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In Floor Remarks, Waters Denounces Partisan Change to Small Bank Policy Statement

Measure Undermines Compromise Enacted in 113th Congress

In remarks on the House floor today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, led Democrats in opposition to H.R. 3791, which would increase by fivefold the asset threshold under the Small Bank Holding Company Policy Statement, encouraging more consolidation of small community banks and endangering their safety and soundness.

In her remarks, Waters noted that this bill reneges on a bipartisan compromise enacted just over a year ago that raised the asset threshold to $1 billion, from $500 million. The Majority is undermining that carefully calibrated level and proposing an additional increase to $5 billion. As the Administration noted in a veto threat on the bill, “this would be an unnecessary and risky change.”


The full text of Ranking Member Waters’ statement, as prepared for delivery, is below.

Thank you Mr. Chairman. We are now considering a bill that not only could put our community banks at risk, but strikes at the heart of why compromise in Congress can be so challenging.

H.R. 3791 would direct the Federal Reserve to raise the asset threshold under the Small Bank Holding Company Policy Statement, allowing small banks and private equity firms to take on additional debt for mergers and acquisitions. The threshold would be increased to $5 billion in consolidated assets, from $1 billion. Let me stress that this would be five times as much as the current threshold, and ten times as much as the initial level that was in place before a bipartisan compromise was enacted last Congress.

The Small Bank Holding Company Policy Statement is important, because it allows small institutions like community banks and minority-owned depositories to access additional debt so they can continue serving their communities. However, it is important that this threshold is carefully calibrated, so it cannot be abused by speculative investors. If the threshold is raised too high, it will have the opposite of the intended impact: it will lead to mergers and acquisitions, riskier banking activities, and a reduction in banking services and credit availability to rural, low-income, minority, and underserved communities.

Indeed, Democrats and Republicans on the Financial Services Committee worked together just a little over a year ago to provide relief to almost 5,000 community banks by doubling the asset threshold under the Policy Statement to the current level of $1 billion, from $500 million in assets. We did so after working closely with regulators and determining that $1 billion was the most appropriate threshold to both help community banks grow without making them targets for mergers and acquisitions. At $1 billion, the policy statement covers 89 percent of banks in the country – providing relief to the vast majority of community banks and minority-owned depository institutions.

So I am trying to understand why my colleagues are reneging on that compromise and undermining the careful and considerate policy that we enacted. The Administration has threatened to veto this measure because of the potential danger to our smaller banks and to the communities that they serve. They have called this bill “an unnecessary and risky change.”

Because we know what will happen if the Federal Reserve had to make this change. For one, raising the threshold would have a serious impact on consolidation of community banks. The Majority purports to be concerned with consolidation in the banking industry and the disappearance of community banks. Well, this bill will all but ensure that larger banks and investors come in and purchase smaller banks, and then cut branches in the communities that need them the most.

We have already seen this happen with banks across the country – both large and small – who have been forced to shut down hundreds of branches because investors and shareholders demand higher and higher returns.

I supported the change we made last year, to $1 billion, because it would help ensure that small, community banks are able to continue serving their communities. That is the point of the Small Bank Holding Company Policy Statement. We must help our communities retain access to local banks that know the specific needs of their consumers and small businesses. But this bill would do the opposite – even those that did survive wouldn’t be able to provide the same personalized service because of their size. I am particularly concerned about how this would impact our underserved communities.

Another problem with this legislation is that it will allow banks with as much as $5 billion in assets to operate under lower standards and less oversight by regulators. Many community banks failed during the 2008 financial crisis because they became overleveraged. Certainly if a bank makes bad decisions in the amount of risk they take on then it’s appropriate to let it fail. But the failure of any bank, and especially a bank with up to $5 billion in assets, has a tremendous impact on the community it serves and on the Deposit Insurance Fund. At the end of day, more bank failures will increase premiums for all the banks protected by the Deposit Insurance Fund.

We cannot allow reckless behavior that benefits investors and bank shareholders at the expense of small banks and the communities they serve.

Mr. Chairman, H.R. 3791 is not a small change. It is a risky move that threatens both bipartisanship in these already polarizing times as well as the safety and soundness of our community banks and the customers they serve.

I urge my colleagues to join me in voting no on this bill and I reserve the balance of my time.


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