Post-Election Insights: What Does it all Mean to the Banking Industry?
So, what does a Democratic federal government portend for the U.S. banking industry?
In an exclusive interview, Stephen Verdier, Senior Vice President and Director of the ICBA's Congressional Relations Group, discusses:
Verdier rejoined the Independent Community Bankers of America on March 1, 2004 as Senior Vice President and Director of the Congressional Relations Group. He was also with ICBA from 1983 until June of 1994 as Senior Legislative Counsel.
He received his college degree in political science from American University and graduated from Catholic University Law School. Both schools are in Washington, D.C. During his college years, he worked on Capitol Hill and was a law clerk with the Antitrust Division of the Department of Justice during law school. Before rejoining ICBA, Verdier was with America's Community Bankers.
Between 1976 and 1983, he was on the House Banking Committee staff and helped draft major banking legislation enacted in 1978, 1980 and 1982. He also worked on legislation dealing with the World Bank, the International Monetary Fund (IMF), and the Export-Import Bank.
TOM FIELD: Hi, this is Tom Field, Editorial Director with Information Security Group. The topic today is the 2008 Presidential Election. I'm talking with Steve Verdier, who is a Senior Vice President and Director of the Congressional Relations Group with the Independent Community Banks of America. Hey, Steve, thanks so much for joining me today.
STEVE VERDIER: Well, I'm glad to be here.
FIELD: Steve, historic day yesterday. We now have a Democratic President elect and a Democratic Congress. Big question in our constituency's mind is: What does this mean to the banking industry?
VERDIER: Well I think one thing it means is we'll have more emphasis on consumer protection and things like that, but I put a caveat on that, and that is that I think there was already going to be a pretty heavy emphasis on those kinds of issues. You know, there is an awful lot of concern, I think, by members of both parties, that the consumers may not have been treated fairly, and taxpayers may not have been treated fairly, particularly by some of the practices of the larger institutions out there and the economy.
The other caveat I have on that is that a lot of the issues that relate to financial services break down on a regional basis. We have a lot of members out on Main Street, and there are good Democrats and good Republicans who represent the Main Streets all over the country, and so I think that augers very well for the community bank sector of the economy in terms of the political situation. So we feel pretty comfortable.
We have still got our strong ties with the Republicans that remain in office, and there are quite a few that were re-elected yesterday, and we also have obviously good ties with the Main Street Democrats. And the last thing I would mention is that when President-elect Obama was a state senator, he was very well aware of the independent community bankers in his state. He knew their concerns and knew their issues, and in my experience he doesn't seem to forget anything, and he remembers the people he has met and the people he has worked with.
FIELD: Now we saw a market boost yesterday; what kind of a short-term impact do you think we might expect to see in the volatile market from the election results, if any?
VERDIER: Yeah, the way I have been thinking about that is that markets love to have certainty, and elections by their very nature are uncertain. And so once you finally have a result -- and thank goodness we have a result that was arrived at quickly and is accepted by everyone. We don't have any hanging chads this time around. The lawyers and the courts are not going to be deciding who our leaders are going to be, and I think the markets just have to love that if nothing else, and they can figure out for themselves what a Democratic Congress and a Democratic President might mean for their particular concerns about the market, and they can build that into the stock prices and look and see who President-elect Obama selects for those key financial appointments that he will have to make.
FIELD: Well that is a question I wanted to ask you, the one that everyone is talking about today. How important is Obama's selection of Treasury Secretary?
VERDIER: I think the selection of Treasury Secretary is absolutely critical because the Congress has given the Treasury Secretary unprecedented authority over the financial services sector and really over the whole economy. And so I think this is a very, very, very important appointment for our sector.
And I think it almost overshadows to some extent what had been very important appointments, and I think still remain important appointments to the financial regulatory agencies; you know, I'm thinking of the Chairman of the FDIC and the Comptroller of the Currency, and some of those other important appointments, obviously members of the Federal Reserve and that sort of thing.
Those are going to be still very, very important appointments because a lot of the nitty gritty legislative issues that are the bread and butter for a community bank frankly don't rise to the level of the White House or the Treasury Department; they are solved by the Fed and FDIC and the Comptroller and the Office of Thrift Supervision and, you know, you get down into the nitty gritty and it is those agencies that really mean a lot to the day to day life of a community banker.
