It goes without saying that the regulatory regime in Washington, D.C., has not been friendly to banking lately. The Dodd-Frank Act, with its seemingly endless round of new rules for the financial industry, is limiting everything from debit card fees to the types of investments banks can make.
In an effort to fight back, the leaders of several state banking associations have formed their own fund to influence federal elections. The group, Friends of Traditional Banking, will ask supporters to contribute directly to candidates for federal election, instead of the group sending donations to candidates, says Howard Headlee, the president of the Utah Bankers Association.
“This is more a response to the treatment we received from the Dodd-Frank Act and the treatment Congress is imposing on community banks,’’ he says. “I’ve talked to so many community bankers across the country and they’re mad.”
He describes traditional banks as the ones whose business model is to take deposits and lend money in the local economies where they reside—banks he feels have been unjustly punished for the sins of the financial crisis.
Headlee wants to attract pledges from bank CEOs, directors and “anybody who understands we need community banks as a country to be successful and we have to stop burning them with outrageous legislation when they were not the problem [in the financial crisis]. No one claims we were the problem, but the level of regulation keeps going up and up to the point where these community banks are really struggling with a business plan going forward.”
Even though Headlee is a national political fundraiser for presidential candidate Mitt Romney in addition to his duties as president of the Utah Bankers Association, the group has not decided to endorse Romney, Headlee says. An advisory council that will recommend candidates is made up of 10 staff members of state banking associations, including the presidents of the banking associations in Idaho, Kansas, Michigan, Minnesota, Vermont, Utah and Oklahoma and the vice presidents of government affairs for New Jersey and Arizona’s state banking associations.
The group will not contribute directly to campaigns because such donations are limited by law, Headlee says. Each state banking association already has its own state political action committee (PAC), and some have federal PACs, but because the state associations are affiliated with the American Bankers Association, those contributions as a group are limited.
Headlee hopes that by avoiding direct contributions, the group will be able to get more community bankers and their friends to contribute to more campaigns.
The group is registered with the Federal Election Commission as a “separate segregated fund,” which means it is a fund affiliated with a group such as a corporation, non-profit or union. Headlee has been calling it a “SuperPAC,” an organization that has been getting a lot of attention during the early days of the 2012 election cycle for the unlimited amounts it can raise to try to influence campaigns.
“They are popular with corporations and labor organizations,’’ says Robert Pinson, an attorney with Bone, McAllester Norton PLLC in Nashville, Tennessee. “Some are funded by billionaires and they pool their money. There is easily going to more than $100 million spent on this presidential campaign in the next couple of months and we’ve barely got started.”
Friends of Traditional Banking has started small. Only about 56 people have pledged to spend $9,000 so far on candidates recommended by the group, Headlee says.
Joe Witt, the president and chief executive officer of the Minnesota Bankers Association, who helped organize the group, says he thinks the need to be active politically and give more to campaigns has intensified. Witt said in the 1990s, he’d need to rally bankers to lobby on an issue once every few years, and now it’s several times per year.
“There’s the expectation that you need to be there for your friends,’’ he says. “We’re conspicuous in our absence if we aren’t there for the political fundraisers and golf outings and all the things the politicians expect us to be at. People run for elections and elections cost money. It’s not a horrible thing.”