Refinement of post-crisis financial rules gives economy a boost

By Keith Rothfus

After an eight-year drought, relief is finally coming to Western Pennsylvania community banks, credit unions, businesses, and families. President Trump recently signed the first large-scale refinement of our post-crisis financial rules, the bipartisan Economic Growth, Regulatory Relief, and Consumer Protection Act.

Because of poorly-crafted, overreaching government regulations, community financial institutions across the country are closing every day and new institutions are not being created. You see this reality in local towns and boroughs that no longer have a bank on their main street. Consequently, consumers have fewer avenues to access credit to buy a car or purchase a home and small businesses have fewer options for funds to expand.

The economic impact of this approach has been profound. One study found that post-recession financial rules held back small business formation and growth to such an extent that there are 650,000 fewer small businesses today than otherwise would have been created during a normal recovery; that is 650,000 missing businesses not creating jobs, innovating, and building their communities!

Our bipartisan regulatory reform package is a big step forward in the effort to right-size our regulations and revitalize our economy. The House Financial Services Committee, of which I am a member, worked to reduce excessive reporting requirements for smaller institutions that increase costs and reduce consumer access. The bill also permits certain mortgages made by smaller financial institutions to be labeled “qualified mortgages,” if the mortgages are not sold to third parties like Fannie Mae. This will make it easier for financial institutions to issue loans. The bill also provides relief for purchasers of manufactured homes and makes it easier for mutual banks and credit unions to lend to their members.

S. 2155 also raises the automatic systemically important financial institution (SIFI) threshold for banks from $50 billion to $250 billion, drawing a clear distinction between many smaller banks and the megabanks that may actually affect the broader financial system. The new law allows regulators to examine the activities of a bank with assets between $100 billion and $250 billion, and if the activities of a particular bank pose a systemic risk, the institution may be designated as a SIFI.

The regulatory reform package includes two of my bipartisan bills, the Pension, Endowment, and Mutual Fund Access to Banking Act and the Federal Savings Association Charter Flexibility Act. The Federal Savings Association Charter Flexibility Act provides flexibility for mutual banks to facilitate broader small business lending. My other bill addresses the counterproductive impacts of a post-crisis capital rule that unintentionally affected the ability of custody banks, such as BNY Mellon, to accept the deposits of large customers, such as pension funds and endowments, in the event of a strain on the financial system. Under the legislation, if a custody bank accepts such customer cash and moves that cash to a Federal Reserve branch, it will not be required to include that cash in the calculation of a leverage ratio. Without this change, custody banks’ ability to accept such customers’ cash was limited.

At a time of political polarization, negotiation and passage of this legislation demonstrates that bipartisanship works to expand economic opportunities for all.

Keith Rothfus is the U.S. Representative for Pennsylvania’s 12th congressional district.


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