Key leaders offer insight at ABA Government Relations Summit
Jim Schipper, IBA Chairman
American State Bank, Osceola
From March 10th through the 12th, an Iowa Bankers Association delegation attended the American Bankers Association Government Relations Summit in Washington, D.C. The Summit brings together volunteer leaders from across the country to review important issues, visit with Congress and our regulators and build our grassroots capabilities.
The event speakers were a collection of who’s who in the beltway when it comes to financial services policy and regulation. FDIC Chairman Sheila Bair reported that even though over 99 percent of banks and thrifts are well capitalized, we are entering a more challenging credit cycle. She suggested bank capital levels need to reflect concentrations in commercial real estate, in light of housing-related challenges emerging in this area. Bair asked banks to consider aggressive use of loan modifications to assist delinquent homeowners, including principal write-down where appropriate. She said a silver lining to the current turmoil is consumer recognition of the value of working with regulated depository institutions.
On the Friday following our visit, the FDIC chose to leave deposit insurance premium levels unchanged (5 to 7 basis points for well managed and capitalized banks), despite the depletion of bank assessment credits and a projected increase in the FDIC designated reserve ratio. Another case where economic uncertainty reigns supreme.
U.S. Treasury Secretary Henry M. Paulson, Jr. reported that U.S. exports are up over 16 percent from the prior year. He was critical of political sentiment to obstruct free trade, when it has become such an important source of economic strength and jobs. He said most job losses in manufacturing are due to automation rather than free trade.
Paulson said the economic fundamentals are strong, even though we’re experiencing a slowdown due to the housing correction. He also said the economic difficulties are regional in nature. To demonstrate the differences in housing markets, he reported home prices in Bakersfield, Calif., increased 122 percent from 2005 to 2006!
Paulson suggested the recently passed economic stimulus package, FHA reform and the Hope Now Alliance should contribute to an improved market going forward. He said market sentiment can change quickly and dramatically. At this time, the administration’s two priorities are to get through the housing crisis with minimal impact on the overall economy and to place a big emphasis on financial institution capital.
The always colorful Chair of the House Financial Services Committee, Barney Frank (D-Mass.), used the occasion to announce his new plan for addressing the mortgage crisis. His program would give lenders the option to write down mortgage loans to where the borrower can repay in exchange for an FHA guarantee on the balance. Frank said, “If only banks and credit unions made mortgage loans, we would not be in this mess.” He believes we have allowed securitization to undermine the lender/borrower relationship. Always quick-witted, Frank said, “The function of editorial writers is to come down from the hill after the battle and shoot the wounded.”
In the area of grassroots legislative involvement, Frank said, “Votes will beat money every day.” He said the best grassroots networks belonged to the realtors, independent insurance agents and the credit unions.
The ABA extended an open invitation for any member banker to attend this year’s Summit. They had attendance of approximately 400, with plans to build on this total next year. Yet, the credit unions had thousands of attendees at their meeting the week before. Much more needs to be done to level the grassroots playing field with credit unions, before we can do the same for the taxation playing field.
I urge you to help us with this challenge in 2008 by attending the IBA Capitol Hill Visit June 10-13. Not only is it the right thing to do for your industry, it’s fun and educational as well. More information is available on the IBA Web site under “Featured Events” at www.iowabankers.com. You can also contact the IBA’s Molly Lydon at 515.286.2988.
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