Tester optimistic banking reform can move forward

The Senate Banking Committee chairman angered colleagues Tuesday with a hefty proposal that includes popular reforms for smaller community banks and major regulatory rollbacks for Wall Street giants.

Chairman Richard Shelby, an Alabama senator, characterized the proposal as a “discussion draft,” but Democratic staffers said Shelby did not include anyone in the drafting process and awkwardly made members wait to get the proposal from the committee website, despite giving reporters a two-hour preview.

Sen. Jon Tester, D-Montana, a member of the committee, said he hasn’t been treated like that since third grade. He told the Chronicle on Wednesday that unleashing Wall Street was a non-starter but that it was time for the “regulatory pendulum to come back to the middle.”

Shelby’s proposal is the most ambitious Republican attempt to repeal federal banking regulations in five years.

Under the 2010 Dodd-Frank banking reforms, part of Congress’ reaction to the 2008 meltdown, banks with assets above $50 billion are subject to stricter federal oversight. Two banks operating in Montana qualify – Wells Fargo and U.S. Bank.

Shelby’s bill, The Financial Regulatory Improvement Act, would change the definition of a bank “too big to fail” to above $500 billion. It would also relieve banks from capital requirements meant to prevent another liquidity crisis.

Shelby is also proposing the Federal Reserve tell Congress more about how it makes the monetary policy and for the president of the New York Federal Reserve Bank to be appointed by the president and confirmed by the Senate.

The bill also changes rules for the country’s small banks by eliminating a yearly privacy disclosure requirement and allowing privately insured credit unions to join the Federal Home Loan Bank system.

Tester said he’ll get over the snub and that about 70 percent of the bill looks OK – like the insurance section that includes protection for personal insurance policies against failing financial institutions and another policy to bring transparency to international insurance – proposed by Tester in March and April.

“If we can get a regulatory reform bill that really helps out the community banks, and focuses on community bank relief, I think that it would be very positive for rural America and America as a whole,” Tester said.

“If he’s hung in pretty tight on some of the Wall Street relief he’s got it’s gonna be a problem,” said Montana’s Democratic senator. “But if he’s willing to be reasonable about this I think there’s folks on both sides of aisle that will join him with a regulatory relief bill that really makes sense.”

The committee will hold a markup hearing on the bill as early as next week.