing delivered one of the few major regulatory reform bills of recent years — remain well positioned to continue advancing their policy goals under the new regime.
The likely next chairman of the House Financial Services Committee, Rep. Maxine WatersMaxine Moore WatersCrypto firm top executives to testify before Congress Powell, Yellen say they underestimated inflation and supply snarls The Hill's Morning Report - Presented by Facebook - Biden to update Americans on omicron; Congress back MORE (D-Calif.), will have different priorities than retiring Chairman Jeb HensarlingThomas (Jeb) Jeb HensarlingLawmakers battle over future of Ex-Im Bank House passes Ex-Im Bank reboot bill opposed by White House, McConnell Has Congress lost the ability or the will to pass a unanimous bipartisan small business bill? MORE (R-Texas). But divided government means legislation will require greater bipartisan cooperation and compromise to get results, and community banks are experts at that. This year’s Economic Growth, Regulatory Relief and Consumer Protection Act — a landmark law targeting regulations to community banks’ smaller size and lower risk profile — was written by a bipartisan coalition of senators and passed with the support of 33 House Democrats as well as 16 Democrats and one independent in the Senate.
That law was years in the making and achieved many regulatory reforms that community banks have long advocated, such as relief from excessively burdensome capital and quarterly reporting requirements. With the amount of time and outreach that community bankers put into those policy changes, a sequel is unlikely in the next Congress. But the partisan shift in the House is equally unlikely to result in a rollback of a law that was enacted with such strong bipartisan backing. In fact, there will be opportunities to expand on these regulatory improvements during the 116th Congress.
Community banks maintain strong bonds with policymakers of all political stripes. Because each congressional district is home to at least one of the nation’s more than 52,000 community bank locations, which have witnessed more than a few transitions of party control, the bipartisan industry maintains strong political relationships on both sides of the aisle. In fact, divided control of Congress will require even greater bipartisan pragmatism to address many pending legislative issues facing lawmakers. And, believe it or not, there are plenty of opportunities for joint action.
For instance, both parties appear to agree that the nation’s anti-money-laundering standards need updating, with community banks encouraging lawmakers to develop a system in which business ownership records are gathered when legal entities are formed, rather than by their banks. There also appears to be broadening support for opening the banking system to cannabis-related businesses to reduce the security threat and lost tax revenue posed by a multi-billion-dollar industry that operates largely on a cash basis.
Meanwhile, the bipartisan focus on breaches at Equifax and large retailers could open the door for Congress to mandate bank-like data-security standards for these and other entities — a top priority for the financial institutions that follow strict security laws but pay much of the tab on these incidents. And there is bipartisan support for ensuring housing-finance reform doesn’t leave the mortgage market exclusively in the hands of the riskiest megabanks, while the need for a balanced regulatory structure for nonbank fintech firms cuts across party lines.
These are but a few of the community bank priorities that can be addressed outside of our often-bitter partisan rift. The politics of community banks is community banking. Serving urban, suburban and rural communities from coast to coast, this industry reflects our vast and diverse nation. Now is our chance to ford the deep partisan gulf that too often divides us and unite around a positive, pragmatic approach to the policy challenges we face.
Rebeca Romero Rainey is president and CEO of the Independent Community Bankers of America.