Banking reform supplies capital to rural Montana, Tester tells bankers

Following a recent vote that drew the ire of many in his own party, Democratic Sen. Jon Tester touted legislation relaxing banking regulations at a roundtable with bankers in Helena Thursday, as curbing regulatory overreach on small banks while leaving stricter rules on larger institutions.

The Economic Growth and Regulatory Relief and Consumer Protection Act passed the Senate and awaits action in the House after Tester voted with some other red-state Democrats and Republicans. The bill reforms the 2010 Dodd-Frank bill, which Tester supported at the time, following the Great Recession of 2008 and bailouts for banks deemed “too big to fail.”

“When the meltdown happened and the regulators came in, part of the problem was people like me put on a lot of pressure saying, ‘Why the hell did this ever happen,’ and I think we overreached, quite frankly,” he said.

Dodd-Frank erred in lumping large financial institutions in with small community banks, he said. Bankers in Helena agreed with Tester that additional rules regulating lending practices and reporting requirements went too far and came with some unintended consequences.

“Community banks cannot and should not be regulated like too-big-to-fail institutions,” said Jim Brown, executive director of the Montana Independent Bankers Association.

President of the Montana Bankers Association Steve Turkiewicz agreed, saying it is important to understand the differences of banking in Montana at small banks and the impacts of additional regulations and costs.

Ben Ruddy, president and CEO of Dutton State Bank, cited the regulations in his institution’s decision to cease mortgage lending, but said the bank would consider mortgages again if the bill becomes law.

Regulations have led to fewer choices for consumers, in particular rural consumers, and weakened local banks as community institutions, participants said.

“If you don’t have a bank in your town, you have to go somewhere else and pretty soon that town sees the impacts of not having access to capital,” Tester said. “Rural America as we all know has had its challenges over the last many decades and I think that we talk about a lot of things, but very seldom do we talk about access to capital.”

While Tester received a warm reception in Helena, nationally he and other Democrats who voted for the bill drew sharp criticism from some prominent members of their party. The debate largely centers on the size of institution deserving regulatory reform, with support for small community banks but major concerns about middle-size to large banks receiving relief.

Small banks under the bill have assets of less than $10 billion – roughly a third of all assets of Montana’s chartered banks by comparison, according to the Billings Gazette.

Many true community banks have assets totaling less than $100 million, Turkiewicz said.

One sticking point for critics is a change to the definition of too-big-to-fail banks, raised under the legislation from $50 billion to $250 billion, the Gazette reported.

Tester rebuffed the criticism following his meeting with bankers.

“Some folks think banks are getting away with murder. They’re not, they’re still highly regulated,” he said to reporters.

“Dodd-Frank was put in for a damn good reason, because the economy was getting ready to melt down and the Wall Street jokers were not doing what they needed to do, so we regulated and saw regulatory bleed-down. In the end what does this really do? I think it’s going to allow banks to do their job, which is to supply capital for economics that hopefully continue to grow, especially in rural parts of our state.”

Tester, facing re-election this year, said he is concentrating on work in the Senate until his Republican opponent emerges from the June primary.

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