Economic Growth, Regulatory Relief, and Consumer Protection Act

Floor Speech

BREAK IN TRANSCRIPT

Mr. LANKFORD. Mr. President, let me tell you about Farmers State Bank of Allen, OK. I know exactly where Allen, OK, is. I bet a bunch of folks in this room do not. It is a small town, and this a small bank. There is $43 million in total assets in that bank. That is a pretty small bank, as banks go. It is located in a town of about 900 Oklahomans in total. The town has a number of small business owners, farmers, and ranchers--folks that some people in this room fly over. There are good families who live in that great town. Many of them have great credit scores and have a good family history of repayment back to the bank when they have taken loans, because that is the bank in town. They have been longtime customers of this bank. In many instances, the bank employees and the people in the bank have grown up together. They know each other, but they also understand seasonal income.

When you are a farmer and rancher who doesn't come in with a W-2 every single week or every month--it comes in seasonally--they understand the credit restrictions there.

A banker, named Debbie, at the Farmer State Bank of Allen wrote me this and said:

Between the Ability to Repay and Global Cash Flow analysis, particularly for a bank of this size, these new rules take our time away from doing what needs to be done--caring for our customers.

We have 12 employees and we're treated the same as JPMorgan Chase, or Goldman Sachs--both of which have an entirely different business model of operating. They do not operate in towns of 900 [people]. . . . That's not their business model or their kinds of markets

One of our key employees now spends most of her time on compliance issues. Total costs for this employee, together with the cost of the annual compliance audit [and everything that goes with it is], now exceeds $100,000 annually.

Again, folks in big towns may not think it is a big issue to have $100,000 in appliance costs, but the total net income of this bank for the year is right at $500,000 a year, and $100,000 of it is now spent on compliance.

How did this happen? This happened when Congress decided in 2010 to pass something called Dodd-Frank. Dodd-Frank was a bill signed into law in July of 2010 to deal with the financial crisis that happened in 2007 and 2008, which was real. The largest banks in our country took some incredible risks. It caused a financial domino effect all over the country, and it caused great risk for our international markets.

In response to that, Congress rose up with a strong Democratic majority, and President Obama ran to it and said: We need to do something.

They looped together as many different financial restrictions as they could. They created a new thing called the Consumer Financial Protection Bureau, with no oversight at all. They created a whole litany of new regulations and said: This will only be for the biggest banks because they were the violators.

They put it out there, and then the regulations started flowing after that. Guess what. Farmers State Bank of Allen, which was not the cause of the financial collapse in America, is now caught up, and they are struggling to survive as a bank. Because Congress decided they were going to do something, the something ended up being something that is devastating rural economies in my State.

Since the passage of Dodd-Frank, we have seen a 16-percent decline in the total number of Oklahoma bank charters--just in my State. There is a 35-percent decline in Oklahoma charter banks with less than $100 million in total assets since Dodd-Frank. The effects of Dodd-Frank were felt pretty quickly in Oklahoma. It was passed in 2010. By the 2013-to-2014 reporting time, more than 40 percent of the banks in Oklahoma no longer did mortgage lending at all.

Let that soak in for a minute--banks that don't do mortgages. If you are in a rural community, that is the bread and butter of normal lending in that community--going to get a mortgage. But 40 percent of the banks in Oklahoma, starting in about the 2013, 2014 reporting cycle--just 3 or 4 years after Dodd-Frank passed--had already said the compliance costs were so high and the complexity was so great that they no longer offered mortgages and mortgage lending.

There are folks who say: We will just drive to a big city and go to a big bank and get it, and they will still take care of that. Quite frankly, that is what is happening. Dodd-Frank has done an excellent job of increasing the size, power, and strength of the biggest banks in America and has targeted the smallest banks in America. We are watching mergers all over my State, as the smallest banks struggle under the compliance costs. It almost looks like the design of Dodd-Frank was to cause biggest banks to get bigger because the smallest banks would not be able to survive under the compliance burdens that were then created for them.

What does that look like in real life? Let me tell you about a gentleman who I bumped into early Monday morning. He was flying out of Oklahoma. I was sitting next to the gentleman, and were striking up a conversation. He is a farmer and rancher in Oklahoma. He owns about 200 acres in North Central Oklahoma. He started to go through the purchase process to actually buy that acreage and couldn't get mortgage lending for it. No banks in the area would do it. Why? The Dodd-Frank requirements. Suddenly, a guy in Oklahoma trying to buy 200 acres had to find a way to scrape together $100,000 of cash to buy a ranch.

Now, 5 years ago, 10 years ago, or 15 years ago, if you wanted to get that same ranch, you would go to the bank in town. Now the bank in town has to tell you that you have to go somewhere else or find some other way to do it because the restrictions are so high that they can't do it anymore.

Local customers don't want to deal with someone else in another State or in another city. They would like to deal with their local bank, but they can't anymore. Oklahoma's community banks had nothing to do with the financial collapse in 2008. Yet they have been penalized all the way through this process.

