5 Hoosier Banker February 2016 FEATURE President’s Ponderings S. Joe DeHaven, President & Chief Executive Officer, Indiana Bankers Association Carlson Completes IBA Board Roster Joseph D. Carlson, president and chief executive officer of Community State Bank, Royal Center, has joined the Indiana Bankers Association board of directors as a northwest region director. Carlson additionally is vice president of Community Bancorp. He joined Community State Bank in 1979 as agricultural loan officer and has advanced through various positions, including vice president-data processing and network administrator. Carlson operates two livestock enterprises with his family, Carlson Cattle and Crooked Creek Boer Goats, and is owner of The Royal Centre Record newspaper. He earned a bachelor’s degree from Purdue University and has completed the SW Graduate School of Banking at Southern Methodist University. The IBA welcomes Joe Carlson, whose recent appointment to the board brings it to full capacity. An updated board roster appears on the following page. t In the November 2008 Hoosier Banker, this President’s Ponderings column outlined in detail the significant part played by Congress over a 25-year period that set the foundation for the financial crisis that was at that time unfolding. In the column, I warned IBA members that Congress believed it had bailed out the banking industry, and that Congress would extract its pound of flesh with what I called “The Financial Institutions Punishment Act of 2009” (FIPA). I went on to warn that any organizations that participated in the mortgage process would be lumped together as “banks.” Little did I know back then how accurate the description would prove to be regarding what was about to happen. Yet as I re-read that article today, those views appear to be naive as to the depth and breadth of what really happened. The FIPA did not come about until 2010, and its name was the Dodd-Frank Wall Street Reform and Consumer Protection Act ‒ or the Dodd-Frank Act, in current vernacular. This massive piece of legislation contained every wish list item ever dreamed up by consumer groups, the retail industry and anti-banking groups. Bank regulators piled on to show Congress that each was tougher than the other bank regulators. It was a nightmare for those of us who support free markets and capitalism, particularly those who are proponents of an efficient and effective banking system. One of those regulators who added to the fray was Sheila C. Bair, then-chairman of the Federal Deposit Insurance Corp. She practically single-handedly convinced Sen. Susan Collins, R-Maine, to sponsor an amendment to equalize large bank and small bank holding company Tier I capital. This amendment caused serious problems for community banks and eliminated one of the few methods that community banks had to raise capital: trust-preferred securities. The amendment was slightly toned down during conference committee, but unfortunately the trust-preferred language remained. This ill-conceived amendment was one of the most egregious elements of the Dodd-Frank Act, among its many other egregious provisions. Bair now serves as president of Washington College in Maryland. Even in her new role, she often chimes in on current banking issues as they are winding their way through Congress, or as regulations are being drafted. Recently Bair wrote an article for the American Banker, the daily newspaper of the banking industry, that was published on Jan. 7. In the article, titled “Stop Treating Small Banks as if They Caused the Crisis,” it seems that Bair has finally figured out what so many of us previously told her, namely that the Dodd-Frank Act would be unfairly punitive to innocent community banks. In describing regulators’ reaction to the crisis, Bair wrote that regulators “failed to sufficiently differentiate regional and community banks ‒ bread-and-butter lenders that for the most part remained healthy and profitable before, during and after the crisis ‒ from the main actors in the subprime debacle: the originators of toxic mortgages and the big firms that structured all those exotic securities and derivatives products on top of them.” Sounds a lot like the villains were mortgage originators and investment bankers, not commercial bankers. Nevertheless, commercial bankers have paid a significant price, reputationally and financially. While this is the closest admission of fault that I have seen from anyone involved in the process, she does go on to state that this occurred “notwithstanding the protests of some Federal Deposit Insurance Corp. board members.” I do not recall protests from former Chairman Bair. Regardless, Bair continues to have a voice in Washington, D.C., and it is refreshing to read her words advising people that community banks, indeed all banks, were harmed by decisions made as a result of the Dodd-Frank Act. In her article, she further outlines support of the bill introduced and passed by the Senate Committee on Banking, Housing, and Urban Affairs by committee Chairman Richard Shelby, R-Alabama. The Shelby bill is supported by the banking industry. Perhaps others who composed much of the Dodd-Frank Act will come forth in agreement with Ms. Bair, so that the pendulum of banking regulations can swing back to a sweet spot where banks can serve customers fairly and appropriately, yet the safety and soundness of the system remains secure.
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