The Politics of Banking

By Colin Barrett, President/CEO, Tennessee Bankers Association

Many of our political leaders believe the solution to the world’s problems can be found within the banking industry. And while we have proven time and again that our industry is capable of great accomplishments—providing access to homeownership, funding small businesses, even saving the economy during a global pandemic—I have concerns about using banks to address all of our nation’s social and economic problems.

In Washington and Nashville, we are seeing political leaders and federal regulators attempt to change the course of history through financial regulation without concern around safety and soundness. And these efforts continue to accelerate.

There is no better example of this than the events that caused Jelena McWilliams to resign as FDIC Chair. On February 4, McWilliams stepped down after OCC Acting Comptroller Michael Hsu, CFPB Director Rohit Chopra and FDIC Vice Chair Martin Gruenberg usurped her authority to set the agency’s agenda and voted over email to request public comment on bank mergers. Make no mistake, this had nothing to do with bank mergers but was an effort to unseat McWilliams. If there was truly concern around bank mergers, the regulators would have spent time looking at their own actions that have led to a decreasing number of banks in recent years.

Meanwhile, Hsu is using his role at the OCC to further the Administration’s efforts around diversity and inclusion although there is no statutory requirement for the agency to do so. He stated that the OCC is considering taking steps “like encouraging banks to make it a practice to nominate or consider a diverse range of candidates.” And while diversity is certainly a strength, are mandatory diversity efforts next?

At the CFPB, Director Chopra recently raised concerns around “junk fees.” Never mind that these are legally permissible fees (including late fees) that are disclosed to customers up front. He also considers overdraft fees, which require customers to opt-in, as “junk fees” even though Morning Consult recently cited 89% of bank customers support them. But the CFPB was founded on the belief that customers are victims and this rhetoric is a tool to increase the scope of the Bureau.

Over at the Federal Reserve, Sarah Bloom Raskin, a former Fed Governor, recently withdrew her nomination for the Vice Chair of Supervision amid concerns around a paper she wrote on the banking industry’s role in climate change. Raskin, a former Maryland banking commissioner, was a strong choice to fill that role but was sidelined because of her views on this political hot topic.

And while the politicization of banking is largely seen in Washington, its impact can be felt in Nashville as well. This past session, we opposed legislation that would have prevented the State of Tennessee from using a bank for cash management services if the bank has a policy against lending to fossil fuel companies. This particular legislation prioritized fossil fuel companies (which are limited in Tennessee) over the best interest of the state’s fiscal management and our fellow Tennesseans. And the response from a proponent when questioned by TBA was that “it would send a message to President Biden” about his push for climate policies. In reality, the bill prioritizes the General Assembly’s politics over the best interests of the state.

And ultimately, that is the problem. Decisions made by those in power in the name of political ideologies are not in the best interest of the American people. If our industry is to continue to thrive by taking care of everyone, we must push back on efforts to further the politicization of the banking industry.

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