Garnet Capital Advisors Blog

Congress is back for its short fall session. There are several banking-related matters on the table - though it's worth noting that lawmakers could delay action on any or all of them owing to the range of national and international issues facing them outside the financial sector. Here are four political fights savvy bankers will want to keep an eye on:

1. Senator Richard Shelby's Bank Reform Bill
The most important banking item on the Congressional agenda is a bill being pushed by Sen. Richard Shelby, R-Alabama, that would, supporters said, cut red tape for small banks and create Congressional watchdog authority over the Federal Reserve. But detractors, mainly Democrats, said the bill amounts to a rollback of the Dodd-Frank regulations put in place amid the financial crisis.

"This bill is good for big banks, but it's bad for families," said noted financial sector critic Sen. Elizabeth Warren, D-Massachusetts, in a social media post responding to the bill. "While we should be providing targeted regulatory relief for community banks and credit unions - and stepping up our consumer protections - the last thing we should be doing is rolling back the rules and weakening the oversight for the biggest banks in this country."

Authoritative sources like the Wall Street Journal and American Banker point out that the original bill could be seen as a canny opening bid by Shelby, a senator known for his deal-making abilities. The bill has already passed Shelby's Senate Banking Committee, albeit on a party-line vote.

At least one close observer expects some version of bank reform to pass.

"At the end of the day," Dan Crowley of K&L Gates told American Banker, "there's a good chance we will have dozens of Dodd-Frank changes enacted into law, and most of them with at least some level of bipartisan support - on the policy if not the process."

2. Key financial nominations
Another much-watched political fight involves somewhat obscure - but nonetheless important - government appointments in the financial sector. Nearly a dozen nominations are in a holding pattern as both sides of the aisle blame the other for the delays, according to The Hill. The empty posts make it more difficult for agencies to put provisions of Dodd-Frank into practical, working language. Key jobs still unfilled include roles at the Security and Exchange Commission, the Commodities Futures Trading Commission, Federal Deposit Insurance Commission and even the Fed. It's becoming possible the nominations won't get up-or-down votes until President Barack Obama leaves office.

3. Cuts to Fed dividends paid to banks
Negotiations over a possible omnibus budget bill include myriad items, but among them is one bankers do not like - the idea of cutting the dividend banks are paid by the Fed to shore up the Highway Trust Fund. American Banker reports increases in guarantee fees at Freddie Mac and Fannie Mae also tied to transportation funding have bankers fuming.

4. Reform to Federal Housing Finance Agency
Bankers are also keeping tabs on a possible shake-up of the Federal Housing Finance Agency, where Director Mel Watt ruffled feathers by approving lucrative raises for the heads of Freddie and Fannie. While larger reforms may be on hold, lawmakers could have retribution in store for Watt, according to American Banker.

Any of these issues could have an impact on loan portfolios. Any questions or concerns can be discussed with loan sale advisory firm Garnet Capital Advisors.