What’s good for the goose
It would never suffice for regulators to allow banks to examine themselves. Why, then, should the actions of regulators not be carefully examined as well?”
Looking back on 2023, TBA has been a national leader in pushing back on regulatory overreach. Our Board of Directors did not hesitate to authorize TBA’s legal challenge to the Consumer Financial Protection Bureau’s (CFPB) Sec. 1071 final rule, and we were a co-plaintiff against CFPB on its UDAAP update that failed to follow administrative procedures law. In both cases, we had success.
The preliminary injunction granted to TBA, Rio Bank and the American Bankers Association on the 1071 final rule provided regulatory relief for most community banks in Texas and most banks in the U.S. for the time being until the Supreme Court rules on the constitutionality of CFPB funding. Community banks across the nation have been spared millions of dollars. Meanwhile, the victory in the UDAAP case with other business and banking co-plaintiffs completely invalidated the Bureau’s unlawful guidance.
Challenging a federal agency in court is undesirable, but in some cases, it is absolutely necessary. CFPB demands that regulated entities follow its rules, but the Bureau regularly exceeds its authority and won’t follow the law as set by Congress. The gross expansion of 1071 data collection from 13 congressionally directed data points to 81 in the final rule is another example of not just regulatory overreach but hypocrisy. CFPB wants to force community banks to collect unreasonable amounts of Sec. 1071 data to ensure they don’t discriminate, but the CFPB recently settled a $6 million lawsuit for discrimination. Further, the CFPB, which advises financial institutions about data protection, had a cyber breach and took months to notify those impacted.
CFPB is not the only regulator in need of oversight. In addition to bank management, there remain significant questions about the role of supervisory agencies in the reverberating California and New York bank failures earlier this spring. In a speech to our colleagues at the Tennessee and Mississippi Bankers Associations, Federal Reserve Governor Michelle Bowman stated that “much work remains to ensure we have identified all of the factors that contributed to the failure of SVB, and the subsequent failures of Signature Bank and First Republic, including the actions of regulators in the lead-up to and following the failures.”
We agree with Governor Bowman. To maintain credibility and public trust in the banking system, Federal regulators — not just bank leaders — should be held to high standards of accountability. A fully independent, third-party review of regulator contributions to these failures should be conducted. Without it, the assessment is incomplete, agencies are unaccountable and unresolved issues keep the system at risk.
It would never suffice for regulators to allow banks to examine themselves. Why, then, should the actions of regulators not be carefully examined as well? What’s good for the goose is good for the gander. Or, in the case of these individual regulators, what’s good for the gander should be good for the goose.
On behalf of the TBA family, Merry Christmas and Happy New Year to you and yours!
Isaiah 9:6