WASHINGTON -- In real estate, it's all about location, location, location.But as credit unions and other financial service providers awaited a draft of the Senate regulatory restructuring, a key negotiator of the bill said when it comes to a new consumer agency, location is less important than teeth.
Sen. Bob Corker (R-Tenn.) said last Thursday that members of his party don't want a final bill in which consumer protection would trump safety and soundness concerns and that he and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) had reached agreement on placing the new consumer regulator inside the Federal Reserve. Dodd was planning to unveil legislation on his own, without Republican co-sponsors on Monday March 15.
Corker said the compromise involved broad rulemaking authority for the new regulator, but the enforcement would be done by the prudential regulator. If the consumer regulator has concerns about a financial institution's practices, they could send a representative to the examination being conducted by the safety and soundness regulator, such as the NCUA.
Corker said at a panel discussion last Wednesday sponsored by The National Journal, "You can't have multiple people dealing with financial institutions and giving them mixed signals."
Fellow Banking Committee Member Mark Warner (D-Va.), who was also on the panel, agreed with Corker that it is less important where the new agency is located. Warner said he hopes the new legislation should be comprehensive and said lawmakers are "not simply going to fix the last crisis."
Both lawmakers agreed that the Federal Reserve didn't do enough in the area of consumer regulation in the past.
Warner also said the section of the legislation dealing with how to deal with troubled institutions deemed too big to fail should be structured in a way that having the government come in and rescue the company "ought to only be a last resort."
During a second panel discussion, CUNA President/CEO Dan Mica and Independent Community Bankers of America President/CEO Camden Fine agreed that having a few large financial services firms dominate the market is unhealthy.
Mica said the concentration issue needs to be looked at but noted that with approximately $900 billion in assets, all credit unions are smaller than any one of the big banks.
Fine said any changes to the regulatory landscape must help small institutions more.
He noted that when he ran a community bank in Missouri he had to fill out a 57-page compliance questionnaire from the Fed. He noted that all the time small institutions spend on compliance takes time away from their ability to provide one-on-one service to their customers. He also said that the exam process needs to be harmonized because the safety and soundness and consumer protection objectives are often in conflict.
Travis Plunkett, the top lobbyist for the Consumer Federation of America, said "safety and soundness concerns, always trump consumer concerns."
He said because many of the problems during the financial crisis were caused by large banks and nonbanks, he hopes the legislation will focus on "broad rules that nobody is exempt from."
In a subsequent interview with Credit Union Times, Fine said while he expects credit unions to try to attach a provision raising the cap on member business lending to the regulatory restructuring bill, his group will fight that effort strongly.
"We want to be sure that lawmakers know about the poor fourth-quarter results of credit unions. This shows they are having problems with the loan portfolios they have," he said.