Bankers Form SuperPac for 'Surgical' Strike at Industry's Enemies

Frustrated by a lack of political power and fed up with blindly donating to politicians who consistently vote against the industry's interests, a handful of leaders are determined to shake things up.

They have formed the industry's first SuperPAC — dubbed Friends of Traditional Banking — that is designed to target the industry's enemies and support its friends in Congress.

Barbara A. Rehm

"It comes back to the old philosophy of walking softly and carrying a big stick," says Howard Headlee, the president and chief executive officer of the Utah Bankers Association. "But we've got no big stick. And we should. We have the capacity to have one, we just aren't organized."

Think of it as an Emily's List for bankers and their allies.

"Congress isn't afraid of bankers," adds Roger Beverage, the president and CEO of the Oklahoma Bankers Association. "They don't think we'll do anything to kick them out of office. We are trying to change that perception."

Unlike traditional banking PACs, which target hundreds of House and Senate races, the SuperPAC instead is focusing on making a big difference in just a handful of close elections.

SuperPACs are the latest campaign finance innovation, made possible by two 2010 court decisions. They are officially known as "independent-expenditure only committees" because they are not allowed to coordinate their activities with candidates. SuperPACs are attractive because there are no limits on contributions or expenditures.

With a regular political action committee, like the American Bankers Association's BankPAC, an individual may donate no more than $5,000 a year. Then the PAC may contribute up to $10,000 to any one candidate in an election cycle — $5,000 for the primary and another $5,000 for the general election.

But Friends of Traditional Banking can direct as much money as it can raise to certain races without such restrictions. Matt Packard, the SuperPAC's chairman and president and CEO of $670 million-asset Central Bank in Provo, Utah, views the SuperPAC as a complement to BankPAC.

"BankPAC is much broader and covers lots of different candidates. This is much more surgical," Packard says. "If someone says I am going to give your opponent $5,000 or $10,000, you might say, 'Yea, okay.' But if you say the bankers are going to put in $100,000 or $500,000 or $1 million into your opponent's campaign, that starts to draw some attention.

"That's why I think this is much more instrumental than BankPAC in a close race."

Friends of Traditional Banking will ask contributors to pledge from $150 to $500 to two congressional races each election cycle. An advisory council will research races and select the candidates to be targeted. A board of directors will sign off on the selections, and then information will be sent to those who pledged funding explaining how to donate to a particular candidate.

The SuperPAC itself will not touch the money. Unlike Emily's List, which raises money for female candidates, Friends of Traditional Banking will merely point its supporters toward the races and the candidates considered key to the future of traditional banking.

If 10,000 supporters sign up at the minimum pledge level — not a high bar considering 2.1 million people work in the banking industry — Friends of Traditional Banking would be channeling more than $1 million. That's enough to make a difference in a tight race.

"My short-term goal is to get to the $1 million mark," Headlee says. "I have a lot of confidence that once we get there we will get way beyond there. People will see how effective it is and they will jump on board."

SuperPACs are considered pretty cutting-edge, which is not a place a lot of bankers feel comfortable. Headlee says the first question most bankers ask him is, "Is this legal?" Friends of Traditional Banking got Federal Election Commission approval last September and federal banking regulators have been briefed on the effort.

But SuperPACs are still relatively rare. As of early April, 407 had been formed and just 18 had raised more than $1 million.

"It would be nice to sit on the sidelines or sit on our hands and say, 'Oh we don't get involved in that stuff,' but that just means you get run over," says Don Childears, the president and CEO of the Colorado Bankers Association. "We need to get more deeply involved as an industry in supporting friends and trying to replace enemies."

Childears says he's seen SuperPACs in action, citing a credit union that donated $50,000 to an independent expenditure committee and defeated a candidate in Colorado. "Regretfully that is our world these days," he says. "Everyone from the Realtors to the credit unions to the consumer groups are playing more hardball. It would be nice not to have to engage in that, but we do."

[The Credit Union National Association, the industry's largest trade group, does not operate a SuperPAC. But it does accomplish many of the same goals by marshalling both institutions and their customers to donate to specific races. PACs are allowed to make these "independent expenditures," or donations that are not coordinated with a campaign, and according to the Center for Responsive Politics, CUNA's PAC spent $837,000 to influence six tight races during the 2010 elections.]

