What reg reform has in common with a classic board game
Many in my generation recall with fond familiarity the game of “Battleship,” in which the objective is to sink one’s opponent’s fleet of warships by guessing their grid-based location on the board. The construct of the game can well be applied to the legislative process in Washington D.C. Forget “Schoolhouse Rock,” the partisan reality is that legislative success or failure is increasingly predicated on the nuance of strategic planning (placement of the fleet), managed expectations (sacrifice a destroyer to save a carrier) and some degree of luck (missed shots across the bow).
Recognizing that “Battleship” is based on actual military strategy, assuming a player represents a singular governmental entity, let’s expand the concept to a coalition — wherein each ship is now subject to multiple actors wielding control. From a show-of-force perspective, a coalition succeeds on the united front, moving in concert, and fails on the irresolute weakest link. The Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155), which passed in the Senate this month, is supported by such an alliance.
The Senate bill is thoughtfully crafted bipartisan legislation that reflects a starting point from which the financial services industry may begin to see some degree of regulatory relief from Dodd-Frank, the retributive response to the overvaluation of securities markets in the early aughts. The current legislative vehicle is tailored to regional and community financial institutions, providing relief from overly burdensome compliance obligations and business restrictions that were designed to curb reckless activity by the bad actors that are the country’s – and the world’s – largest commercial and investment banks.
The vast majority of financial services trade associations support the legislation, not only because it proffers sound solutions for a number of constituent groups, but also for the bipartisanship that has carried through from the drafting process to ultimate passage in the upper chamber. The notion that any financial services trade association would foolishly attempt to hold hostage the legislation as a scheme to secure something mythically “greater” is not only irresponsible, but — to use the “Battleship” scenario — treasonous, akin to handing over the location data for the fleet.
At this point in the game, there is little utility in stepping out as the weakest link in the group. On the credit union side, we’ve seen this fail time and again. Last year, when the National Credit Union Administration was contemplating closure of the Temporary Corporate Credit Union Stabilization Fund and merger with the Share Insurance Fund — which will provide a dividend payout to credit unions and eliminate a 12.2 basis-point payment into the fund – an industry trade actually about-faced and advocated against such regulatory action. Fortunately, their reckless tactic did not result in sinking the ship, but in a broader arena, like the loose alliance supporting the financial regulatory reform bill, it very well could signal game over.