By Rebeca Romero Rainey
The 116th Congress faces a tight legislative calendar during its second session ahead of this fall’s presidential election. To make the most of this narrow policymaking window, the nation’s community bankers are strategically focused on top-priority initiatives that already boast bipartisan support and can realistically advance before year-end.
The first step for lawmakers is continuing the momentum for more efficient Bank Secrecy Act enforcement. That begins with finalizing House-passed and Senate-introduced bipartisan legislation that would require companies to disclose their “beneficial” owners when they are formed or there is a change in ownership structure, increasing the efficacy of this information to thwart terrorists and illegal activities. Other pending BSA reforms would create a central database of company beneficial ownership information at the Financial Crimes Enforcement Network and index currency transaction report thresholds to inflation. Together, these and other measures would modernize the anti-money-laundering regime to modernize compliance while providing more useful data to law enforcement.
Legislation to create a cannabis-banking safe harbor is another House-passed bill that community banks are pressing to finalize this year. Community bankers support the Secure and Fair Enforcement Banking Act, which would apply to financial institutions and ancillary companies serving cannabis-related businesses in states where cannabis is already legal. The safe harbor would address regulatory compliance concerns and improve public safety by reducing cash-motivated crimes.
While Senate Banking Committee Chairman Mike Crapo (R-Idaho) has raised questions about the SAFE Banking Act, community banks continue working to address any remaining concerns with a bipartisan bill that won the support of 90 Republican lawmakers in passing the House 321–103. Treasury Secretary Steven Mnuchin had indicated administration support for the measure, telling Congress in April that the IRS has built “cash rooms” to hold federal taxes paid by cannabis-related businesses lacking access to the banking system. Meanwhile, Federal Reserve Chairman Jerome Powell has testified that “it would be great to have clarity” from Congress on how banks and insurers can serve these businesses.
The SAFE Banking Act also includes a Crapo-supported provision preventing another Operation Choke Point by barring federal regulators from discouraging financial institutions from serving legal but politically disfavored industries. While there is more work to be done in getting this bill over the finish line, broad bipartisan support bodes well for its ultimate passage.
Of course community banks will continue to drive the message of leveling the unfair tax and regulatory playing field with industrial loan companies, the Farm Credit System, and tax-exempt credit unions. Legislation recently introduced by Senate Banking Committee member John Kennedy (R-La.) would close the ILC loophole, which allows commercial interests to own full-service banks and avoid consolidated supervision. Meanwhile, the Enhancing Credit Opportunities in Rural America Act, which would provide tax relief for agricultural and rural residential lending to offset FCS lenders’ taxpayer-funded competitive advantage, is gaining a higher profile as lawmakers look to facilitate growth in rural America.
And credit unions are under growing scrutiny as they increasingly use their tax exemption to purchase community banks while enjoying relatively lax oversight by the National Credit Union Administration. Responding to House Financial Services Committee member questions during a hearing last month, FDIC Chairman Jelena McWilliams said the playing field is unlevel due to credit union exemptions from federal taxes and the Community Reinvestment Act.
Meanwhile, legal questions remain about the NCUA’s plan to allow credit unions to include wealthy suburbs of metropolitan areas in their fields of membership while leaving out their urban cores. And credit unions’ increasingly high-risk loans and role in the taxi medallion scandal continue to generate negative headlines. There appears to be a growing receptiveness to community banker calls for policymakers to “wake up” to these financial firms’ inequitable and risky treatment.
With each congressional district home to at least one of the nation’s more than 50,000 community bank locations, these locally based institutions have a strong and reliable voice in Washington and a proven track record of bipartisan achievement. Looking ahead at a compact legislative session, community banks will continue to use that voice in working with lawmakers on realistic and pragmatic solutions that will benefit the urban, suburban and rural communities they serve.
Rebeca Romero Rainey is president and CEO of the Independent Community Bankers of America.
