High drama in 2023
... each of the more than 200,000 bankers in the state of Texas must engage with and voice their opposition to their legislators ...”
Everything Everywhere All at Once
As 2023 draws to a close, it feels like one of the busiest years on record, which is saying a lot given the fact that the pandemic and the rollout of the PPP program were just three years ago. From both political and policy perspectives, it’s hard to wrap my mind around everything that’s happened this calendar year.
Terms of Endearment
The 118th Congress kicked off in January with a new Republican majority in the U.S. House of Representatives. After a historic 15 votes to elect the new Speaker of the House, California Republican Kevin McCarthy emerged as the winner. His victory was relatively short-lived, though, because in an even more historic turn of events, in early October, McCarthy became the first Speaker in U.S. history to be voted out of office — on a motion from a member of his own party. The vote to replace McCarthy was scheduled to take place on October 11.
Political drama usually ebbs and flows such that when things are at a fever pitch in Washington, the seas are calm in Austin. Not this year! While Congressional Republicans battled leadership issues and governed with such a tight margin in the House, state legislators were in historic times as well.
In early May, for the first time since 1927, the Texas House of Representatives voted to expel Bryan Slaton, a House member from Royce Center who resigned the previous day under a cloud of controversy. Then, later that same month, for the first time since the impeachment of Texas Governor Pa Ferguson more than 100 years ago, the Texas House of Representatives impeached a statewide elected official. The House prepared 20 impeachment charges against and approved the impeachment of Texas Attorney General Ken Paxton. After a two-week trial in September, the Texas Senate acquitted General Paxton on all charges. Shortly thereafter, Governor Abbott called legislators back for a third-called special session focusing on school choice and border issues. Citizen legislators who originally planned to be in Austin for the 140-day 88th Session have now been in Austin for 190 days and counting, which isn’t necessarily conducive to political calm.
All Quiet on the Western Front
With the political drama at the capitols in Austin and Washington, it would be nice to have calm on the policy front, but that certainly was not in the stars this year. With the unexpected and rapid failures of both Silicon Valley and Signature Banks, liquidity and the structure of the Deposit Insurance Fund became above-the-fold issues. While legislators have seemingly moved on from the deposit insurance discussion, regulators remain laser-focused on liquidity, with many bankers feeling whipsawed because what was perfectly acceptable from a regulatory perspective in February became verboten in April.
Speaking of April, on April 26, TBA took the highly unusual step of suing the federal government. Along with McAllen-based Rio Bank and later the American Bankers Association, TBA sued the CFPB in federal district court, alleging the agency’s rule implementing Sec. 1071 of the Dodd-Frank Act is unconstitutional from an agency funding perspective and for violating the Administrative Procedures Act.
At the end of May, we filed a Motion for Preliminary Injunction blocking the nationwide implementation of the rule, and at the end of July, U.S. District Judge Randy Crane granted our injunction request but limited the injunction’s applicability to members of TBA and the ABA. The injunction is a sweet victory; however, it is not keeping our eyes off the ultimate prize of having the rule completely invalidated, so our preparations for our underlying suit continue.
Small business lending is the bread and butter for many of our members, and we support small business lending for women- and minority-owned businesses. What we do not support, however, is the overly prescriptive and onerous Sec. 1071 final rule that took three pages of statutory text and turned it into 888 pages of implementing regulations. Thankfully, 46 members of the U.S. Senate and 37 members of the U.S. House agree — S.J.Res. 32, cosponsored by both Senators Cornyn and Cruz, and H.J.Res. 66, authored by Congressman Roger Williams and cosponsored by eight Texans, seek to nullify the final rule. S.J.Res. 32 should come up for a vote before the full Senate this year.
In addition to the above, bankers are increasingly educating lawmakers — both federal and state — about the sanctity of contracts in the free market because retailers, restaurateurs and advocates are seeking government intervention in private contracts.
In both Austin and Washington, formerly laissez-faire Republicans are picking winners and losers in the credit and debit markets by imposing government limits on fees that can be charged by banks and card issuers on electronic payment transactions. Shifting costs from one entity — banks — in favor of another — restaurants and retailers — is anathema to free markets, but legislators in Austin and Washington continue to push this very notion. We have been successful thus far in staving off these efforts; however, each of the more than 200,000 bankers in the state of Texas must engage with and voice their opposition to their legislators to ensure these markets remain free.
It’s a Wonderful Life
Despite the challenges 2023 has presented, the Texas banking industry continues to thrive and be a beacon for our communities and our peers across the country. Committed, passionate, and principled bankers across the state drive the Texas miracle. What an honor and privilege it is to represent you! As 2023 nears an end, I thank you for your continued membership and support and look forward to representing your interests in 2024 — The Year of the Dragon.