U.S. Congressman Marlin Stutzman, a member of the House Committee on Financial Services, led a group of Hoosier representatives today, expressing concern to Federal Reserve Chairman Ben Bernanke and other pertinent regulators about the newly issued rules implementing the “Volker Rule” and their unintended consequences on Indiana’s banks, including community banks and lending institutions. If left unchanged, the rule’s treatment of Trust Preferred Securities could result in nearly $60 million in losses by Hoosier institutions due to accounting changes that would have to be implemented immediately.
“Unless Washington’s bureaucracy reverses its course before the end of the year, Hoosier lending institutions could face nearly $60 million in losses,” said Stutzman. “With nearly 1,000 pages of regulation and red tape, the Volcker Rule has created a flood of unintended consequence that will do nothing to put Hoosiers back to work, help our communities access capital, or prevent another financial crisis. My colleagues and I have urged Chairman Bernanke and his colleagues to address this issue immediately and avoid these costly and needless losses.”
The full text of the letter is found below.
Dear Chairman Bernanke, Chairman Gruenberg and Comptroller Curry:
We are writing to you about an urgent issue regarding the treatment of Trust Preferred Securities (TruPS) in the recently finalized regulations implementing the “Volcker Rule”. Since the release of these rules, it is our understanding that the industry has been in touch with you directly to underscore the urgency of the matter and its impact. Furthermore, associations representing all 50 states, including Indiana, wrote to you on December 17th to ask for your immediate relief from the rules that would require accounting practices that “could subject many banks to imminent financial losses.”
As Members of Congress who represent numerous Hoosier institutions affected by these rules, we wish to reiterate the devastating impact that these rules would have on consumer lending and the health of the financial institutions in our state.
According to our most recent data, the unfavorable treatment of TruPS could affect as many as 275 institutions nationwide with the median asset size of just over $690 million. In Indiana alone, 16 institutions could face nearly $60 million in losses if these rules are left unchanged. The total losses around the country would affect many banks, including small and community-based lending institutions that are the lifeblood of many of our communities.
We appreciate that the rule-making process is very complex. However, regulators must correct this issue before the end of the year. In implementing the Dodd-Frank Act, regulators have taken careful precautions to recognize the measured treatment of TruPS given their importance to these institutions and their ability to lend. Therefore, we ask that you address this issue as soon as possible and we appreciate your prompt reply.
Congressman Marlin Stutzman (IN-03)
Congresswoman Susan Brooks (IN-05)
Congressman Larry Bucshon (IN-08)
Congressman Luke Messer (IN-06)
Congressman Todd Rokita (IN-04)
Congresswoman Jackie Walorski (IN-02)
Congressman Todd Young (IN-09)