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U.S. Lawmakers Discuss Need for Regulatory Relief
Monday, March 23, 2015 6:40 AM

The House Financial Services Committee renewed its look at regulatory relief for small financial institutions on Wednesday, pressing bankers and credit union representatives for details about their compliance burdens.

Rep. Jeb Hensarling (R-TX), chairman of the committee, warned that "time is of the essence" for community banks and credit unions that are struggling with the costs of additional rules under the Dodd-Frank Act and other provisions.

"It is not an exaggeration to say that they are literally withering on the vine," Hensarling said. "We are losing more than one a day, and they are not perishing of natural causes. The sheer weight, volume, cost, complexity, and uncertainty of federal regulation is a burden that is killing them off."

The chairman added that he would be willing to take up any "legitimate, bipartisan piece of legislation to provide needed regulatory relief to community financial institutions" introduced before the panel.

Lawmakers in both chambers have been working for years to address concerns about the regulatory burden, and it's unclear what kind of deal can be brokered in the GOP-led Congress. Although Democrats are wary of widespread relief that undermines Dodd-Frank, they have said they support the need for targeted legislation.

Rep. Maxine Waters (D-CA), the ranking member on the panel, signaled her support for lifting the member business lending cap on credit unions from the current limit of 12.25 percent of total assets. There have been several efforts in recent years to more than double the cap to 27.5 percent.

Peggy Bosma-LaMascus, president and chief executive of Patriot Federal Credit Union, testified about  areas where credit union and banking industries are aligned. "We have many issues on which we are very much in agreement—and in fact, I believe we're all in agreement that if Congress could require realistic and robust cost-benefit analyses of proposed regulations and documentation that we would all be able to give much more targeted feedback, so the result would be smarter regulation," she said, also discussing proposed changes to the six-withdrawal limit under the Federal Reserve's Regulation D for savings and money market accounts.

Adam Levitin, a professor at Georgetown University, argued that problems facing community institutions span beyond Dodd-Frank, noting that consolidation began well before the financial crisis. He suggested that lawmakers should instead focus on restraining the Wall Street banks if they want to level the playing field for smaller banks.

"If this committee really wants to help community financial institutions, the single best thing it could do, would be to pass legislation that would tax or break up the megabanks," he said. "Additional regulatory exemptions for community banks are insufficient to save this industry because no amount of exemptions will sufficiently level the playing field for community banks. Moreover, these exemptions will come at the cost of consumer protection."

Meanwhile, the Senate is also moving forward with regulatory relief efforts. The Banking Committee has held several hearings on the issue, and Sens. Jerry Moran (R-KS) and Joe Manchin (D-WV) reintroduced legislation Wednesday that would give institutions additional recourse for sharing concerns regarding their regulatory exams.