* Community bankers take reform gripes to FDIC head Bair
* Complaints about overdraft rules, Dodd-Frank law
* Bair shoots back, cites reforms helpful to small banks
* Encourages community banks to think for themselves
(Adds detail on banker complaints, paragraphs 8-10)
By Dave Clarke
WASHINGTON, March 16 Bankers guffawed and
groaned at a top U.S. regulator when she told them they should
embrace financial crisis-inspired reforms.
She responded by portraying them as ungrateful.
In one of the most bitter exchanges between a top official
and bankers since the financial crisis, Federal Deposit
Insurance Corp Chairman Sheila Bair got exasperated on
Wednesday when her appearance at an American Bankers
Association event turned into a gripe fest.
In an expansive hotel ballroom, executives of mostly
smaller banks complained about new restrictions on overdraft
fees and about regulation in general, including the Dodd-Frank
financial reform law.
Bair responded by saying the industry needed to stop
focusing on what it does not like, and try to work more with
regulators on changes that could benefit the industry.
She said Dodd-Frank was good for community banks because,
among other things, it drives down small banks' deposit
insurance costs, while hammering larger firms with more
"Is there ever times when you can acknowledge what
regulators have done to help the stability of the industry?
What the FDIC has done? What, frankly, Dodd-Frank did? I think
there needs to be some acknowledgment of that," Bair said.
Audience members who complained about Dodd-Frank did not
provide specific examples of what troubled them.
Since the law was enacted, community banking groups have
complained it will raise compliance costs even if larger banks
are the specific targets. As prime examples they cite a
crackdown on debit card fees and the new consumer bureau.
"The only thing these new regulations are doing for us is
raising our costs," a Vermont banker told Bair.
Bair asked if the community bankers in the room wanted to
repeal Dodd-Frank and give up the benefits targeted at them.
The question got huge cheers.
"I can't believe this. I really can't believe this," Bair
In her speech to the group, Bair argued that the biggest
threat to the industry is a reluctance to embrace reforms that
could restore its badly-bruised reputation with the public and
its proper role in the economy.
"The biggest long-term risk to the success of the banking
industry would be its failure to support the reforms needed to
ensure long-term stability in our financial markets and our
economy," she said.
Bair's speech came on the third day of the ABA's government
relations conference in Washington D.C. It was largely attended
by community bankers who came to town, in part, to lobby
lawmakers to roll back, or soften, Dodd-Frank.
The ABA represents banks of all sizes, but its conferences
tend to largely draw executives from smaller banks.
Bair tried to persuade the audience that Dodd-Frank is
almost completely targeted at large banks.
Then she mentioned that the new Consumer Financial
Protection Bureau could help bankers eliminate some of the
paperwork involved in mortgage disclosures, drawing more
CHAMPION OF THE LITTLE GUYS
Bair argued that throughout her five-year term at the FDIC,
that ends in June, she has been a champion of smaller banks.
She has consistently praised small banks for being better
than their larger peers at extending loans, especially during
the recession. And she has fought to end the perception that
big banks are "too big to fail," saying that perception drives
up smaller banks' borrowing costs.
In recent weeks, she noted, the FDIC advocated for changes
to a crackdown on fees banks can charge merchants when debit
cards are used. She said the current Federal Reserve proposal
could harm small banks.
"I think my tenure at the FDIC has shown that I am not the
enemy of community banks, quite the opposite," she said.
Bair also said the American Bankers Association represents
both large and small banks, which have different interests in
trying to repeal Dodd-Frank.
She said Dodd-Frank hits large banks harder through its
restrictions on risky trading, its greater oversight of
derivatives and its attempts to end "too big to fail."
"They're really facing the brunt of this. The community
banks are not. But I think the community banks agitate for the
repeal of Dodd-Frank in a way that would raise their premiums,"
"I would just encourage you to think for yourselves."
(Reporting by Dave Clarke; Editing by Dave Zimmerman and Tim