WASHINGTON (Reuters) - Members of the New York congressional delegation on Thursday defended legislation that would come to the direct aid of a single lender, saying it is not political cronyism.
The House of Representative Financial Services Committee voted 35 to 15 on Thursday to approve a bill that would benefit Emigrant Bank, a lender headquartered in New York City.
The bill has drawn attention in recent days because it would only affect one bank and because its chairman is active in politics.
On Thursday the administration of President Barack Obama weighed in against the measure, citing its narrow focus.
The chairman of Emigrant, Howard Milstein, served as a donation “bundler” for President Barack Obama in 2008 and has made $34,050 in campaign donations this election cycle, including to some of the bill’s Republican and Democratic sponsors, according to the Center for Responsive Politics.
Supporters of the law said their sole concern is trying to prevent a responsible local bank from getting ensnared in costly new capital regulations aimed at larger, more complicated financial firms.
“This is called leadership, it’s called doing the right thing regardless of what papers want to use to make news,” said Representative Michael Grimm, a Republican.
Grimm is the main sponsor of the bill; six other New York lawmakers, Democrats and Republicans, have put their names behind it as well.
Following the committee vote an administration official said the Obama administration is against the bill because it opposes attempts to “reopen” the 2010 Dodd-Frank financial oversight law as well as legislation aimed only at one institution.
The bill would make a date change to Dodd-Frank that would have the effect of letting the bank escape tough new capital requirements aimed at large banks.
Without the change, Emigrant said its capital levels will take a $300 million hit, which in turn will hurt its ability to lend to small businesses and other customers in New York.
The bill was supported by committee Chairman Spencer Bachus, a Republican, and its top Democrat, Barney Frank, who was an author of the 2010 law.
Frank said his only request when the bill first came up was that the legislation be subjected to a hearing - one was held May 18 - so any objections could be raised publicly.
He used Thursday’s vote, however, to needle Republicans about supporting the bill after having made congressional “earmarks,” money in spending bills directed at a single company or local government, a campaign issue in recent elections.
“There have been some who have suggested over time that doing something that effects one institution alone is somehow suspect,” he said, adding he brought up the issue to avoid any “inconsistencies in the future” about how “single-shot” legislation is viewed.
The prospects for the bill are unclear because a similar measure has not been introduced in the Senate, although the legislation will likely be passed by the House soon.
The capital rule in question is the so-called Collins amendment, which was added to the Dodd-Frank law by Republican Senator Susan Collins.
The provision sets a floor on the amount of capital U.S. banks have to hold to prevent them from using internationally agreed risk measurements to determine that they can hold less capital than smaller federally insured depository institutions.
The provision also prohibits banks from counting trust preferred securities (TruPS) toward capital requirements.
The law, however, grandfathers in TruPS held by banks as of December 31, 2009, so long as the institution had less than $15 billion in assets at the time.
Emigrant’s plea to lawmakers is that it briefly went over the $15 billion threshold at the time of the deadline because it had taken a loan from the Federal Home Loan Bank of New York to make sure it had enough cash to cover customer deposits.
“This is an example of no good deed goes unpunished,” said bill supporter Carolyn Maloney, a Democrat from New York.
The bill would shift the deadline to March 31, 2010, at which point Emigrant’s assets had fallen back below $15 billion, meaning it would not be subject to new capital requirements.
Editing by Leslie Adler and Phil Berlowitz