At a time when debate is heating up in Washington over easing some Dodd-Frank Act regulations, Charlotte Congressman Robert Pittenger is among those pushing for fewer rules on banks.
Pittenger, a Republican serving his second term, argues that regulations designed to prevent another financial crisis are actually hurting the U.S. economy. The regulations, Pittenger says, are creating rising compliance costs for smaller banks, restraining their ability to lend.
A member of the House Financial Services Committee, Pittenger says he will continue to pursue legislation that would ease regulations on banks.
This year, he re-introduced a bill that seeks to give community banks, credit unions and small business more say in regulations being created by the Consumer Financial Protection Bureau. The bill, which won approval of the House of Representatives in April, is now in the Senate. Pittenger has been a frequent critic of the bureau, which was established by Dodd-Frank to enforce federal consumer financial laws.
The Obama administration has said it opposes the bill, which would lower the cap on the CFPB’s funding. Pittenger’s office says Texas Republican Jeb Hensarling added an amendment that lowers the cap to fund the advisory panels the bill would create. The lower cap would reduce the bureau’s funding by less than 1 percent, Pittenger’s office has said.
The Observer interviewed Pittenger in his south Charlotte office this week. His answers have been edited for brevity and clarity.
Q. Are there enough regulations in place to prevent another financial crisis?
A. I think we have enough regulations in place to cause another crisis. The pendulum has swung so far that it’s impeding job growth. The evidence is our current economic growth is a very tepid 2.2 percent. The primary people who have been hurt the worst are your small business people and your small entrepreneur. What you’ve done is deprived the people, who need it the most, the access to capital, and that’s your entrepreneur.
Q. So, you believe regulations put in place since the crisis are slowing U.S. economic growth?
A. There’s no doubt about it. Community banks historically have written 47 percent of the small business loans. (But with) the boxes that they have to check (to be in) compliance (to make) loans to entrepreneurs and small business folks, it’s impossible. Now your larger institutions, your larger businesses, that have a credit standing, they can find access to credit. But it’s that entrepreneur, that start-up company, that small business, it’s really hurting the worst.
Q. You have said smaller banks are being “crushed” by regulations. Yet others, like Democratic Sen. Elizabeth Warren of Massachusetts, have been skeptical of claims that regulations have hurt profits of small banks. What is your response?
A. I’d say, Mrs. Warren, look at the consolidation (taking place among smaller banks). That’s the evidence of the struggle that they’re going through with their compliance costs. So, what they’re doing is merging. Look at the number of start-ups of community banks. We (have) lost like 800 banks in the last five years. That’s some indication, Mrs. Warren, that your analysis is not correct at all.
Q. What caused the financial crisis, in your opinion?
A. The initial blame, I think, was well-intended but misguided government policies. (Prior to the crisis) the banks were pushed (partly by the Community Reinvestment Act) to make loans to people who couldn’t afford it. (That) laid out the scenario of loaning money to people, easy money, that they did not have the credit profile to support.
Q. Then why have you been opposed to the 2014 “qualified mortgage” rule, which is designed to make sure borrowers applying for a mortgage can repay it?
A. What the QM rule does, it puts the banks in a vise. Either they’re in compliance with QM, or they don’t loan (to the QM standards) and (then) they’re out of compliance. So, it’s a Catch-22 for the banks. The reality is: government, get out of the way. Banks know who to lend money to. It’s really important to know the empowerment of markets and that the market understands who’s credit-worthy.
Q. What new legislation are you working on?
A. I have a ... bill, called the Financial Regulatory Clarity Act, that I’m getting ready to introduce. (West Virginia Republican Sen.) Shelley Capito (sponsored) it last year. This (bill) takes (aim at financial) regulations that are either inconsistent or duplicative (of one another).
Q. A year ago, you disclosed that criminals racked up $4,000 in fraudulent charges on your credit card. Why are you a critic, then, of the Consumer Financial Protection Bureau, which has been pushing to help consumers better protect themselves from cybercrime and improve cybersecurity in the banking industry?
A. The key is that we need (a) regulatory environment. But it is such an overkill. It’s not that there aren’t some provisions of the CFPB that haven’t been healthy or supportive. It’s not a matter of getting out an eraser (and) erase the entire CFPB. The imposition of the overall regulatory burden clearly is impacting our economy and making it impossible for small businesses to get capital to grow.
Deon blogs about Charlotte’s banking scene daily at charlotteobserver.com/business. Follow him on Twitter at @DeonERoberts. Reach him at firstname.lastname@example.org or 704-358-5248.