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2009 Government Relations Action Priorities
Adopted by ABA Board of Directors, December 2008

Thes following priorities reflect the diverse and forward-looking agenda of the American Bankers Association. Our member banks pursue progressive, entrepreneurial and service-oriented strategies to provide financial services to benefit their customers and communities. These policies are designed to help bankers achieve their goals by maximizing the operating flexibility and business options available to them while reducing federal regulatory burdens.

Action Priorities

Reinforcing Confidence in the Banking Industry

High confidence in the banking industry is central to our success and the economic strength of the United States. Recent events have shown that this confidence is well deserved as the banking industry has performed during the financial turmoil far better than non-banking financial institutions; non-banking financial firms have in large measure severely contracted business, disappeared, or changed their business models to become banking institutions. We will continue to reinforce publicly, as well as with regulators and Congress, what makes the true banking industry different, including the strength of the banking industry based on such factors as our robust capital and reserves, resilient security programs, diverse lines of business, and demonstrated ability to respond to changing customer needs and economic trends. We will actively resist and promptly respond to actions that could jeopardize confidence in the banking industry and our ability to serve our customers and our communities.

Promoting Economic Growth and Recovery

Banks are invested in economic growth. We prosper as our customers and communities prosper.  We will lead efforts to provide good lending for good projects and support regulatory, legislative, and accounting proposals that would prudently enhance the availability of funding, promote economic recovery, remove barriers to sound lending and investment, and reinforce the ability of banks to meet the credit needs of our communities. 

Effective, Efficient, and Flexible Financial Regulatory Structure

The banking industry benefits from a resilient financial system that responds to the wide range of evolving financial services needs of customers and communities. That system is supervised through a regulatory structure beginning with the dual banking system, offering an array of federal and state banking charter choices and options, including national and state banks and savings associations.  In addition, there is a versatility in ownership options, including public corporation, mutual, and privately held structures, among others. We will work to promote the strengths of our system though a regulatory structure that reinforces safety and soundness at both the level of individual institutions and at the systemic level, promotes consistent regulatory requirements for like activities, preserves charter choice, fosters innovation and creativity, and facilitates the ability of the banking industry to meet customer needs efficiently and competitively (including addressing the effects of regulation on competitiveness).

Strong, Adequately Funded Deposit Insurance Program

A strong Deposit Insurance Fund, with resources provided by the banking industry, has been an important source of confidence for the banking industry and the general public. ABA fully supports providing adequate means to maintain the strength of the Fund. Programs to rebuild Fund ratios should take full advantage of the letter and intent of the law to minimize any procyclical effects, relying upon a program of steady premiums that avoids spikes in rates (especially when the economy is under stress), noting that excess payments into the Fund reduce resources needed to finance economic growth in our communities. We believe that the temporary increase in the limit of FDIC account coverage to $250,000 should be made permanent (subject to the subsequent inflation adjustment provisions of current law). We support updating the treatment of CDARS reciprocal programs as core deposits rather than as brokered deposits. We oppose tying FDIC premium increases to Federal Home Loan Bank advances, as such a step would tend to reduce reliance upon this important additional source of bank liquidity, increasing bank risk rather than reducing it.

Appropriate Accounting Treatment for Bank Assets

Banks have long acted as economic shock absorbers, making and holding loans for the long-term.  Recent  economic events have well demonstrated the weaknesses in accounting rules and proposals to impose full fair value accounting treatment on all bank assets, accentuating economic cycles, driving banks toward short-term holdings, and, moreover, discouraging acquisition of troubled banks in troubled times. ABA will continue to be a leader in advocating a system for valuing bank assets that is based upon the economic use of the asset rather than immediate, liquidation estimates of value. ABA will also encourage improved transparency and accountability in the standard setting process, ensuring that the interests of the users of financial statements—including businesses and investors—are taken into account.  

Strong Bank Capital

The capital strength of the American banking system has allowed it to weather the current financial turmoil better than non-banking financial businesses and better than less-well capitalized banks in other countries. ABA supports capital standards that adequately support the strength and risk profile of financial institutions. That requires a flexible regulatory program that properly aligns the capital program with the complexity and activity of the bank, such as through a menu of acceptable capital standards. While the ABA takes no position as to whether a bank should participate in the Treasury Department's Capital Purchase Program (CPP), we note that the fundamental strength of the banking industry attracted the Treasury Department to use that strength to stimulate economic growth through the CPP. For that reason, all healthy banks, regardless of charter type or ownership structure, should be eligible to apply for participation in the CPP. Moreover, the effectiveness of the CPP should not be undermined by the imposition of new requirements and directives that could compromise the ability of banks to employ that capital most efficiently.

