U.S. Congressman Marlin Stutzman, a member of the House Committee on Financial Services, issued the following statement regarding federal regulators’ decision to reverse a Volcker Rule provision that harms community banks and lending institutions. The decision follows legislative and administrative efforts by Stutzman and others.
“This is a victory for common sense and I’m pleased that Washington’s bureaucracy recognized that the Volcker Rule’s unfair regulations would have harmed community banks,” Stutzman said. “This rule would have saddled Hoosier institutions with nearly $60 million in needless losses. In exchange for a massive $600 million loss in capital nationally, this regulation would have done nothing to create jobs, open opportunities for families and small businesses, or prevent another financial crisis. Over the past month, businesses and lawmakers only started wading through the Volcker Rule’s nearly 1,000 pages of regulations and red tape. While I am pleased that regulators responded to our calls for common sense, I am concerned that this was the first act in a tragedy of unintended consequences.”
On Dec. 10, 2013, the final Volcker Rule was approved by Washington regulators. Although most community financial institutions do not engage in activities covered by the Volcker Rule, the rule’s treatment of trust preferred securities could result in nearly $60 million in losses by Hoosier institutions. On Dec. 19, Congressman Stutzman led a group of Hoosier representatives in sending a letter to regulators urging them to prevent these losses.
On January 8, Stutzman co-sponsored the Fairness for Community Job Creators Act, legislation to clarify that the Volcker Rule will not force institutions to divest ownership of trust preferred securities that were issued prior to the rule’s final implementation.
On January 14, five federal agencies approved an interim final rule to permit banks to retain interest in certain collateralized debt obligations backed primarily by trust preferred securities.