U.S. Rep. Frank Lucas (R-OK), a senior member serving on the U.S. House Financial Services Committee, recently voted to pass the Economic Growth, Regulatory Relief, and Consumer Protection Act, a new federal law that stands to greatly benefit residents in the Sooner State.
S. 2155 modifies provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, among other laws governing regulation of the financial industry, that created specific challenges for community banks in Oklahoma and other states around the nation.
“Over the last decade, I have been trying to restrain this zealot legislation and now we’re finally getting it back to something that will work,” said Rep. Lucas about Dodd-Frank.
Signed into law on May 25, S. 2155 changes the regulatory framework for small financial institutions like community banks and credit unions with assets under $10 billion and for large banks with assets over $50 billion. S. 2155 also changes consumer mortgage and credit-reporting regulations and the authorities of the federal agencies that regulate the financial industry.
“Dodd-Frank was supposed to address problems associated with the country’s property boom that became a property bubble that became a property bust that almost took down the country’s financial system,” Lucas told The Ripon Advance during a June 14 interview. “With the new law, we’ve tried to rein in some of the most egregious, excessive regulations in the old Dodd-Frank bill.”
Rep. Lucas highlighted an example of the negative impact Dodd-Frank had on a banker serving an Oklahoma town with fewer than 1,000 people.
“The rules were so egregious that the bank, which did only three or four mortgages a month, stopped doing them because the banker said he couldn’t afford to pay the two people on staff to handle them anymore,” Rep. Lucas explained. “That’s a classic example why Dodd-Frank was a heavy burden on a small community. A lot of institutions don’t want to be in a small town or small community of less than a thousand people.”
The legislation was strangling the very people it was supposed to help when it came to borrowing money at a good rate to buy a home, he said. Dodd-Frank met its goal of placing parameters on the biggest financial institutions, Lucas added, but they were too extreme.
“The way it was structured, and we’ll never know if it was done intentionally or accidentally, ended up disproportionately hurting intermediate and smaller institutions,” said the congressman.
Traditional community banks generally serve consumers who live in smaller communities across Oklahoma, those who often work in local businesses such as those that support the energy exploration industry or the business of food production.
With his home state’s biggest banking institutions having less than $50 billion in assets, they all will be able to get back to providing banking services to residents, Rep. Lucas said, “which is critically important.”
Home state constituents agree. Craig Buford, president of the Community Bankers Association of Oklahoma, said, “S. 2155 is the first meaningful legislation passed that helps pull back some of the onerous over-regulation for community banks that came from Dodd-Frank.”
“Every community bank has experienced the need to hire more compliance staff and sadly less customer service staff,” Buford said. “It becomes a challenge for community banks to spread the overhead of expensive regulatory compliance over smaller assets while competing with the too-big-to-fail institutions whose compliance cost is just a blip on their P&L.”
Since Dodd-Frank was enacted in 2010, the number of smaller banks with under $100 million in assets in Oklahoma has dropped by 35 percent, according to the Oklahoma Bankers Association, as many have merged with other banks or been acquired.
“When that happens, what it means for consumers is they now have fewer choices for financial services,” said Roger Beverage, president and CEO of the Oklahoma Bankers Association. “Moreover, those same consumers have lost the local ‘relationship’ with their banker that is the foundation for traditional community banks to survive.”
Like the congressman, Buford also pointed to Dodd-Frank’s overreaction to the mortgage collapse, primarily from the unregulated mortgage industry, as being part of the reason why many community banks stopped making home mortgages.
“Prior to Dodd-Frank, home mortgages were the bread and butter of community banks,” he said. “They loaned money for small business owners to buy a home.” But most of these smaller banks’ customers did not meet the strict requirements for a “qualified mortgage.”
For a time, Buford explained, the unintended consequences of “consumer protection” in Dodd-Frank “almost removed this wonderful product from the market. I believe the return of qualified mortgage status to these loans by itself makes S. 2155 a huge victory for our banks, but more importantly the communities that they serve.”
Beverage noted that the Oklahoma Bankers Association has worked for years with Rep. Lucas on the issue of regulatory reform for traditional community banks. “The main point of our argument – and the point that was emphasized early on by Frank – became helping more consumers gain access to credit for which they were not previously eligible. Without his help we may not have been as successful,” he said.
Rep. Lucas said he has worked “to swing the pendulum back to not only protect consumers and consumer markets, but to allow bankers to be bankers and consumers to be able to get the credit they need at the most affordable price. With this law, the average fellow and average lady on the street … they have relief and that’s what we set out to do. That’s an amazing accomplishment.”
