WASHINGTON — During a meeting with more than a hundred community bankers on Monday, Trump administration officials made it clear they favored a system with different rules for small and big banks.

Community bankers have long sought so-called two-tiered regulation, but policymakers are generally unwilling or unable to shake up the existing system, which imposes many of the same regulations across the spectrum of institutions.

During the meeting, President Trump largely reiterated comments he’s made in the past, discussing the importance of community banks for the economy and small businesses. But his willingness to speak to so many bankers at once, combined with comments by his senior advisers who also attended, sent a strong message to attendees.

Vice President Mike Pence and President Donald Trump
"I can promise you under President Donald Trump, Dodd-Frank’s days are numbered," said Vice President Mike Pence. Bloomberg News

“He has changed the tone,” said Cam Fine, president and chief executive of the Independent Community Bankers of America, which helped to organize the meeting. “We did not have a single meeting like this in eight years at the White House … he has given a bunch of dispirited bankers, who felt like beaten dogs for the last eight years, hope. The morale of our members is sky high right now.”

Though the meeting was light on prescriptive policy plans, Vice President Mike Pence and National Economic Council Director Gary Cohn both spoke of the need to reduce regulations, according to participants. Cohn in particular suggested moving to a two-tiered regulatory system where big and small banks would play by different rules, they said.

“They understand the two different business models that are out there,” said Timothy Zimmerman, chairman-elect of the ICBA and president and CEO of the $486 million-asset Standard Bank in Monroeville, Pa.

Cohn also told bankers that the administration is looking at reinstating some form of the Glass-Steagall Act, the Depression-era law that separated commercial and investment banking, though he suggested a new version would be significantly different.

“It was more so about trying to level the playing field. … He was soft-selling the process of having two sets of rules,” said Peter Stenehjem, president of the $2.3 billion-asset First International Bank & Trust in Watford City, N.D., who attended the meeting.

Cohn’s comments came the same day President Trump told Bloomberg News that he was “looking at” Glass-Steagall right now.

“There’s some people that want to go back to the old system, right? So we’re going to look at that,” Trump said.

Yet the vision Cohn mentioned in his discussion to bankers — which happened before Trump’s arrival — appeared less like the 1930s version of the law and instead related to the two-tiered system, participants said.

“The 21st-century Glass-Steagall was creating a body of regulation for systemically important financial institutions… and a body of regulation for smaller local institutions that are scaled to fit those organizations,” Fine said, referring to remarks by Cohn.

Jill Castilla, president and CEO of the $251 million-asset Citizens Bank of Edmond in Oklahoma, said she was surprised to hear Cohn so enthusiastic about tiered regulation.

“Cohn made it clear that there needs to be catered regulation according to size … that small banks don’t need to have the same regulatory burden,” Castilla said.

Stenehjem said he had the sense that banks with less than $10 billion of assets would face different capital levels and restrictions than larger institutions.

White House spokesman Sean Spicer later seemed to hint at the idea of two-tiered regulation as a way to modernize Glass-Steagall. In a separate press conference on Monday, he said the president’s vision of a new Glass-Steagall “will allow these banks to spend less time complying with unnecessary requirements, many of which were designed to police much larger entities, and more time, infusing their communities and local small businesses with capital.”

During the meeting, Pence spoke at greater length than Trump and was even more emphatic about undoing Dodd-Frank regulations.

“And I can promise you under President Donald Trump, Dodd-Frank’s days are numbered,” said Pence, according to a transcript of his remarks sent out by the White House. “Dismantling Dodd-Frank is a major part of the president’s legislative agenda, and we will get it done.”

During the meeting, administration officials also made clear that they support a bill by House Financial Services Committee Chairman Jeb Hensarling, R-Tex., to revamp the Dodd-Frank law. The bill will be voted on by the panel on Tuesday.

The Choice Act “is an enormously important step toward real reform and would unburden community banks and spur growth,” Pence said. “The Choice Act is a common-sense bill that repeals Dodd-Frank and empowers consumers and businesses, not bureaucrats and lawyers.”

The bankers also said that stress testing and prescriptive lending requirements are in the administration’s cross-hairs.

“They understand that our business model is unique in that we serve different types of communities,” said Rebecca Romero Rainey, chairman and CEO of the $220 million-asset Centinel Bank in Taos, N.M., who also attended the meeting.

She added that Pence wanted banks to go back to character lending.

“You make decisions not so much by running a calculator, but by calculating in your heart who that person is and the character of the men and women that are building the enterprises of your communities,” Pence said.

In a March meeting between Trump and a small number of bankers, discussion centered on the Consumer Financial Protection Bureau. That was not the case Monday.

Pence “mentioned" the bureau "as part of it in his remarks, he mentioned it as part of the regulatory overreach, but it was not a focus,” Fine said.

Though the administration has done little so far to provide regulatory relief, bankers at the meeting said the officials clearly intend to do so.

“This is not just lip service. They are not going through the motions, because they are talking too specifically about a number of these things of the impact that we have,” Zimmerman said.

Castilla said that “to have that intention set out this early in an administration — and making the time to meet with 100 community bankers — shows there is an interest there and an intention that we haven’t seen previously, maybe even ever."

“It’s a huge statement this early in an administration,” she said. “It really blew me away.”