Senator John Kennedy will soon move into his refurbished office after having more of a war room in the basement of the Senate Russell Office Building. LBA has been in D.C. twice this year and a third visit is scheduled for early May when a group will participate in the annual ICBA Capitol Summit. We remain hopeful that Louisiana banking will have relief from onerous regulations, and the enforcement of those regulations. Senator Kennedy has been focused on community bank relief since the campaign. He is now working on legislation that will give that relief and we should have a clearer idea of what that will entail soon. The LBA has asked Senator Kennedy to look also at the examination process and consider items such as: set a deadline for when the interview must occur, to require the exam report be provided within 60 days of the exit interview, establish an independent examination review council, give banks the right to appeal a material supervisory determination contained in the final report of the examination, among other items. We are encouraging and are hopeful Senator Kennedy and the Senate Banking Committee are able to work in a bipartisan manner and seek to solve problems that interfere with commerce and common sense.
The expectation continues to be the House of Representatives will pass the Financial CHOICE Act by Chairman Hensarling, which has a tremendous number of provisions that have been sought after for many years, along with others that reset the regulatory process and the how regulations are promulgated to assure a more thorough vetting of proposals. The House will likely also have rifle shot legislation that aims at specific areas and that could individually gain broader support.
The LBA has worked on a few proposals of our own which we accept up front is a high hill to climb. Nonetheless, we believe fair lending has areas that should be addressed. One area targets the circumstances of when a bank is referred to the Department of Justice due to a fair lending allegation, and another deals with fair lending and flood insurance. There is an aversion in D.C. to talk seriously about fair lending. I tell people there I am not talking about unfair lending in place of fair lending. But I will say that having these conversations has found some receptivity in talking further. LBA would like to change the automatic referral to DOJ if allegations reach a certain ‘threshold’, as we have been told by the most senior staffer at a federal banking agency that they as staff have had allegations they do not deem serious enough to refer but must refer under current law. Further, LBA believes that ‘pattern and practice’ needs to be defined as greater than just a few loans, or even one loan, but enough loans to be meaningful and pass the common sense understanding of a true pattern that supports an allegation. Beyond that, we have been told that a very senior federal banking agency staffer in D.C., after hearing the ideas LBA is promoting, suggested that perhaps another way to get at this is, for banks $10 billion and below, to bar any fair lending allegation being referred to DOJ and have the banking regulator address any issues through their normal exam process. This idea is supported by the extremely small numbers of banks below $10 billion that are referred to DOJ and then the almost universal response by DOJ to kick the allegations back to the regulator anyway. We will continue to press these ideas as someone needs to raise the topic for discussion.