In a break from tradition, banks and their lobbyists are openly challenging federal regulators, resorting to legal threats and public campaigns to challenge what they perceive as overreach in new rules. Trade groups representing banks, including the American Bankers Association, the Independent Community Bankers of America, and the Bank Policy Institute, have accused regulatory agencies such as the Consumer Financial Protection Bureau and the Federal Reserve of excessive regulation.
Recent lawsuits have been filed against the consumer bureau over new rules mandating banks to share data on small-business lending practices and to examine potential discrimination. Trade groups have also supported constitutional challenges to the C.F.P.B. pending before the Supreme Court. Additionally, threats of legal action loom over newly finalized implementations of the 1977 Community Reinvestment Act and proposed tightening of capital rules.
The shift towards legal battles signifies a cultural change within the banking industry, as lobbying efforts are increasingly moving into the public eye. While the Biden administration supports common-sense reforms, lobbyists argue that regulatory heads appointed by the administration are unwilling to compromise or listen to their concerns. This approach contrasts sharply with the industry’s behavior during the Trump administration when rules were significantly rolled back.
Public campaigns and legal threats have emerged as a response to the acrimonious political discourse in the country. Previously handled discreetly, industry grievances are now settled through public disputes. Trade groups argue that their tactics are necessary due to the extraordinary demands placed on banks by regulators, especially smaller institutions.
Lobbyists have criticized proposed rules by multiple regulators, such as the Fed’s plan to tighten capital requirements, through public posts and news releases. These public statements are seen as potential preludes to lawsuits, reflecting the industry’s adoption of aggressive strategies previously favored by outside interest groups.
Despite the pushback, regulatory authorities maintain that they are exercising long-held powers to address specific issues within the industry, including racial discrimination. The battle between banks and regulators continues to intensify, with the outcome expected to shape the future regulatory landscape.
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