The ABA's BankPAC has spent $1.146 million so far in the 2011-12 election cycle, which ranks it 9th overall, just behind CUNA at $1.184 million, and well behind the second-ranked National Association of Realtors at $1.629 million, according to the Center for Responsive Politics. BankPAC expects to raise $3.5 million during this election cycle.

Gary Fields, BankPAC's treasurer, says it will contribute to 380 House races and virtually all the Senate races this year. Fields says the ABA is considering an effort that would parallel Friends of Traditional Banking loosely dubbed the "Chairman's Club."

"For those bankers who want to do more than just contribute to the PAC, Howard has his Friends of Traditional Banking and we're looking at something, the Chairman's Club, which would be a pledge program that would complement Friends of Traditional Banking," Fields says. "But it's only on the drawing board and nothing has been rolled out to the public on that yet."

Fields, however, sounds more focused on the traditional PAC. Asked if he is excited about the prospects for Friends of Traditional Banking, Fields says, "I'm more excited about the ABA BankPAC… What we would like to see is more bankers participate in the PAC."

Why isn't ABA, the industry's broadest trade group, or the Independent Community Bankers of America, the group devoted to Main Street banking, involved in Friends of Traditional Banking?

"We didn't ask the ABA or ICBA to participate," Headlee said. "I don't think they want to have any kind of control over this because we may piss some people off inside the Beltway. We fully intend to. They have to work back there."

ICBA President and CEO Cam Fine is enthusiastic about the effort.

"I am for any PAC that is going to defeat our enemies," Fine says. "I agree with Howard on this. More power to him. I hope he raises a lot of money and hammers these guys."

Beyond Utah, Oklahoma and Colorado, the advisory council currently includes members from eight other state associations: Arizona, Colorado, Idaho, Kansas, Michigan, Minnesota, New Jersey and Vermont.

Headlee and the other state association leaders see Friends of Traditional Banking going beyond bankers to tap shareholders and customers and anyone else who sees the value in preserving Main Street banking.

"Clearly there are Members of Congress who have absolutely no reservations about kicking traditional banks in the teeth, and we are tired of it," says Headlee. "We've got to be able to defend the folks who have the courage to stand up for us as well."

The vehicle now exists. The potential is there. It's up to bankers to make it happen.

Comments (11)
Part 2 Big ISDA cartel say they're financially innovating with their OTC derivatives contracting - which in reality is virtually completely disengenuous, while they can't survive without quantitative easing, which is largely the current way they've had liquidity in order to have moving markets to 'trade' their OTC derivs contracts and also to have what appear to be markets not correcting so that when fair valuing these balance sheet items, they're not marking to market shadowing correcting markets, which the financial markets should be reflecting the true condition of the economy.

The US economy has been poor since at least NAFTA in 1993 when we began aggressive constraining of the US economy and offshoring production out of the US. This negative ripple effect has been a key reason for consolidation in the financial sector. One could say it was/has been many things that have caused financial sector consolidation, but most of the excuse, the reason for consolidation is rooted in a shrinking economy that the 1% who own bank stocks, the 1% in the old world who own banks/bank stocks and control policy there and by way of multi-lateralism influence policy here, knew the US economy was going to shrink, be constrained or reduced on purpose, and what nearly everyone else by which is caught by surprise or some say were the 'unintended' consequences, when by way of lobbyists and those who make campaign contributions/political contributions that hire lobbyists know - the gravy train or rentier or free rider situation that will benefit the few, the inner hand. We're there and have been there for over 100 years.

Community bankers have tacitly understood this; they lobby like all the others, however it relates again to lobbying for what worked; look at the Constitution and lobby for that.

Actually I don't even support the National Banking Act or the Federal Reserve Act, but let's get to what worked at least 25 years ago, before Gramm Leach Bliley, or Commodity Futures Modernization Act, or Net Capital Rule, or G20 Agreements and beginning with NAFTA and all other 'free' trade agreements to follow, even including 'fast track' yet another utter abrogation of the Constitution.

Repeal these sorts of treaties/agreements and US compliance and acquiescence to flawed multi-lateral policy that have facilitated management offshoring production out of the localities where these community bankers do their business, and force corporate management to reshore production.

