ABA Banking Journal - October 2008 - (Page 16)
briefing ABA Chairman’s Position ABA Resources continued from page 15 BRADLEY E. ROCK CEO, Smithtown Bancorp firstname.lastname@example.org Our competitors just won’t take “no” for an answer WHILE BANKS CONTINUE TO SERVE their customers and communities amidst a challenging economic environment, the credit union industry and the Farm Credit System are looking for new ways to expand their horizons and further their competition against us. Thanks to your solid grassroots support, ABA has been successful in stopping their expansionary plans in Congress. But credit unions and the FCS don’t give up easily. Now they’re working the regulatory arena to try to win there what they cannot win in Congress. ABA is keeping the pressure on and arguing against their proposals at every opportunity. These battles are not as visible nor are they as dramatic as legislative confrontations. But they are just as important because the consequences of those decisions will also affect our banks. Let’s take a brief look at two different regulatory proposals. Credit unions vie for increased business lending The National Credit Union Administration, which serves the unique role of credit union safety and soundness regulator and industry cheerleader, is seeking comments on whether it should ease its regulations on business loans. NCUA has already eased its rule on business lending three times since 2003, despite Congress’ decision to limit credit unions’ business lending. ABA Senior Economist Keith Leggett, who wrote ABA’s objection to any further easing, says that business lending by credit unions is risky, particularly in the current economic environment. At the end of the first quarter, for example, the delinquency rate for credit union business loans to members that are 30 days or more past due at federally insured credit unions were 60% higher than at the same time one year ago. And the dollar amount of delinquent business loans was up by 91% from March 2007 to March 2008. 16 OCTOBER 2008/ABA BANKING JOURNAL If NCUA were to decide to permit more business lending, it would increase the potential for further losses, ABA told NCUA. And the more active credit unions are as business lenders, the greater the risk to the credit union insurance fund. ABA vigorously objected to any further changes. Farm Credit System The Farm Credit System is a government sponsored enterprise created by Congress to make loans to farmers and ranchers. Two years ago, FCS said its members needed to expand their horizons away from rural areas and into communities up to 50,000. Last year, thousands and thousands of bankers helped ABA beat back efforts to expand FCS through the 2008 farm bill. But the FCS is another of those tax-advantaged agencies that won’t take “no” for an answer—not even from Congress. Its regulator, the Farm Credit Administration, has proposed that FCS become a commercial lender, providing financing through debt and equity investments, including investments in venture capital funds. Congress never intended FCS to be a venture capitalist, and only Congress can change FCS’s mission. More than 5,000 bankers stood up to FCA and opposed its proposal. And ABA President Ed Yingling sent the agency a highly detailed analysis showing the folly of its proposal. For example, it would define as “rural” an area that includes 98% of the United States—98%. And it would shift the FCS away from its mission of serving agriculture. Federal regulatory agencies are the fourth branch of government. They don’t receive the public spotlight the way Congress does. But their decisions often have a major impact on our industry. And that’s why the work ABA does on federal regulations can be just as important as the far more visible legislative battles we wage. BJ powerhouse and McCain advisor Carly Fiorina; political analysts Bill Kristol and Mike McCurry; and football legend Archie Manning. Strategic solution sessions and workshops will target issues that bankers say keep them up at night—or drive them crazy during the day. The Market Expo features exhibitors that focus on supplying business solutions and the latest technology. To learn more, go to http://www.aba.com/Events/an nual.htm. Ag bankers look to future of changing industry Bankers at the American Bankers Association’s annual agricultural bankers conference will find out why Dr. Lowell B. Catllett, one of the few futurists in the world who specializes in agriculture, is predicting that the industry will change more in the next decade than in the last century. The conference, Nov. 16-19 at the Des Moines Marriott Downtown in Des Moines, Iowa, will bring together experts from around the world to help agricultural bankers succeed today and in the future. The conference will include discussions about trends in the marketplace; business ethics and how to preserve them; predictions about the industry in 2025; and the national economic picture. More than 40 experts will provide the latest tools for making good loans in the changing world of credit standards and will share information on issues such as immigration policy, margin calls, fertilizer prices, agriculture policy, and economic outlook. Subscribe at www.ababj.com
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