FIELD: You know what struck me is I was remembering that Henry Paulson proposed a pretty dramatic overhaul of the banking regulatory agencies last spring. What do you expect to see happen to that plan now and to the regulatory agencies?
VERDIER: Well, we are hoping that President-elect Obama will be just the change we need from that particular proposal. We had a lot of negative feelings about that -- particularly the creation of a one single safety and soundness regulator to cover the whole financial services sector, abolishing state regulatory authority, which is very important to a lot of community banks, and really all community banks when you get down to it; abolishing the agencies we were just talking about. We just think that would be disastrous for community banks if we have that kind of a proposal and it is not necessary.
I mean, the agencies that regulate community banks have done a terrific job, and the community banking sector has been one of the best sectors that we have had in the financial services areas. We face challenges, but we are in a heck of a lot better shape than a lot of other folks out there, so we think that the Obama Administration would be well advised -- and we are going to make those comments to them -- to focus on those parts of the financial services industry that have not been properly regulated, and we all know what those sectors are and they ought to be regulated.
You know, community bank loans to small businesses don't need increased scrutiny; the issuance of credit default slots, whatever the heck they are, they need much more scrutiny, and so we also are going to recommend to the Congress and the Obama Administration that some of these behemoths, the enormous financial services companies that have been created, simply be broken up. They were to big too fail before, and now they are way too big to fail and so they need to be broken up so that they can be properly regulated and properly managed. We just have too much concentration of power in the financial services industry today.
FIELD: Well that certainly has been a resonant theme over the past couple of months, and with the election behind us, what new types of regulations do you think banking institutions should expect from this President and Congress?
VERDIER: Well, I think there will be an emphasis again on consumer protection, and that was going to happen regardless of who won the election. Democrats are pretty traditionally sympathetic and very interested in protecting consumers, so we are expecting that to take place.
But what I would also like to emphasize is that the leadership in Congress that we are going to be dealing with knows the difference between community banks and the largest institutions, and they know the community banks have not been a problem area for consumers. And so we think we can go to people like Barney Frank and Chris Dodd and Richard Shelby and Spencer Backus -- I've just mentioned the leadership on the two banking committees -- and explain to them that whatever is being proposed needs to be adjusted to take into account the abilities of community banks and the needs of community banks. So, we are hopeful that those members that I mentioned and really a lot of other moderate members of the House and the Senate will be very sympathetic to our concerns, and so they will allow us to compete and continue to offer credit cards and consumer loans and business loans and checking accounts and all the rest of those services without any additional undue encumbrance.
I think the regulatory system really needs to recognize the difference between community banks and the biggest banks in terms of the problems that those kinds of institutions present and their abilities to comply with new regulations.
FIELD: Steve, bottom line, how is the banking industry different today as a result of yesterday's election?
VERDIER: I think the banking industry remains in good shape, particularly from the community banking sector and I don't see a fundamental change in the industry going forward. I think the new agenda that we have been talking about was going to be the agenda regardless of which party won the election.
Again, I think there would be differences and emphasis in differences of approach, but I think both parties have been through really a searing experience with this financial meltdown and the passage of the Emergency Financial Act, and I think anybody that has been through that is going to want to take a "let's not go through this again" attitude.
We have been preparing ourselves for a very, very tough legislative season next year. A lot of issues are going to be on the table, and we have our work cut out for us. We are just thankful that our bankers are behind us in terms of the ICBA's agenda, and they are ready to jump in at the grass roots level and make sure Congress understands what community banks are all about and what we need out of the administration and Congress.
So I think we are going to be in terrific shape going forward. We would have been in good shape if the Republicans had prevailed, but we are going to be in great shape now that the Democrats have prevailed.
FIELD: The adventure begins.
VERDIER: Absolutely. Let's bring it on, but let's give ourselves a few months, or at least a few weeks to get a breather.
FIELD: Steve, I appreciate your time and insight today.
VERDIER: Hey, glad to do it.
FIELD: We've been talking with Steve Verdier, Senior Vice President and Director of the Congressional Relations Group for the Independent Community Bankers of America. For Information Security media group, I'm Tom Field. Thank you very much.