Reinvigorating Prudent Mortgage Lending

The ABA supports efforts to strengthen the flow of financing for good mortgage loans. We are committed to work with Congress, Treasury, and federal regulators to address mortgage origination and funding problems. The ABA is equally committed to avoiding measures that would unwisely limit prudent lending, which could contribute to a credit crunch and undermine economic recovery.  We support efforts to enhance the availability of mortgage financing in a way that aligns the interests of borrowers, lenders, and investors with the performance of the loan. We believe that recent changes to the regulations under the Home Owners Equity Protection Act should be reviewed to ensure that they are not in practice hindering the provision of prudential mortgage finance.

Federal Home Loan Banks

The ABA seeks to maintain a strong and vigorous Federal Home Loan Bank System, fully capable of expanding activities to support new demands for prudent lending by the banking industry.  In order to meet these public policy objectives and adequately manage and capitalize risks, resources that have been diverted to service REFCorp bonds since 1987 should, upon completion of that obligation, remain within the Federal Home Loan Bank System. Moves to pull these resources outside of the system will be strongly opposed, because these funds are needed to support the banking industry's capacity to meet the credit needs of communities and to assist in the housing recovery.

A Strong Secondary Mortgage Market

The ABA supports a strong and resilient secondary market for mortgages as an important means of broadening the financing of home ownership. ABA will work with Congress and the regulators to ensure an efficient market that adequately evaluates risk, with an appropriate role for the Federal Home Loan Banks as cooperative institutions, as well as appropriate roles for Fannie Mae and Freddie Mac.

Unfair Competition from Government-Advantaged Institutions

We will continue our work to redress efforts of the credit union industry and Farm Credit System to abandon their core missions and use their government advantages to expand into the banking business.  Moves to broaden government advantages to these institutions will be strongly opposed, while policy makers will be encouraged to require these institutions to return to their core missions or formally obtain a banking charter. The Internal Revenue Service will also be encouraged to continue to reevaluate whether tax benefits for these institutions should be retained and to ensure that unrelated business income is taxed fairly. We will seek to have the Farm Credit System brought under the supervision of the new GSE regulator.

Industrial Loan Companies

We will work with Congress and the regulators to finalize proposed restrictions on the ownership of banks by non-financial firms through the enactment of legislation adopted by the House of Representatives during the previous Congress. 

Payments System Issues

Legislation and regulation will be actively supported that allow banks to sustain their leadership in the vitality and versatility of the payments system in meeting customer needs and preferences, including use of credit and debit cards, as well as prepaid and stored-value cards and other payments innovations. We will emphasize the ineffectiveness and costs of using the payments system as a policing tool. We will encourage the setting and enforcement of uniform standards for all significant providers of payments services, designed to protect the integrity of the payments system, including appropriate assigning of liability for data breaches resulting from failure to follow standards for protecting payments data.

• Interchange: ABA believes that interchange rates and governance should be set by the free operation of the market forces in the private sector. ABA will oppose proposals to have state or federal governments set price controls or otherwise regulate interchange rates, which currently are set by the private market through contractual relationships.
  
• Overdraft Accommodation Programs: ABA supports the ability of banks to provide both credit-based and discretionary overdraft accommodation services for customers within a rational regulatory scheme, preserving the flexibility of banks to operate programs in keeping with customer desires and the efficient operation of the payments system.

Anti-Money Laundering Reform

ABA recognizes the important role banks play in the fight against terrorist financing, money laundering, and other financial crimes.  We will seek to implement the recommendations of the ABA Chairman's Committee on Bank Secrecy Act/Anti-Money Laundering Reform, which would refocus the government program more on criminals and financial crime and make it less of a massive reporting program that documents the legal activities of law abiding people and businesses.  

Expanded Organizational Options for Community Banks

ABA will work to expand organizational options for community banks by seeking to improve Subchapter S rules, address tax code obstacles to LLC structures, and update the shareholder threshold at which corporations are required to register with the Securities and Exchange Commission.