Not only will the US economy improve,employment will emprove and the constituents to which the community bankers lend, this/these market areas also will improve commercially. Our economy will be put on better footing and be decoupled from the Old world. Where we're solution to it at risk for having only Germany as its answer, there are many things I dislike about central banking, but if we're there so that the other European Sovereigns dont have to rely or have only Germany on which to fall back, we'll again have saved Europe from the bund and its storm trooper commercial and financial war, while our community banks will have a better market into which to lend when the US repeals its compliance to G20, we restore our Constitution's Article 1 Section 8 requisite for imports, the EU 'free' trade zone and the Euro break up and all those sovereigns too restore their tariff//custom regime against german imports of capital goods into their countries. Their own industries will be restored and they'll have better economies and the Germans won't be able to get away with their fiscal and commercial war tactics including 'austerity' or asset sales, etc, all code for those countries, their sovereignty and their assets/resources being controlled by the 1% in GErmany, its agents, while it can get away with this era's war(s) only done differently without panzers, or luftwaffe, like that.
Posted by Psorasam | Wednesday, April 18 2012 at 2:58PM ET
Part 1
It is sad that community banks are suffering for the sins of the ISDA cartel, although over the years the community banks have not had a great reputation with regard to neutral, fair lending that in spite of if the borrower is a woman, or a minority or a person of a diffe religion, the community banks conceitedly would discriminate. This in part was what red-lining was and some of the slick ways it was practiced, or available homes in some white neighborhoods would not be shown to minority buyers.... like that....

Back to this current state of affairs the community banks were suffering, it would not surprise me if they regret giving in to Phil Gramm in order to obtain their consent for GLB which repealed 'Glass Steagall' but also enabled OTC derivatives to be deemed as 'insurance' contracts and thus became contracting that ISDA cartel management could inflate and also knowingly tox their balance sheets while producing the $780Trillion problem of OTC derivatives contracts which the little banks had nothing at all to do with or create.

It is a painful thing to have watched, but the way out isnt among the ordinary common prescriptions; its lobbyists need to require the repeal of flawed multi-lateral policy that has been a key driver in the erosion of the US economy that the community banks have encountered.

Community Bank lobbyists need to demand repeal of US compliance with the G20 Transatlantic Agreements, which the Germans dominate. The G20 requires the US to constrain or in effect collapse our economy and de-industrialize so that the dominant european economy, ie Germany can 'enjoy' the lack of US threat to the capital exports Germany has been making and using those industries keeping its people employed.

As a result of the US de-industrializing to suit the German dominated G20 Transatlantic Agreements, Germany now has a lower unemployment rate than before it reunited in 1989.

For the US to deindustrialize, we've adopted antiConstitutional policies that in effect have fostered 'jobless' recoveries since and including NAFTA. This was the first aggressive non tariff'd trade agreement, under which imports are permitted into the US without complying with the Constitution's Article 1 Section 8 constraints. Economist Simon Johnson's new book admits that what he calls 'custom' was successful in the health of the US economy after the ratifying of the US Constitution, and the indirect taxation method that the founders used for obtaining fiscal revenues, they observed having been successfully used by the Dutch and British for nearly 200 years before the founders established the Republic.

The community banks and US commerce in general arguably still relies on the Constitution but actually looks to what isnt functioning at this point. Meanwhile, what's been happening is we've been importing the flawed economics and practices of the Old world, ie pressure for 'austerity', more direct taxation (income-wage-salary taxes), more control of assets in the hands of the few away from the hands of the many, more land under control of the few and not in the hands of the voters, that we've been using, accepting more and more while we've mixed ourselves with the ways and policies of the Old World by way of the US signatory to G20 Agreements, our community banks are encountereing the on the ground reality of the contracting US economy.
Posted by Psorasam | Wednesday, April 18 2012 at 2:57PM ET
This is a very troubling development on many fronts. First of all, as S.B. observed, traditional banking is thrown around without definition. Who's to say that this isn't a sham name to hide a Superpac in service to the interests and contributions of JP Morgan, Wells Fargo, BofA,, etc? You need only think about "Clean Coal" campaign to get really suspicious of this supposed mission. Even big banks wrap themselves in the George Bailey blanket of claiming to serve small business and small borrowers even as they have, frankly, ripped off small business and small borrowers with some of their activities. Even Countrywide made this claim up to the moment that they and their cohorts drove the US economy off the cliff.

Secondly, the fact that this Superpac is declaring war on banking "enemies" leads one to wonder, what constitutes and enemy -- could it be perhaps any congressman who dares in the future to support even the weakest regulations or politically hobbled CFPB? Or maybe responsible bankers will be targetted -- just wait for the smear campaign against Volker for proposing the Volker rule? Bad money and bad actors are certain to drive good actors and money out of the system... again. Haven't we seen this go down enough already?

