First Savings Bank, F.S.B.

Over the few years my position has required me to work with reporters and politicians. What I have learned of both is that: 1) they are generally trying to do the right thing, 2) they are asked to be experts in many fields, 3) they often are not experts in any fields, 4) they sometimes have difficulty separating facts from emotion and 5) they exert great influence on public perception. I bring this up because Congress is wrapping up its work on the financial regulatory reform bill (Dodd-Frank Act) and emotions are running high in Congress. Congress is acting on a very complex set of issues of which many members do not understand the origins or implications. In turn, the media will be reporting on these complex issues with less than a full understanding. Because there is not enough time, resources or expertise to devote to fully explaining these issues, the public will be left with sound bites and incomplete information. That is not only unfortunate, but unacceptable.

The proposed legislation adds at least 30 new areas of regulatory burden for community banks. These new regulations do little to address the causes of the “financial meltdown” or our current economic problems. Community banks will have to hire more people to monitor these new regulations and provide the proper reporting to the government. This does nothing but increase our costs without providing any tangible benefit to our clients or shareholders. Eventually such costs must be passed on to the consumer.

The legislation also creates a Consumer Finance Protection Bureau (CFPB) which duplicates existing regulatory oversight and enforcement. What is interesting about this portion of the legislation is it virtually silent concerning the non-banking and government entities that account for over 70% of the mortgages and were a major generator of subprime mortgages. How can they monitor, regulate and enforce rules when they only apply to the minority and exempt the true culprits? Community banks like ours are routinely examined for compliance with all consumer protection regulations and there is virtually zero tolerance for violations. How can this new agency be more effective than that? In addition, the cost for the CFBP is estimated at $19 billion annually. To fund this expense Congress is proposing an addition tax on the FDIC insurance premiums paid by the all banks, but is not paid for by the non-banking and government entities. This is troublesome since the FDIC was created to protect this nation’s depositors, not serve a funding vehicle for Congressional projects.

This legislation restricts what banks can charge on debit card interchange fees although the banks carry the infrastructure costs and incur the fraud losses. Interchange fees had nothing to do with the economic meltdown or with financial reform. This was a pet amendment by a senator who has been pushing this for years with the encouragement of the big box retailers who stand to benefit significantly at the expense of consumers. When the banking industry pointed out to Congress that many of their social benefits are paid using cards that would be negatively impacted by this proposal, they amended the legislation to exempt their cards from the regulation. In other words they don’t want to follow the same rules they want everyone else to follow. That doesn’t seem fair.