WASHINGTON — If you want to know why the American Bankers Association blames the Independent Community Bankers of America for undercutting the industry's lobbying on regulatory reform legislation, you have to start in Nebraska.
In late April, the Senate held a series of votes that would determine whether the bill could move to the floor. The cloture motion was rejected three times, in large part because Sen. Ben Nelson of Nebraska voted against cloture.
But on April 28, the Democrat, along with the two Republican senators from Maine, switched sides, allowing the bill to proceed to the floor.
Why did Nelson change his vote? According to the ABA, it was the ICBA's fault.
"While we were telling senators to vote against cloture, ICBA was in those same offices telling them… this bill needed to go to the floor now," said ABA president Ed Yingling. "That gave those senators the excuse to vote for cloture."
To ICBA president Cam Fine, the charge is ludicrous. Although his member bankers did lobby Nelson to support cloture, Fine said Nelson was already heading that direction for other reasons.
"I can guarantee you that two bankers in Nebraska weren't the deciding factors," Fine said.
But to hear Yingling tell it, the battle over regulatory reform was largely lost at that moment.
Sen. Richard Shelby, the lead Republican on the Senate Banking Committee, was trying to block a floor vote, hoping to win enough time to strike a deal with Chairman Chris Dodd.
Such a deal, Yingling argued, would have been better for the entire banking industry. He believes a series of amendments that were accepted during debate on the Senate floor, including a push to restrict interchange debit fees and eliminate trust-preferred securities from Tier 1 capital, would have failed.
Republicans "would have gotten a better deal," Yingling said. "All you had to do is to read Shelby's public talking points. He wouldn't have gotten every one of them but it would have been a better deal."
Animosity between the two groups is nothing new, but ABA laying the blame for Dodd-Frank at the ICBA's door has brought the relationship to a new low.
"It is as bad as I have seen it," said Al DelliBovi, the president of the Federal Home Loan Bank of New York, who has been in and around the financial services business for decades and knows both groups well.
For the ICBA, the ABA's charges are sour grapes. ICBA officials said that the ABA sidelined itself by opposing the reform bill at every turn.
By showing more willingness to work with the Obama administration and lawmakers, Fine said the ICBA was able to improve the bill for its members. He points to a provision that exempts banks with less than $10 billion of assets from examinations and enforcement from the new Consumer Financial Protection Bureau.
He also is particularly proud of a provision that changes the way the Federal Deposit Insurance Corp. assesses banks, forcing the agency to use all liabilities instead of domestic deposits. According to ICBA, that change saved community banks $4.5 billion.
"If we would have totally just joined the other financial trades and said, 'Hell no we won't go,' the community banking sector would have been road kill on the financial reform highway," Fine said. "We cut some pretty good deals and they actually got even sweeter in the Senate. I don't apologize for that."
Both sides claim members have quit the other association as a result of lobbying on the bill. Fine said his membership is up slightly at yearend, despite 76 members that have failed and 49 others that have been merged out of existence.
The ABA does not disclose its membership numbers, but says it, too, gained dues paying members this year.
Despite rumors of mass defections, finding bankers who will talk about this issue is tough. One banker, Michael Edwards, the chief executive officer of $700 million-asset Marquette Savings Bank in Erie, Pa., said he joined ICBA this year due to the FDIC assessment change.
"I think the ABA does a good job representing community banks, but it only took one issue for me -- and that was the deposit insurance premium change. That was the issue that pushed me to ICBA," Edwards said. "It dawned on me that they are representing solely community banks and that's the type of organization I want to be with."
But bankers on the other side argue the ICBA's lobbying put the industry in a weaker position.
"At the end of the day I was concerned that the ICBA's strategy may have given some cover to some congressman to vote in favor of Dodd-Frank," said Patrick Little, president of $750 million-asset Teche Federal Bank in Franklin, La.
It is difficult to examine lobbying after a bill has passed because claims are usually vague and hard to prove.
But ABA's claims against ICBA are unusually specific, allowing a greater opportunity to examine them.
Yingling views the Senate cloture votes as proof that ICBA's strategy was wrong.
Asked if he feels ICBA undercut the industry, Yingling replies, "We don't feel it. We know it. It's a provable fact."
Both Sens. Olympia Snowe and Susan Collins opposed the cloture vote three times, but were well-known moderates who eventually voted to allow the bill to move forward.
Although Yingling claims ICBA lobbying played a role — Fine said the group never lobbied Snowe or Collins on the cloture vote -- there is no evidence to suggest the two Maine lawmakers were much affected by the group's views.
