Power transcends policy in dysfunctional Washington, D.C., where the No. 1 job of every member of Congress is to get re-elected. That is what Camden R. Fine sees in his role as president and CEO of the Independent Community Bankers of America. “They don’t give a darn about policy,” he told members of the Missouri Independent Bankers Association at their annual convention last month. “They have one goal — re-election.”
Describing a Congress in disarray, he noted that from Jan. 1 through July 31, more than 4,000 bills were introduced; 21 have become law when signed by President Barack Obama. They did not resolve any of the weighty matters the nation faces. Rather, they were along the lines of the Freedom to Fish Act and naming a bridge after St. Louis Cardinals icon Stan Musial. While it considers the national debt, a new appropriations bill and immigration reform, the House will try to rename 49 post offices around the country, according to Fine.
But the legislators do not seem very worried about any of these issues. Fine said the House was scheduled to be in session just six more days and the Senate for 10 days through Sept. 30. “They will be in Washington only five days together in order to accomplish anything,” he added.
Nevertheless, Fine had some nuggets of encouraging news for the Missouri bankers. Even though credit union taxation is not something to hold their breath about, “We have blunted the credit unions’ efforts to expand their lending powers,” he said. “We stopped it in the 112th Congress and it is not coming back.”
Industry lobbyists are also making progress on imposing limits on the Farm Credit System, Fine reported. “It is not a mutual institution, it is a government entity,” he pointed out, “and government entities are not in favor in Washington. We are going to get them out of your business, if not in this Congress hopefully the next.”
As for remaking Fannie Mae and Freddie Mac, Congress does not know what to do about them, in Fine’s opinion. “It will take years,” he said.
Fine concluded his remarks by telling the MIBA members community bankers are revered in Washington. “You can push your representatives,” he said. “You have a great reputation; they hear you.” Tell them not to make the onerous and unnecessary regulations apply to community banks, he advised.
Jim Reber, president of ICBA Securities, in describing the impact of Federal Reserve policies on community bank investment portfolios, recalled that on June 19, within three minutes after the following comment by Federal Reserve Chairman Ben Bernanke, interest rates rocketed up by 15 basis points: “When asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent.”
Yields have gotten ahead of themselves, he suggested to the Missouri bankers. “It doesn’t look like yields will go up much from here,” he said.
Reber reminded them that “swap season” is approaching as the year-end nears. His ground rules for the game: You have to beat your “take-out yield” to make economic sense; the step yield curve makes extension swaps work well; and the worst bonds to sell at a gain are tax-frees — unless you have losses elsewhere in your portfolio.
Good candidates for sale during the swap season are odd-lot mortgage-backed securities, short municipals (at a loss) and bullet agencies. Sales of other assets, such as SBA loans, at gains can facilitate taking losses on bonds, according to Reber, and municipals lose value late in the year, he reminded the audience.
Reber concluded his presentation by noting that rates have risen faster than Fed comments should have caused; yields are at two-year highs; barbells are poised to perform well; and there are lots of options with bond swaps.
New MIBA board members elected during the convention were Michael Hoff, executive vice president, Community First Banking Co., West Plains; Stevens Plowman, president and CEO, F&M Bank and Trust, Hannibal; Jim Ross, RCSBank, New London; Brian L. VanFosson, senior vice president, Citizens Bank of Rogersville; Douglas M. Watson, president and CEO, MRV Banks, Ste. Genevieve; and Rudy Riley, president, Northeast Missouri State, Kirksville.
Bill Poquette is editor-in-chief of BankNews.
Copyright (c) October 2013 by BankNews Media