SAN DIEGO — Federal Deposit Insurance Corp. Chairman Sheila Bair received not one but two standing ovations from the Independent Community Bankers of America, a week after she was heckled by members of the industry's other main trade group.
Bair's reception at the ICBA convention here on Tuesday was a stark contrast to her tense exchange with the American Bankers Association. The affection was mutual, with Bair praising ICBA for staying engaged with lawmakers while "other financial trade groups" tried to kill the bill. (The ABA opposed passage of Dodd-Frank.)
"The ICBA realized the inevitability of the process," Bair said. "You kept a seat at the table, and you had an impact on the outcome. You have, and you should, take pride in that."
It was Bair's final address to the annual convention before her term as FDIC chairman expires in June.
ICBA Chairman James MacPhee, the chief executive of Kalamazoo County State Bank in Schoolcraft, Mich., set the tone with Bair's introduction, calling her "a leader worth listening to."
"Chairman Bair has been a good friend and a steady companion, a champion of community banks, and we thank her for her support," he said.
In particular, MacPhee praised the FDIC for taking a moderate approach to its long-term plan to rebuild the Deposit Insurance Fund. He also thanked Bair for speaking out about the potential damage of a provision that would limit debit interchange fees, and for helping stop Wal-Mart Stores Inc.'s attempt to get into the banking business.
"We wish you luck," MacPhee told Bair. "You're welcome back for a visit anytime."
Bair took only one question, from MacPhee, a move that may have helped head off a few potential naysayers. But if there were any disgruntled bankers, they couldn't be heard in the crowd, which stood when Bair entered and exited the stage and frequently interrupted her remarks with applause.
Bair acknowledged she has "always had an affinity" for ICBA, and even likened her defense of the FDIC to the group's mission to defend community banks.
"Like me, you are frequently direct and pointed in your communications," she said. "You pride yourselves in your professionalism, and you influence opinion through reasoned public debate. Like me, you stay focused on your objectives."
But she got a jubilant response when she indirectly touched on ICBA's long-standing criticism of the ABA; namely that the group primarily looks out for the largest banks, ignoring the concerns of small ones -- a charge the ABA has denied.
"You are never confused about who you represent," Bair said, eliciting cheers from several in the crowd. "That has been a key to your considerable effectiveness in Washington."
Bair has taken flak for recent FDIC guidance on overdraft protections, which requires banks it supervises to engage customers who routinely pay overdraft fees and offer alternative options. Both the ICBA and ABA have said the rule would place an unfair burden on small banks, which make up the vast majority of the banks the FDIC regulates.
She grew frustrated during the question-and-answer portion of her ABA address last week when bankers indicated they wanted to repeal Dodd-Frank, even though many of the provisions benefit community banks.
In her speech Tuesday, Bair defended those provisions, including a permanent increase in the deposit insurance limit to $250,000, lower assessments for smaller institutions and temporary blanket coverage for transaction checking accounts.
"Dodd-Frank is not a perfect law," she said. "There are many things in it that I would like to change. But, on balance, it is a good law and one which I think will strengthen, not weaken, community banks."
Bankers' concerns about the potential impact of the law's interchange provision are well-founded, Bair said, and she told the crowd that the FDIC was working to ensure small banks receive the protection they were guaranteed by the law.
But Bair said banks also need to continue their robust efforts to educate lawmakers about the costs of regulatory compliance for community banks. Doing so will mitigate the collateral impact of regulations intended for larger institutions, such as new mortgage servicing rules.
"Community banks have had nothing to do with this," Bair said. "Portfolio lenders are servicing those loans just fine. That's not an area where I would want to see massive movement on regulations and structure" that could impact community banks.
In a nod to the next speaker, Elizabeth Warren, Bair also asked bankers to keep an open mind about the potential positive benefits of the Consumer Financial Protection Bureau, and said many of the fears she has heard expressed about the agency are not well-founded.
"On the contrary, I believe that this agency holds the promise of doing tremendous good by simplifying consumer rules and disclosures, reducing compliance costs for you and making products easier to understand for your customers," Bair said. "I also think this agency can help level your competitive playing field by applying much-needed regulation and enforcement to non-bank mortgage originators and other providers of consumer credit."
By the time Bair left the stage, there was even a little love left for Warren, the oft criticized official in charge of setting up the CFPB. She earned laughs when she said the agency's budget is essentially the Fed tithing for consumer issues. (The central bank provides a portion of its budget to fund the CFPB.) And bankers cheered when she talked about ensuring that non-bank financial companies follow consumer rules, too.
"We can't enforce the law only against the banks that are easiest to find," she said.
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