There are only 32 banks in Maine and they were united against the bill.
"I'm not aware of a bank that specifically took a position opposite to that of the association," said Chris Pinkham, the president of the Maine Bankers Association, which opposed the cloture votes and the bill. "There is no case along the way we gave them a wink or nod that we were supporting the bill."
But in Nebraska, the situation is different. While many states no longer have multiple banking trade groups, Nebraska still has two: the Nebraska Bankers Association, which is aligned with the ABA, and the Nebraska Independent Community Bankers, which is aligned with ICBA.
The two groups took different approaches to lobbying Nelson. For the Nebraska Bankers Association, it was outright opposition, while the independent community bank group figured it was better to engage in the debate.
"This train, in one form or another, was going to leave the station," said Kurt Yost, president of the NICB. "We were either going to get run over or throw some baggage on it as it went by."
While Nelson initially opposed moving the reform bill forward, he changed his mind at a critical moment. George Beattie, president of the Nebraska Bankers Association, said that switch came after talking with local bankers.
"Sen. Nelson told me he knew he was going to change his vote and we were going to be disappointed," said Beattie. "He had contact from a couple banks in Nebraska indicating he should support the bill."
Although Beattie declined to name the banks, others pointed to two executives: Jeff Gerhart, president of the $31 million-asset Bank of Newman Grove and Sid Dinsdale, the chairman of $2.7 billion-asset Pinnacle Bank.
In an interview, Gerhart said he never spoke with the senator directly, but did tell his staff how important certain provisions were to the ICBA, particularly the deposit insurance assessment change.
"Another 30-year-old goal of ICBA was to have a more fair opportunity for deposit insurance assessments," said Gerhart, who is currently the vice chairman of ICBA. "We've been fighting for that a long time."
Gerhart said the trade group was also successful in getting key exemptions from the CFPB, making the $250,000 insurance limit permanent and ensuring the Federal Reserve Board could continue to supervise small community banks.
"We feel like we speak for community banks and can show some good results," he said.
Similarly, Mark Hesser, president of Lincoln-based Pinnacle Bank, said he stressed the same provisions in talks with Nelson and his staff. (The provisions were not part of the Senate bill at the time, but were added to it later.)
Like other community bankers who support ICBA, Gerhart and Hesser characterized the ABA's strategy as a "just say no" approach that would backfire.
"Personally as a banker it felt there was going to be legislation passed, you wanted to get the best passed that you could," Hesser said.
Both bankers refute claims that they were the reason Nelson changed his mind.
"Any senator had numerous considerations," Hesser said. "America wanted Wall Street reform, which is why ABA's position seemed that much more outrageous."
Gerhart said he's "flattered" by the notion his view had much weight with the senator, but doesn't believe it. "I'm one banker, one constituent and there are a lot of very fine bankers on the other side of the issue," he said.
A spokesman for Nelson said he initially declined to vote for cloture because he hadn't seen the bill's text.
"He also spoke to and listened to Nebraska Main Street business owners, Nebraska bankers from large and small banks and many Nebraskans who wrote or called him about financial reform," the spokesman said. "As he weighed all of those viewpoints, he decided to support cloture because he'd seen enough details of the bill and felt assured it wouldn't hurt Main Street as it was trying to rein in abuses on Wall Street."
Yingling does not believe Nelson was persuaded solely by the ICBA's arguments, but he does think the senator used them as political cover.
"You're Ben Nelson. You've just gone from having the hell beat out of you over health insurance. You voted against cloture three times. All of a sudden you have an out," said Yingling. "You go to the bankers in Nebraska and say, 'You told me to vote against cloture and this is terrible for you, but I just had three bankers tell me they want me to vote for this, so therefore it's all right to vote for it because you guys are split.' That's the dynamic."
Roger Beverage, president of the Oklahoma Bankers Association and a friend of Nelson's since law school, agreed. "You are handing a senator or representative a get out of jail free card when you have a divided industry," he said.
Even if Nelson switched his vote based on ICBA's lobbying, other questions remain.
If Nelson had remained opposed to cloture, would it have really forced Dodd to cut a deal with Shelby? How different would that deal have looked? To Yingling, the answer is clear.
"I'm not arguing in the end there wouldn't have been a bill with tough new regulations. I'm saying it could have been a better bill," he said. "You could have gotten everything that was positive for community banks in it and still gotten a better bill."
For Fine, however, Yingling is playing a game of hypotheticals.
"We are talking about events that did not happen and not knowing about the vagaries of history," he said. "Who the heck knows what would have happened? How do we know that the outcome would have been any different? That's all speculation."