In total, Dodd-Frank required more than 10 Federal agencies to write more than 400 new rules, imposing 27,000 new mandates on financial institutions of every size. Just process that. When you are Farmer State Bank of Allen and you have 12 employees, you now have to track 27,000 new mandates to keep up with it.

How are you doing with that?

That is what real life looks like. I have had folks say to me: This is some giveaway to the biggest banks.

What we are dealing with in this reform package is pretty straightforward. The Wall Street Journal wrote an editorial earlier this week saying that the bill ``eases administrative burdens on 5,000 community banks that make up 98% of the financial institutions but only 15% of the assets.''

Let me run that past you again. What we are dealing with deals with 98 percent of the banks, but of total banking assets in the country, it is only 15 percent of the assets. That means the top 2 percent of the banks in the country--the largest top 2 percent of the banks in the country--have 85 percent of the assets. I understand the higher regulations on those. They are significant. If they fail, they take down the global economy. For the other 98 percent of the banks in the country that have only 15 percent of the total assets in the country-- these are the smallest banks in the country--why are they being dragged into this?

All we want to say is to allow local banks to be local banks again and to be able to loan to their neighbors. These are the folks with whom they go to church and are in Rotary Club, and with whom they have grown up. They know their kids, and they know their families, but they are dealing with all these arcane requirements. They are dealing with 27,000 new rules, and they just can't make it.

What does this look like in real life? Let me give you an illustration from Legacy Bank in Elk City. Damon, from Legacy Bank in Elk City, OK, said:

As a community banker, my job has become much more difficult and burdensome to our customers. Legacy has always strived to offer the best customer service a bank can offer. I used to be a lender to all. However, with the changes that have come about with this bill, along with the fines and penalties that are a potential and, at times, don't use common sense, I am now a commercial lender only.

Let that soak in for a second. At Legacy Bank in Elk City, he used to make loans to everyone, and now he is a commercial lender only. What does that look like in real life? I have folks who come to this floor and people who catch me and say: Banks are still making lots of money, and banks are doing just fine. Why is Dodd-Frank a problem?

Yes, banks are going to find a way to still do business. What has happened? The biggest banks are loaning to corporate customers, and the smallest banks that used to do small business lending and mortgages and took care of their community can't do that anymore. So the big is getting bigger and helping the biggest, and the small is not able to help the small.

I thought we were supposed to be a country that helped everyone-- corporations or individual farmers and ranchers and citizens who are trying to start small businesses. Let's get back to doing that again. Let's not put 27,000 new restrictions on a small community bank and tell it that it has to abide by everything that JPMorgan Chase does and treat it as if it is the same. It is not.

There is Frazer Bank in Altus, about which my wife and I have a longstanding saying: Everywhere you go in the world, you are going to bump into somebody from Altus, OK. Try it sometime.

A local banker wrote: This past week in Altus, we had a local small business owner who applied for a home mortgage loan. The customer had a down payment and closing costs, but one of the key issues preventing our bank from making this personal loan was the time constraint of 2 years of history. This is someone to whom we would have made a home loan prior to Dodd-Frank, but now we cannot.

So a small business owner with closing cost money and with an ability to repay is now blocked out. How serious is that?

Jim Hamby from Vision Bank in Ada wrote me and was trying to describe exactly what this looks like.

He made the statement: Overly prescriptive rules on mortgage lending are the big issue. The ability to repay and the rules governing that topic are geared for people who are W-2 wage earners, not small business people. Many small business people have already been denied credit who would have otherwise qualified for a mortgage, and that is bad policy. Any mortgage bank keeps its own books and should automatically define what is a qualified mortgage. This would help alleviate the ``ability to repay'' rule and allow us to take better care of our customers.

Don't miss what he is saying there. The rules are written for people who get a paycheck from week to week, not for the small business owner and certainly not for the farmers and ranchers.

Here is a statement from a banker in Northwest Oklahoma who asked a simple question: What about a $60 million bank in the northwest corner of Oklahoma? What about other rural markets where smaller, traditional community banks have completely abandoned lines of business and products because the cost of regulation makes it so unprofitable or because the price of regulation and risk from examiners and lawyers bring so much additional scrutiny that you can't afford it?

One thing is certain. When banks are forced to leave lines of business due to government regulation, both customers and communities suffer. Even in markets in which there are other participants in the abandoned product line, the reality is, with fewer competitors, customers pay higher rates and higher fees for a simple service.

This is not a hard issue. For the 2 percent of the largest banks that have 85 percent of the banking assets, I understand there is systemic risk there. For the other 98 percent of the banks in the country that cover 15 percent total of all of the banking assets in the country, why are they considered so systemically important that 27,000 new regulations would need to come down on their 12 employees?

This is a good moment in which to get small towns in rural America working again and to allow people to go down the street to the bankers they know and went to school with rather than to have to drive to some big city and talk to the biggest banks in America and have them try to understand more about rural America.

We can fix this. I am looking forward to passing this reform and allowing our banks not just to make money--they will find a way to make money; they are businesses--but to actually get back to serving the customers they want to serve again in a fair way--farmers and ranchers and small businesses.

BREAK IN TRANSCRIPT

Source