The banks have become increasingly frustrated with their federal regulators and, breaking with tradition, they have brought the fight out into the open.
In an effort to overturn new rules and challenge the legitimacy of regulators’ powers, bank lobbyists have added legal threats and public attacks to the more common lobbying efforts that once took place behind closed doors on Capitol Hill.
In recent months, trade groups representing banks of all sizes, including the American Bankers Association, the Independent Community Bankers of America and the Bank Policy Institute, have accused federal regulators like the Consumer Financial Protection Bureau and the Federal Reserve of regulatory overreach.
Cam Fine, former longtime president of the Community Bankers Group, said the cultural shift leading to the lawsuits was remarkable. He said, in his 18 years in the group, he remembers going to court only twice.
“You almost have to suffer some kind of cataclysmic event before a trade union like mine can file a lawsuit in the courts,” Mr. Fine said.
Trade groups recently filed a lawsuit against the Consumer Bureau over a new rule Banks need to share data on their small-business lending practices, and on a new initiative to investigate them for possible discrimination. He has filed court papers in support of a constitutional challenge to the CFPB that is pending before the Supreme Court.
He has threatened other lawsuits, including the Federal Deposit Insurance Corporation, the Fed, and the Office of the Comptroller of the Currency, over the new final implementation of the Community Reinvestment Act of 1977, and some analysts expect him to sue the Fed. Other regulators are considering proposals to tighten capital rules.
Regulators say they are using powers they have long held to address specific problems in the industry, such as racial discrimination. A crisis among medium-sized banks that has led to the collapse of four lenders this year has heightened the need to tighten capital rules, they say.
“We will not comment on specific rules, but President Biden supports common-sense reforms to strengthen our banking system and address Trump-era weaknesses in oversight of large regional banks to protect American jobs,” Michael A. said Kikukawa, a white House spokesman. “A safe and diverse banking sector – including healthy community and regional banks – is a source of strength for our economy.”
Lobbyists say the Biden administration has chosen regulatory chiefs who are often unwilling to compromise or listen to their concerns. The lobbyists’ tactics stand in sharp contrast to their behavior under the Trump administration, when regulators rolled back rules so drastically that even the banking industry feared they were going too far.
But the public campaign, which consumer advocates worry could undermine the authority of regulators, is also a product of the country’s bitter political discourse. What was once settled quietly, away from public view, is now decided through knockout fights, said Mr. Fine, the former leader of the Community Bankers.
“We didn’t think so,” he said. “We’ll try to resolve it within the agencies. We will appeal to the agencies and we will sit with them and we will meet them again and again and try to motivate them to modify their rules and many times we will succeed.
The Independent Community Bankers of America, which represents about 5,700 community banks, is fighting against a rule that requires lenders to provide regulators with demographic details on all small-business loans — such as the borrower’s race. and location – to determine whether banks are lending fairly. In August, the organization joined a lawsuit that was filed by other trade groups. block Rule.
“The decision to litigate a public policy through the courts is not a trivial matter,” said Anne Balser, the group’s chief lobbyist. Rather, he said, it is a last resort in response to regulators’ “extraordinary” demands, which the group says are too difficult for smaller banks to meet.
Allison Preece, a spokeswoman for the Consumer Financial Protection Bureau, said in a statement that regulators “carefully considered public feedback and made significant changes from the original proposal” before finalizing the small business loan rule, including “simplifying compliance for everyone.” and streamlining”. Institutions – especially smaller lenders.”
Industry groups have also mounted rigorous public influence campaigns.
Last month, when the Senate voted to repeal the small-business loan-data rule, the Community Bankers Association praised the move in a news release emailed to reporters, citing a quiet conversation with lawmakers. A public element was added to a series of. last.
In public posts, the Bank Policy Institute and the Financial Services Forum, which represent the largest banks, have criticized proposed rules by several regulators, including the Fed, to tighten capital requirements. He has condemned”Excessive“change and warn”$1.4 trillion tax on financial services provided by big banks,
Many observers believe that these public statements are a prelude to the trial.
“It seems clear that a lawsuit is likely,” said Ian Katz, a financial policy analyst at Washington research firm Capital Alpha Partners, who added that even if the Fed made changes to the proposed rule before finalizing it, But change will not be likely. Important enough to satisfy the bankers. “They also feel they have strong procedural grounds on which to base their case.”
Jamie Dimon, chief executive of JPMorgan Chase, the largest U.S. bank, in September called the Fed’s proposal, which was made in conjunction with other federal bank regulators, “extremely disappointing,
To directly confront regulators, lobbyists have generally adopted a playbook supported by outside interest groups that are not regulated and often adopt more aggressive strategies to pressure for change, including President Donald J. Also includes Trump’s time in office.
“The Trump administration has really changed the tone and the conversation around regulations,” said Jesse Van Tol, president of the National Community Reinvestment Coalition, a group that pushes banks to do business in poor and minority communities and Generally supports strict regulations.
“Many of us who were fighting tooth and nail everything that was coming during the Trump administration used similar tactics.”
Lobbyists have won some victories. In September, a federal court ruled that the consumer bureau did not have the authority to investigate banks for discrimination and, in a separate case last year, an appeals court ruled that its funding structure was unconstitutional.
In an October 26 decision, a federal judge in Texas said small banks would not have to follow the Consumer Bureau’s small-business-loan reporting rule while the Supreme Court considered the case over its funding structure. Ms Preece, the CFPB spokeswoman, said the regulator “will continue to respond in court” to legal challenges to the rule.