When Bill Clinton was elected President, bankers thought they had found a champion to lead them in their fight for regulatory relief.
At the economic conference in Little Rock last December, the President-elect sounded as enthusiastic as a bank president about the industry's agenda for cutting red tape. And in March, he added action to his by announcing a package of reforms aimed at spurring lending.
Today, however, with Mr. Clinton attempting to repair his damaged presidency, some sense a different tone taking hold within the White House -- one less receptive to the industry's arguments.
The administration is developing new rules on mutual fund sales, and it apparently has decided against proposing legislation aimed at easing the burden of regulation. Moreover, its aggressive stance on fair lending gives some industry leaders the willies.
Heavier Burden Seen
And with the last of the Bushera regulations beginning to take effect, bankers have begun to wonder if the compliance burden is not actually on the rise.
"The combination of what they are doing on fair lending -- plus regulations still coming down the pike -- is putting much more regulatory burden on banks than was taken away" by the March initiative, said Kenneth A. Guenther, head of the Independent Bankers Association of America.
"It's a mixed bag," added Marty Farmer, a lobbyist for Barnett Banks Inc.
"They did what they did in the name of easing the credit crunch," he said, referring to the March initiative. "But the mutual fund package they are coming out with is a tightening up of regulations, and the lending discrimination stuff is worrisome."
Disappointment Widespread
Though Mr. Guenther doesn't hold the Clinton administration responsible for the new regulations mandated during the Bush era, there is considerable disappointment among bankers that the White House will not propose legislation to undo those rules.
The Federal Financial Institutions Examination Council had begun examining bank regulation in the last year of the Bush administration, and was expected to make legislative recommendations this year.
"I had expected legislative proposals to come out by early summer, and that would imply administration support," Mr. Guenther said. "That would have gotten the ball rolling."
However, he said, Comptroller of the Currency Eugene Ludwig recently told the bank trade group that the administration does not intend to propose legislation now.
Of even greater concern is the administration's approach to fair lending. The Justice Department is moving more aggressively to investigate complaints of lending discrimination, and Mr. Ludwig plans to send testers into banks to see if minorities are treated on the same footing as white applicants.
"The ground rules are changing," said Mr. Guenther. "They are no longer looking at overt discrimination, but at more subtle forms," such as how much help white and minority borrowers receive with their applications.
Criticism Seen as Premature
Karen Shaw, president of the Institute for Strategy Development, thinks banks' disappointment with the administration is premature. In the long run, she said. its performance on fair lending will give it credibility on regulatory relief.
The administration should husband its political resources "and then come back later with a 'competitive relief package, rather than a regulatory relief package," she said.
In particular, she said, bankers should give the President a chance to make good on his promise to rewrite the Community Reinvestment Act to stress performance over paperwork -- a goal many bankers have endorsed.
Directive to Regulators
A draft of a letter President Clinton is expected to sign this week has sharp criticism for the Community Reinvestment Act.
The draft, a copy of which was obtained by American Banker, says "banks rightly complain about excessive paperwork and inconsistent implementation of the law."
The letter, addressed to the four bank and thrift regulatory agencies, asks them to overhaul the system of CRA enforcement by next Jan. 1.
"I ask that, in undertaking this effort, you work to promote consistency and evenhandedness, and develop and set forth more objective, performance-based CRA assessment standards that reduce the compliance burden on financial institutions while stimulating improved CRA performance." the letter adds.
Ms. Shaw concedes that bankers may have problems with new guidelines under the reinvestment act, even if paperwork is reduced.
Bankers, she said, "have realized that the flip side of |performance over paperwork' is quantitative performance standards that are easier to administer, but which smack of credit allocation."
Consumer Groups Dismayed
Still, the Clinton administration has managed to disappoint groups on all sides of the issue. As unhappy as bankers may be with the President's performance, consumer and antipoverty organizations are equally dismayed.
"We are not pleased with the direction that things seem to be heading," said Chris Lewis, the banking lobbyist for the Consumer Federation of America.
One reason both sides are unhappy could be that administration's wants to please too many people, Mr. Lewis said.
Mr. Ludwig, he said, "is saying the right things, but he suffers from the same fault as the President -- he thinks we can all be one big happy family.
"Sometimes you have to lead and take the risk of making some people unhappy."