And while Rep. Lucas agreed that S. 2155 doesn’t fix everything, “by my estimation it fixes the most egregious 25 percent in Dodd-Frank.”
For the remaining, related items in the bill that members of the House Financial Services Committee think require further consideration, Rep. Lucas said they’re being compiled into a package that will be sent back soon to the U.S. Senate.
“But it will be tough,” he said. “We’re now in an election year so a goodly amount of people will be hesitant to pass anything else.”
But if Rep. Lucas is named the new chairman of the House Financial Services Committee, which changes leadership in January 2019, he could set an aggressive agenda to take up further Dodd-Frank reforms, along with another top priority of his on the committee: restructuring the Consumer Financial Protection Bureau.
“That is a battle I’ll struggle with in the coming session of Congress,” he said.
Changing seats
The House Financial Services Committee has jurisdiction over issues related to the nation’s economy, the banking system, housing, insurance, and securities and exchanges, as well as over monetary policy, international finance, international monetary organizations, and anti-terrorist financing efforts. The committee also oversees the Federal Reserve Board, individual reserve banks, the U.S. Treasury Department and the nation’s capital markets.
Currently, the committee is led by U.S. Rep. Jeb Hensarling (R-TX), who isn’t seeking reelection this year. Hensarling’s retirement leaves vacant the position of chair, which he has held since the 2013-2014 congressional term.
Rep. Lucas confirmed that he is “one of the folks on the shortlist” being considered to lead the Financial Services Committee following this year’s midterm elections.
If chosen as committee chairman – which the Republican Steering Committee votes on following the 2018 midterm elections in November – Rep. Lucas said he has “been working very hard” and would “like to have a chance to do things differently on the committee.”
“The committee has become partisan and we must work our way back to being bipartisan,” he told The Ripon Advance. “We can all disagree on policy … but we should agree we all must accomplish what is in the common good.”
Rep. Lucas, first elected to the U.S. House in 1994 and who represents Oklahoma’s 3rd Congressional District, is among several members also interested in being chair of the House Financial Services Committee, including U.S. Reps. Bill Huizenga (R-MI), Pete King (R-NY), Patrick McHenry (R-NC) and Blaine Luetkemeyer (R-MO), according to public statements.
“So we’ll see who gets reelected and where they choose to go. I think I have a strong track record of getting things accomplished,” said Rep. Lucas, referring to his successful work on the 2014 Farm Bill while chairman of the U.S. House Agriculture Committee from 2011 to 2015.
Buford noted how Lucas’ experience, combined with his quiet diplomacy, tenacity, and hard work not only helped bring varied factions together to pass the Farm Bill, but those attributes also helped steer S. 2155 to passage in the House.
“Congressman Lucas has proven what he can do as chairman of a major House committee and I hope we can have his leadership once again as the next chairman of the House Committee on Financial Services,” Buford said.
Today, as chair of the U.S. House Agriculture Conservation and Forestry Subcommittee, Rep. Lucas has worked hard on the 2018 Farm Bill. “I am one of the old guys now with institutional memory about what did and didn’t work,” he said.
The House passed its Farm Bill on Thursday. The Senate finished committee work on its version of the Farm Bill earlier this month.
After the bill moves to conference, Lucas said, “we’ll try to figure out how to work out all four corners of the square. That will be my specialty.”
Democrats in the House are fired up about proposed education and work requirements under the provisions for SNAP, the nation’s food stamps program, he said. The Senate bill won’t have that language so the issue will have to be resolved.
Those reforms also are one of House Speaker Paul Ryan’s (R-WI) high priorities, “so because he has a personal stake in the issue, it makes it more of a priority,” said Rep. Lucas, adding that the issues can be resolved.
Rep. Lucas also currently is vice chair of the House Science, Space, and Technology Committee, another committee where the current chairman is retiring, presenting another potential chairmanship opportunity for the lawmaker.
And while Rep. Lucas has said publicly that he’s interested in this position, too, he’s primarily concerned about finance policy, which is paramount to his constituents in the 3rd District, a largely rural area covering half of the state of Oklahoma.
So as election season approaches, what does the congressman want the American people to consider?
“It is critical that they sit down and consider where they are economically,” he told The Ripon Advance. “We’ve just come off a 10-year economic roller coaster. They need to consider, where do they want to go? If they believe reasonable regulations and economic growth have transpired, give us some credit for working very hard on that.
“This should be a pocketbook election for the average voter,” he added. “To folks at home, it’s still about, do I have a paycheck? Is it buying more or less? Is my standard of living getting better or worse? What’s going to happen to me as I age?”