We taxpayers bailed out the banking industry in 2008 and this is how we are repaid -- by stepped up efforts by banking hit men to further capture government power for themselves and subvert the balancing of multiple and sometimes conflicting interests? I have yet to hear of a single Senator or Congressman who is against community banking even if he rails against Wall Street abuses. I have yet to see a single regulation proposed or passed that wasn't the result of abuses by either bankers or other players in the financial industry (though admittedly mostly of the non-traditional banking variety). If anything, politicians and regulators are too lenient since they seem only to close the barn door when when the cows are long gone. And when these cows get out, somehow they don't behave as herbivours, but devour little guys and grandmas, and then start on chomping on "systemically important" institutions.

I'm all for traditional banking, operating within constraints that insure of safety and banking longevity. But I don't trust that this superpac is going to promote "boring banking" that puts the interests of depositors and customers first.
Posted by j.doe | Wednesday, April 11 2012 at 9:35AM ET
I'm with the majority of the above posters ...... is it a feature of the article that "Main Street Banking" and "Traditional Banking" are not defined by the author?

Are you all talking about George Bailey's Saving and Loan type banking or are you astroturfing for Mr. Potter????

Do better.

Pay attention.

We are more pissed off than you can imagine.
Posted by Stephen Blackpool | Thursday, April 05 2012 at 8:36PM ET
The bankers of America would do better by acting on the so-called ethical standards they always yammer about and perform a surgical strike to put all the people back in the homes bankers found more profitable to foreclose upon than actually do the right thing.
Posted by Gordon Hilgers | Thursday, April 05 2012 at 7:47PM ET
Since when do bankers have a "lack of political power?" Maybe this is true in the Bizarro World, where everything is backwards. In the reality based world, of course, bankers have virtually bought our government. They have so much power that even though our financial sector and our entire economy almost melted down into a second Depression because of a lack of regulation and oversight, Congress barely passed even very mild new regulatory laws, which are being gutted via regulations "suggested" by banking lobbyists even as I write.
Posted by ejsjr | Thursday, April 05 2012 at 6:02PM ET
I think pretending the ABA or ICBA could have successfully opposed the creation of the CFPB is misguided. The abject failure of the existing federal regulators to correct the proliferation of dangerous consumer products led directly to the financial crisis. There was no way bankers or banking trade groups could have stopped the creation of CFPB. --Rob Blackwell, Washington bureau chief, American Banker
Posted by rblackwe | Thursday, April 05 2012 at 3:03PM ET
Having escaped being held accountable for their parts in precipitating the worst economic disaster in the US since the Great Depression, it should now be crystal clear that the Too-Big-To-Behave banks are not satisfied with simply controlling the agencies that are supposed to enforce federal financial regulations. They want to gain control of the federal law-making bodies that create the regulations. God help us all.
Posted by jim_wells | Thursday, April 05 2012 at 2:23PM ET
Kelley L's comments are spot on. It's about time we start a Super PAC to push back against regulators, congressmen, senators, and a President who have repeatedly and stupidly burdened the banking industry. Our traditional trade organizations like ABA and ICBA have been unable or unwilling to stand up to them -- example, their whimpered protests against CPFB before rolling over. . Our industry has been needlessly punished in ways that hurt our shareholders and our customers with costs that don't create offsetting benefits, Our enemies have demonized our industry because they are ignorant of our issues, or they are in the pocket of other interest groups, or they are anti-capitalist. Barney, Dirtbin, Elijah, and the rest of you -- take cover.
Posted by formrbanker | Thursday, April 05 2012 at 12:17PM ET
Clearly you don't fully understand or appreciate the role of "traditional community banks". If you found yourself paying for the sins of others (community banks impacted by more regulations due to the egregious ways of Wall Street), I'm sure you would be much more sympathetic.
Posted by SEG NSFP | Thursday, April 05 2012 at 10:53AM ET
"Clearly there are Members of Congress who have absolutely no reservations about kicking traditional banks in the teeth, and we are tired of it," says Headlee."

Tired of WHAT? What, prey tell, has been done to banks by Congress other than permitting them to rob us all blind with impunity?
Posted by american i | Wednesday, April 04 2012 at 10:52PM ET
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