After repeatedly criticizing the Independent Bankers Association of America for opposing financial reform legislation, Rep. Jim Leach thinks he's made some progress.
The House Banking Committee chairman said the community bank group is "very open to legislation."
In an Oct. 6 letter to House Republican Conference chairman John Boehner, IBAA president William D. Sones identified four changes to the legislation needed to gain the group's support.
But IBAA executive vice president Kenneth A. Guenther said the group continues to oppose the bill.
"We did what he requested," Mr. Guenther said. "We put forward the conditions that would have to be met before we would support a bill. But the only bill on the table does not meet that criteria in any way."
In the letter, Mr. Sones argued that lawmakers must do more to forbid mergers of banks and nonfinancial firms. He condemned a House Banking Committee measure passed in June that would allow limited cross-industry mergers. Though House Commerce has proposed eliminating that provision, its plan would let financial companies maintain existing commercial affiliations when they merge with banks, he noted.
He urged lawmakers to force securities and insurance firms to divest their commercial holdings when they merge with banks.
Mr. Sones also complained that pending legislation would place new restrictions on banks' ability to offer insurance products, allow diversified financial firms that acquire banks to escape strict Federal Reserve Board supervision, and create uninsured wholesale financial institutions.
"This provision was included to please a handful of large securities and insurance firms at the expense of the banking industry," Mr. Sones wrote.
But even if the IBAA is still blasting legislation, Rep. Leach considered it a victory to get the group's demands on paper, said a spokesman for the Iowa Republican.
"Rep. Leach has criticized them for not being part of the negotiations, now they have joined in," the spokesman said.
Rep. Leach's most recent attack came in a Sept. 30 letter to Mr. Guenther. "If community bankers do not reassess tactics," Rep. Leach wrote, "small banks will be competitively disadvantaged for years to come."
Furthermore, financial reform proposals include Federal Home Loan Bank reforms that will expand small banks' access to capital, he noted. The Banking Committee bill would allow banks with assets under $500 million to use Home Loan bank advances for small-business, agricultural, and low- income community development loans.
Christopher L. Williston, executive director of the Independent Bankers Association of Texas, said Rep. Leach's warnings are having little sway with community bankers.
"Rep. Leach can preach to me or Ken all he wants," he said. "We report to our membership and they're telling us this bill is something they can't live with."