Pro-Business Tax Policies

ABA will seek tax policies that promote growth and investment for our customers and for our institutions. That includes policies to enhance the value of the Subchapter S and LLC options for banks and small businesses, to encourage saving and investment, and to promote economic growth and development.

Student Loans

Banks have a long history of supporting educational opportunities by providing loans to students for college and vocational education. Changes in federal requirements have made it increasingly difficult for banks to provide this funding. ABA will support policies that facilitate the ability of banks to meet this important need of our customers.

Fundamental Policy Principles

Promoting the Security of America

Recognizing that terrorism affects us all, and that banks are often the targets of attacks, fighting terrorism continues to be a high priority of the banking industry. We are working with executive branch agencies and the Congress to improve both effectiveness and focus, with programs that achieve tangible results to upset terrorist plans. Banking industry leadership includes areas such as financial system resilience, anti-money laundering efforts, and enhanced physical security measures.

Serving the Whole Community

The banking industry takes pride in its strong record of compliance with anti-discrimination standards and fair lending laws and regulations. Banks have also been the leading source for providing financial services to our communities, demonstrated by consistently high records of compliance with the Community Reinvestment Act. We believe that credit unions, that receive significant government benefits in order to serve particularly low and moderate income people, should be required to demonstrate, through measurable standards, that they are meeting their service obligations. 

Regulatory Effectiveness and Efficiency

Promoting the effectiveness and efficiency of regulatory requirements is a constant effort and a primary purpose of the ABA. The measure of a law or regulation must be whether it helps the banking industry serve our customers; if it makes it harder or interferes with efforts to serve our customers, then the law or regulation must be changed. This standard is applied to newly proposed legislation and regulations, as well as in response to the need to reform existing laws and regulations. The effort cannot be only in reaction to proposals but must also be found in affirmative industry proposals for reform. The resulting benefits to customers are also in the interest both of banks and government policymakers. We believe that consistency in regulatory standards and coordination of similar regulatory requirements among appropriate regulatory agencies is important to the achievement of these goals. Most frequently, this can be achieved through joint rulemaking involving the relevant agencies.

Charter Choice, Dual Banking, and Business Flexibility

ABA believes that depository institutions of all types should have the ability to choose the charter that best suits their business model as they respond to the needs of their customers. This also applies to credit unions that seek to change their charter and become banks. This chartering flexibility has given the United States the most robust financial system in the world and has provided access to basic financial services for the vast majority of Americans. ABA also believes that banks and financial holding companies should be permitted to evolve in ways that continue to meet the needs of their customers. Eliminating choices for depository institutions is not the best way to promote efficiency of regulation among regulatory agencies. Efforts to improve regulation should focus on greater cooperation and coordination, not reducing the number of charters, the flexibility of some charters, or eliminating agencies with history and expertise in supervising those charters. ABA opposes efforts that reduce the ability of institutions to choose their form of organization or charter or limit institutions' business flexibility.

Mutual Institution Charter ABA firmly supports the continued availability and vitality of the mutual form of organization for depository institutions. ABA actively supports the ability of mutually chartered institutions to grow, serve their communities, and actively compete in the financial services marketplace. Mutuality is one of ABA's fundamental government relations priorities. As approved by the ABA Board of Directors, ABA supports the mutual and mutual holding company options through active participation with the banking agencies to achieve more flexible and tailored rulemaking and supervisory guidance for mutual charters

Dual Banking System. For over 100 years the dual banking system has been a source of innovation and strength for the banking system and the communities and customers we serve.  Many popular banking services had their origins in one or the other charter option, not available at the time under alternative charters. ABA opposes efforts to undermine the dual banking system.

Independence of the OTS

ABA strongly supports the independence of the OTS. The long term viability of the thrift charter and of the thrift holding company structure is supported by a dedicated regulatory agency with the mission and expertise to provide effective supervision. As long as housing and home ownership remain national priorities there will be compelling value in the thrift charter option, supported by a strong OTS.

Financial Education

ABA strongly supports financial literacy initiatives at the local, state and federal levels. The ABA directly supports bankers' efforts through its financial education subsidiary, the ABA Education Foundation.  Founded by bankers in 1925, the Foundation assists bankers in their work to promote financially literate customers and communities