Independent Banker - November 2017 - 26

Grassroots
will help Subchapter S community
banks meet regulator demands for
higher capital.
»Parity in the taxation of fi nancial
services providers. Credit unions
and Farm Credit System lenders are
becoming the equivalent of banks and
should be taxed equivalently.
»Permanent repeal of the estate tax
as a threat to the intergenerational
transfer of many community banks.
Many community banks have been
held and operated within families for
as many as four generations.
» A call to preserve the mortgage
interest deduction. Any change to it
would abruptly reduce home values.
Community banks would disproportionately
bear the impact of collateral
devaluation because they are more
likely than other lenders to hold the
mortgages they make in portfolio.
» Preservation of the current-law
tax exemption for interest earned on
municipal debt. Community banks
support their communities by investing
in state and local government debt.
ICBA Principles for GSE Reform
and a Way Forward
This white paper outlines ICBA's
approach to housing governmentsponsored
entity (GSE) reform. Its
approach is simple: Use what's
in place today
and is working,
and focus
reform on
aspects of the
system that are
not working or
that put taxpayers
at risk.
The current
GSE secondarymortgage
market
structure has
worked well for
community banks by providing direct
and equitable access, not competing
at the retail level and permitting
community banks to retain mortgageservicing
rights on the loans they sell.
ICBA strongly supports secondary
market reform measures that will
prevent or signifi cantly reduce the
risk of devastating market failures
that have hobbled our economy in
the past. Reforms that would break
up Fannie Mae and Freddie Mac
or sell off their assets to large Wall
Street fi rms would further concentrate
mortgage lending and the
secondary market in a small number
of mega fi rms. This would signifi -
cantly increase the risk of another
market failure.
ICBA's white paper provides a
roadmap for reform that will preserve
the role of community bank
mortgage lenders, restore the safety,
soundness and fi nancial stability to
the GSEs, and ensure that Wall Street
and the megabanks do not effectively
capture the secondary market system
to the detriment of borrowers
and communities.
It will take time to reach consensus
on the many critical features of
comprehensive reform legislation.
Pending completion of that effort,
the Federal Housing Finance Agency
(FHFA), which regulates the GSEs,
should protect taxpayers from
another bailout. ICBA urges FHFA
to require both GSEs to develop
and implement capital restoration
plans, start to retain earnings and,
over time, build capital to a
level that adequately supports
their operations and protects
US taxpayers.
Community Bank Regulatory
Relief: A Roadmap
to Economic Growth &
Prosperity
The purpose of this white
paper is to describe what
is unique about American
community banks, survey the
regulatory environment in
which they operate, identify
regulatory barriers and recommend
solutions that will allow them to
serve as engines of economic growth
and prosperity for generations to
come. These solutions include:
» Strengthening community bank
mortgage lending by reforming the
26 ICBA IndependentBanker November 2017
" qualifi ed mortgage " rule, unnecessary
escrow requirements, costly
appraisal and application mandates,
and more.
» Easing commercial
lending
rules, such as
data-collection
and rural-credit
mandates,
to mitigate
the negative
impact on
small businesses
and
farms.
»Reforming
punitive Basel III capital rules and
refocusing them on the largest fi nancial
fi rms.
»Addressing growth-inhibiting burdens
stemming from the Consumer
Financial Protection Bureau, Bank
Secrecy Act, quarterly call report and
examination environment.
»Reviewing the credit union industry's
tax and regulatory exemptions
to promote a level playing fi eld in the
fi nancial services industry.
This white paper was submitted
to the Treasury Department and
discussed by community bankers
in Treasury meetings as the agency
prepared a report mandated by
President Trump's executive order
to review fi nancial regulations. The
fi nal Treasury report issued in June,
" A Financial System that Creates
Economic Opportunities, " refl ects
many of the recommendations made
in ICBA's white paper.
Alan Keller (alan.keller@icba.org) is
ICBA vice president, legislative policy.
____________
Further reading
To read the white papers
discussed here, as well as
other related material, visit the
Advocacy section of icba.org.
http://www.qmags.com/clickthrough.asp?url=www.icba.org&id=20402&adid=P26E1
Independent Banker - November 2017

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