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Wall Street Opposes Wall Street Reform

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Wall Street reform likely got a boost in the eyes of the public on Monday when the major trade association representing big banks came out strongly against the conference committee compromise that emerged on Friday morning.

The American Bankers Association, which represents the major banks as well as some smaller ones, sent a letter to the Hill expressing "strong opposition to the Conference Report to accompany H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act."

The bankers said that they supported the goals of reform -- much as the insurance industry supported the goals of health care reform -- but it couldn't back the final package. "Bankers have supported key reform principles since the beginning of this debate," reads the letter, which was provided to HuffPost by a congressional aide. "Creating a systemic risk council, developing a robust method for handling the failure of large institutions, ending the concept of too-big-to-fail, closing gaps in regulatory oversight, and enhancing consumer protection are all laudable goals that the industry supports."

The banks cited two specific elements of reform that were the most objectionable. First among them was swipe fee reform, legislation that reduces what banks and credit card companies can charge retailers for the use of credit card machines. "This amendment, which had nothing to do with financial regulatory restructuring, has been falsely presented as benefitting [sic] consumers. In reality, the beneficiaries of this provision are the retailers, who extract great benefits from debit cards, such as reduced personnel and fraud costs, but will no longer have to pay to support these benefits," the bankers write.

Secondly, the banks were offended at the creation of a Consumer Financial Protection Bureau, arguing that it would lead to increased litigation and decreased credit availability.

"More generally, the conference report includes provisions that add more than 30 new and expanded regulations that will limit the ability of banks, particularly smaller institutions, to extend credit," the bankers say.

Read the full letter:

June 28, 2010

To: Members of the U.S. Senate

Members of the U.S. House of Representatives

Re: Conference Report to H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act

The undersigned banking trade associations, representing banks of all sizes in every state, are writing to express strong opposition to the Conference Report to accompany H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Bankers have supported key reform principles since the beginning of this debate. Creating a systemic risk council, developing a robust method for handling the failure of large institutions, ending the concept of too-big-to-fail, closing gaps in regulatory oversight, and enhancing consumer protection are all laudable goals that the industry supports.

But these important provisions are overshadowed by a number of other provisions in the bill that run far afield from Wall Street reform and will ultimately harm Main Street. The consequences involved are very real and will have a very negative impact on traditional banks, on consumers, and on the broader economy. Above all, the capability of traditional banks to provide the credit needed to move the economy forward has been undermined in numerous ways.

For example, the conference report contains a provision that would limit the interchange fees on debit cards to the cost of the specific transactions. This amendment, which had nothing to do with financial regulatory restructuring, has been falsely presented as benefitting consumers. In reality, the beneficiaries of this provision are the retailers, who extract great benefits from debit cards, such as reduced personnel and fraud costs, but will no longer have to pay to support these benefits. The losers will be consumers and traditional banks. Low income consumers will be particularly hurt, as funds used to support basic banking accounts and other services will not be available.

As another example, the conference report would create the Consumer Financial Protection Bureau (CFPB), with unprecedented authority to impose new requirements on all banks. The conference report allows the CFPB to determine if products or practices are "unfair" or "abusive," broad terms that make if far from clear what this new standard will mean. Extensive litigation is likely, and product innovation will be limited. Even worse, certain non-bank competitors, such as auto dealers, are carved out of the CFPB's jurisdiction.

More generally, the conference report includes provisions that add more than 30 new and expanded regulations that will limit the ability of banks, particularly smaller institutions, to extend credit.

We urge you to vote against the Conference Report on regulatory restructuring.

Sincerely,

American Bankers Association

Alabama Bankers Association

Alaska Bankers Association

Arizona Bankers Association

Arkansas Bankers Association

California Bankers Association

Colorado Bankers Association

Connecticut Bankers Association

Delaware Bankers Association

Florida Bankers Association

Georgia Bankers Association

Hawaii Bankers Association

Idaho Bankers Association

Illinois Bankers Association

Illinois League of Financial Institutions

Indiana Bankers Association

Iowa Bankers Association

Kansas Bankers Association

Kentucky Bankers Association

Louisiana Bankers Association

Maine Association of Community Banks

Maryland Bankers Association

Massachusetts Bankers Association

Michigan Bankers Association

Minnesota Bankers Association

Mississippi Bankers Association

Missouri Bankers Association

Montana Bankers Association

Nebraska Bankers Association

Nevada Bankers Association

New Hampshire Bankers Association

New Jersey Bankers Association

New Mexico Bankers Association

New York Bankers Association

North Carolina Bankers Association

North Dakota Bankers Association

Ohio Bankers League

Oklahoma Bankers Association

Oregon Bankers Association

Pennsylvania Bankers Association

Puerto Rico Bankers Association

Rhode Island Bankers Association

South Carolina Bankers Association

South Dakota Bankers Association

Tennessee Bankers Association

Texas Bankers Association

Utah Bankers Association

Vermont Bankers Association

Virginia Bankers Association

Washington Bankers Association

Washington Financial League

West Virginia Bankers Association

Wisconsin Bankers Association

Wyoming Bankers Association

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