Exclusive: Local bankers emerge as Fed ally in fight against audit bill

Mon Feb 23, 2015 5:43am EST
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By Jonathan Spicer

COLUMBUS, Ohio (Reuters) - Local bankers are joining the fight against a congressional proposal to audit the U.S. Federal Reserve's policy decisions, with more expected to lobby against the bill if it gains traction in Washington.

The audit of the Fed bill, championed by Rand Paul of Kentucky, a Republican Senator and likely presidential candidate, would encourage interference from lawmakers into the central bank’s monetary policy discussions. A similar Fed audit bill passed the House of Representatives late last year and a hearing on Fed transparency is expected to be formally called by the Senate banking committee, according to people familiar with the matter.

A Reuters survey of 24 state banking groups has found that four are actively opposed to Audit the Fed and five would probably take a stand against the bill if it gains more support, giving the central bank an influential ally as the Fed ramps up its own public opposition.

The support of groups like the Ohio Bankers League, which is sending 82 members to Washington this week with the bill on its agenda, shows that even though banks of all sizes complain about restrictive Fed regulations, they support its ability to independently set monetary policy.

"We feel the current system works well, it's time-tested, and there are all kinds of reasons why political influence at the Fed is a bad thing," said Bob Lameier, president of the Ohio group and head of Miami Savings Bank in Miamitown, near Cincinnati.

In the run-up to the 2010 Dodd-Frank legislation, community bankers aligned with Fed officials to convince lawmakers not to strip the central bank of responsibility for supervising small banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act was a group of rules passed in 2010 in a bid to prevent the recurrence of events that caused the 2008 financial crisis. 

There are more than 6,000 community banks in the U.S., representing 93 percent of all lenders in the country, government data show. Community banks, which typically have less than $10 billion in assets, account for about 45 percent of all of the small loans to businesses and farms made by insured institutions in the United States.

The sector is also an influential voice in Washington. The Independent Community Bankers of America, their trade group, gave $1.3 million in political contributions in the 2013-14 campaign cycle, according to the Center For Responsive Politics.   Continued...

The United States Federal Reserve Board building is shown in Washington October 28, 2014. REUTERS/Gary Cameron