Tester expects financial reforms will pass, won't hurt Montana-based banks
The Lee State Bureau
HELENA – U.S. Sen. Jon Tester said Friday he's confident Congress will pass a financial regulatory reform bill that will protect consumers, hold Montana banks harmless and crack down on practices that led to the 2008 financial meltdown.
"If we get the bill to do what it needs to do, and that is focus on Wall Street, then the potential for passage is good," he said in an interview.
Tester, D-Mont., who sits on the Senate Banking Committee, also rebutted claims by Republican opponents that the bill will lead to more taxpayer bailouts of large banks and financial institutions.
The measure does just the opposite, he explained, giving federal regulators the tools to close or restructure banks facing insolvency and restrict losses to shareholders and creditors.
"It's to stop bailouts from happening, and to really give folks some belief that the system will work for Main Street and not just for Wall Street," he said.
The Banking Committee endorsed the bill on a party-line vote this week, with Democrats in favor.
The measure would create a new Consumer Financial Protection Agency to oversee the marketing of financial and credit products, toughen regulation of complex financial products like "derivatives" and "credit default swaps," and make it easier for federal regulators to disassemble failing banks and limit the financial fallout of such failures.
The Obama administration is behind the measure. All 41 Republican members of the U.S. Senate signed a letter Friday saying there needs to be more bipartisan work on the bill.
Steve Turkiewicz, president and chief executive officer of the Montana Bankers Association, said his group is concerned about placing Montana banks under new rules from the consumer protection agency that could affect what products they can offer customers.
"Banks like we have in Montana are not part of the problem," he said. "So why are we investing so much rule-making authority into the already well-regulated banking industry?"
Tester said banks with less than $10 billion in assets will be exempt from those rules, essentially exempting all banks domiciled in Montana. However, he said Montana banks are still worried that the rules could end up being extended to them in the future.
"There will be an opportunity to change the bill," he said. "Community banks and credit unions didn't create this financial meltdown we've experienced … and they shouldn't be made to jump through the hoops that the mortgage bankers, the investment bankers and Wall Street folks have to."
Tester said further amendments will be added to the bill before floor debate begins, and that he expects further amendments from members of both parties will be offered and considered.
Republican critics of the bill have pointed to its creation of a new $50 billion fund to cover the costs of failed firms, saying the fund is an invitation to more taxpayer bailouts.
That fund, financed by a tax on banks, would be used to dismantle failing firms and put them out of business, without further harming the general financial markets, Tester said.
"You have the ability to unwind them," he said. "The (federal government) had no ability, unless this bill gets passed, to really unwind these big financial firms."