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.
"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.