[Congressional Record (Bound Edition), Volume 157 (2011), Part 13]
[Senate]
[Pages 18392-18393]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         COMMUNITIES FIRST ACT

  Mr. MORAN. Mr. President, I am here to speak on another topic, but it 
has been my privilege to hear the discussion between the Senator from 
South Carolina, Mr. Graham, and the Senator from Connecticut, Mr. 
Lieberman, about what I think is a very serious debate; that is, the 
juxtaposition of our constitutional rights as U.S. citizens in light of 
our desire to make sure Americans' lives are protected. I have always 
struggled with trying to find that right balance, and I found tonight's 
conversation on the Senate floor very valuable.
  I wish to turn my attention and bring to the attention of my 
colleagues in the Senate a pending piece of legislation, a bill I have 
introduced dealing with our country's economy and particularly as it 
relates to financial institutions and particularly our community banks.
  There are, as we know, so many Americans who are looking for work. I 
would say our government's first priority is to defend our country, and 
we have been having a debate about how we do that, but we also have a 
significant responsibility to create an environment where businesses 
can grow and put people to work. I want to point out tonight a piece of 
legislation I have introduced that I believe is part of the solution. 
It is called the Communities First Act, and it is a compilation of what 
I would say are commonsense tax and regulatory relief ideas for our 
Nation's smallest financial institutions.
  We constantly hear about Wall Street. I want to worry tonight about 
Main Street. These banks in communities across Kansas and in States 
across our country were not the cause of the financial crisis from 
which we are still struggling to emerge, but unfortunately they have 
become the victims. They have become casualties of the crisis on Wall 
Street. Hundreds of community banks have been allowed to fail, and the 
survivors are left waiting for the next burdensome regulation to come 
from Washington, DC.
  Until banks are willing and able to make prudent loans to 
creditworthy hometown customers, job creation will remain stifled and 
our economic recovery will continue to lag.
  The evidence seems clear to me that the current regulatory 
requirements impose a disproportionate burden on community banks 
because they do not operate on the scale to spread the legal and 
compliance costs. When a bank with, say, just 40 employees requires 4 
compliance experts, I believe something is terribly wrong.
  This expensive overregulation diminishes the ability of a community 
bank to attract capital and to support the credit needs of customers. 
What that means is that someone who wants to be a stockholder or the 
owner of a community bank, because regulatory requirements increase the 
cost of capital, will decide there is a different way to earn a living, 
a different place to invest that capital. So, in short, these burdens 
prevent a community bank from serving the community, and they avoid, 
therefore, the resulting job creation that comes when a community bank 
invests at home.
  All of the regulations being piled on community banks might be 
justified if the failure of a community bank could pose a serious risk 
to our Nation's financial system, but that is clearly not the case. It 
was not the failure of several hundred community banks that left our 
economy in such poor condition; it was the financial condition of a 
handful of the largest firms in America that grew so large and so 
complex that their failure or bankruptcy could not be tolerated and the 
consequences would affect every American. We need a tailored approach 
to regulation.
  Ross Wilson, one of my constituents in LaCrosse, KS, a banker, wrote 
to me. He says his bank will no longer make home loans, real estate 
loans. This is his quote:

       As a community banker, I really hate this decision, but the 
     complexity of the new regulations have forced us to make this 
     decision. It appears that the powers that be in Washington 
     don't understand the importance of a small community bank.

  When your hometown bank won't make a home loan to one of its 
customers not because the loan won't be repaid but because the 
regulatory costs are far too significant, our regulations have far 
exceeded their value.
  How does the Communities First Act that I have introduced change this 
trend and restore some level of sanity to our financial regulations? 
This bill would strip away outdated and unnecessary regulations, such 
as the Gramm-Leach-Bliley annual privacy notice requirement. Under 
current law, every bank and credit union is required to disclose their 
privacy policies on an annual basis even if that bank's policy has 
never changed during the year. So you can have a customer of a bank who

[[Page 18393]]

has been a customer forever, and the bank has a policy in place that 
never changes, but every year the bank has to send out a significant 
mailing to every customer explaining their policy in regard to privacy. 
While that burden maybe doesn't sound too significant, it is a costly 
requirement of questionable benefit.
  Blake Heid of the First Option Bank in Paola, KS, tells me:

       Very little of what the regulations have us do is 
     productive or helps us take care of our customers better. 
     Just the privacy notices alone cost our small bank in excess 
     of $13,000 annually. We haven't changed it . . . we never 
     sold our customer information, and we still don't.

  The Communities First Act would also address an issue regarding SEC 
registration by community banks. The number of shareholders which 
triggers a registration has not been updated in a long time and remains 
a burden that discourages community bankers from raising capital and 
making loans.
  The Communities First Act would also reform which banks are required 
to comply with the costly burdens of Sarbanes-Oxley. Current law 
exempts banks with market capitalizations under $75 million from 
compliance under section 404. The benefits of that section do not 
appear to be worth the cost, so my legislation raises that threshold.
  Another commonsense provision would encourage Americans to save by 
reducing the tax on longer term certificates of deposit. It would also 
allow for individuals under the age of 26 to invest in Roth IRAs 
without regard to their income level. We desperately need Americans to 
save money for their long-term retirement benefits.
  The Communities First Act would also reform the new Consumer 
Financial Protection Bureau so that the National Credit Union 
Administration, the FDIC, the Federal Reserve, and the other regulators 
would have a meaningful role in the creation of consumer protection 
rules. Dodd-Frank provides these regulators insufficient input, and 
review of the CFPB and the results of poorly written regulations could 
mean less credit and, again, fewer jobs.
  There seems to be some disagreement here in Washington, DC, today 
about the effects of burdensome regulations on our economic recovery. 
But back in Kansas, Jay Kennedy of the First National Bank of Frankfurt 
indicates:

       Our staff of 7\1/2\ people are busy taking care of our 
     customers and serving our communities. The extra burden from 
     things like tracking escrow payments, sending privacy 
     notices, and filing call reports that take a month to 
     complete all create undue stress and busy work for us.

  Kansans don't know what the words ``busy work'' mean.

       The relief of those three things alone would allow us time 
     to teach financial literacy that our schools can no longer 
     afford to do and create new products to better serve our 
     customers.

  The provisions of the Communities First Act are just a first step in 
unleashing the ability of small banks to do what they do best--provide 
capital that results in jobs.
  Congress has created a regulatory monster, and I urge my colleagues 
to join me in removing unnecessary burdens from our financial system 
and cosponsor S. 1600, the Communities First Act. While this 
legislation may directly benefit our Nation's community banks--our 
small financial institutions--the real beneficiaries are the 
entrepreneurs, the Main Street small business men and women, and 
farmers and ranchers who, with access to credit, can help put Americans 
back to work.
  Thank you, Mr. President.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, parliamentary inquiry: Are we in morning 
business?
  The PRESIDING OFFICER. We are.

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