CFPBs Elizabeth Warren Meets with CBAI Bankers.pdf

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					                              CFPB's Elizabeth Warren Meets with CBAI Bankers
                                                           February 23, 2011

The Community Bankers Association of Illinois (CBAI) and Community BancService Corporation hosted
a Roundtable Discussion with Elizabeth Warren of the Consumer Financial Protection Bureau (CFPB)
and CBAI bankers at The Westin O'Hare on February 23, 2011.

CBAI Vice President of Federal Governmental Relations David Schroeder welcomed everyone to the
Roundtable Discussion, highlighted the Association's 37 year history of exclusively representing Illinois
community banks, and emphasized the importance of our cooperative efforts with the Independent
Community Bankers of America (ICBA).

Schroeder said the CFPB had previously reached out to the CBAI senior staff to discuss the formation of
the new Bureau. Last December CBAI suggested that the laser focus of the CFPB should be on the true
causes and real culprits of the mortgage meltdown and the financial crisis - the largest banks in the
country and the shadow financial industry. In addition, the goal of the CFPB should be to hold those
financial service providers up to the existing high standard for compliance with consumer laws, rules, and
regulations currently required of community banks.

The Roundtable Discussion among CBAI bankers is part of the continuing outreach effort of the CFPB,
an excellent opportunity for community bankers to hear Professor Warren's vision for the CFPB, and
for Professor Warren to answer questions and specific concerns about the focus and practices of the new

Professor Warren was named Special Assistant
to the President and Special Advisor to the
Secretary of the Treasury to oversee the
development of the new CFPB. She brings to
this position a long and impressive background
of accomplishments. Warren most recently
served as the Leo Gottlieb Professor of Law at
Harvard University. She has written nine
books, and more than a hundred scholarly
articles dealing with credit and economic stress.
Also, Time magazine has twice named her one
of the Time 100 Most Influential People in the
World.                                              CBAI bankers engaged in the Roundtable Discussion with
                                                    Professor Elizabeth Warren, Assistant to the President/S pecial
                                                    Advisor - Consumer Financial Protection Bureau
                                                  Professor Warren thanked CBAI and the bankers for the
                                                  opportunity to meet, and briefly reviewed the origins of the
                                                  new Bureau. The CFPB was created by the Dodd-Frank
                                                  Wall Street Reform Act of 2010 and will be an
                                                  independent bureau within the Federal Reserve System. Its
                                                  stated goal is to empower consumers with the information
                                                  they need to make financial decisions that are best for them
                                                  and their families. Further, the CFPB’s goal will be to set
                                                  clear and consistent rules that allow banks and other
                                                  consumer financial services providers to compete on a level
                                                  playing field and that let consumers clearly see the costs and
                                                  features of products and services.
Professor Elizabeth Warren, Assistant to the
President/S pecial Advisor - Consumer Financial   The discussion continued with a lengthy period of thoughtful
Protection Bureau                                 questions and comments from CBAI bankers to Professor

Roger Lehmann, President and CEO of The Harvard State Bank and Director of the Federal Home Loan
Bank of Chicago, graphically illustrated the increased consumer regulatory burden on banks as well as
consumers when he produced a multi-inch thick residential mortgage application package with all of the
attachments, together with a thick set of residential mortgage loan documents. In contrast, he revealed a
one page Promissory Note and single page Trust Deed from the purchase of his home several decades
ago. Professor Warren clearly acknowledged Lehmann's message on the increased burden of consumer
regulatory compliance. She said that if the result
of the creation of the CFPB was just to add
additional regulation on top of the existing
burden, then the Bureau will have failed in its
mission. Rather the goal of the Bureau is to
simultaneously assist consumers, simplify
regulatory compliance for everyone, and level
the playing field between the banks and non-

HomeStar Bank in Manteno’s General Counsel
William Smith stated that existing mortgage         Left to Right: Kent Siltman (Citizens First S tate Bank,
disclosure forms are difficult for attorneys,       Walnut), Terry Griffin (CBAI), Roger Lehmann (The
compliance officers, and even the regulators        Harvard S tate Bank), Rick Jameson (Morton Community
themselves to understand (not to mention            Bank), and Mike Kelly (CBS C)
consumers). He said there is very real need to
simplify and enable everyone to understand these disclosures. Professor Warren agreed and stated one of
the goals of the new Bureau is to develop a one page mortgage comparison document that is clear and
understandable that facilitates an easy comparison of products from both bank and non-bank mortgage
service providers.

Tom Marantz, Chairman and CEO of the Bank of Springfield and CBAI Regional Vice Chairman,
expressed a concern that without a Fannie Mae and Freddie Mac, community banks will have to access
the secondary market through the large banks which will put community banks at a significant
competitive disadvantage. Other bankers stated that the traditional operations of Fannie and Freddie were
not responsible for their current problems. The explosion of the GSE's balance sheets with the purchase
of sub-prime residential mortgage loans caused the problems. Several of the bankers shared their low
delinquency rates and their proactive outreach efforts to delinquent borrowers as evidence of how
community banks service their properly underwritten residential mortgage loan portfolios. Professor
Warren acknowledged the GSE issue and agreed with the need for community banks to access the
secondary mortgage market through independent sources so as not to be at a competitive disadvantage.

Tony Sisto, Chairman and CEO of STC Capital Bank in St. Charles and CBAI Group Director, said the
umbrella term "Bank" has unfortunately been adopted by many firms in the broader financial services
industry which is a disturbing trend as these firms’ use the good name and reputation of community
banks. Professor Warren acknowledged this trend and stated that this is all the more reason to have easily
understood disclosure documents that consumers can use when they are shopping for financial products
across the entire financial service industry.

Tom Marantz also cautioned Professor
Warren about financial service
providers who will move just beyond
the bounds of the regulations so as to
avoid the consumer compliance
requirements. Professor Warren
acknowledged this very real possibility
and noted that the majority of the
funding for the new Bureau will be for
examination and enforcement (from
which community banks are exempt).
To put the Bureau's challenge into           Left to Right: William S mith (HomeStar Bank), Richard Remijas (Park
perspective, while there are                 Federal S avings Bank), Tom Marantz (Bank of S pringfield), Jason
approximately 8,000 banks there are          Knoedler (Bank of S pringfield), Gerry Johnson (Grand Ridge National
over 80,000 non-bank financial service       Bank), S usan Volkert (Bank of Montgomery), Tony Sisto (S TC Capital
                                             Bank in S t. Charles), and Val DuCharme (STC Capital Bank in St.
providers. She fears that if the Bureau is   Charles)
not properly funded the examination and
enforcement efforts will suffer.

Greg Ohlendorf, President and CEO of First Community Bank in Beecher and Chairman of ICBA's
Policy Development Committee, spoke about the long tradition of community banks custom tailoring
loans to fit the unique needs of their customers, and voiced a concern that the Bureau would impact this
practice and stifle product innovation. He said if it were to happen, it would be an unfortunate unintended
consequence of the legislation which created the Bureau. Professor Warren acknowledged this challenge
and expressed a willingness to accommodate, perhaps through exemptions or in other ways, and permit
community banks to continue to serve their customers’ unique needs while not hindering product

Several common themes expressed by the bankers throughout the discussions were: a consensus among
the bankers about the challenges of complying with the current and increasing regulatory burden, that
community banks are least able to shoulder the cost of this burden, and the urgent need to level the
playing field between community banks and the country’s largest banks and shadow banks.

Professor Warren was asked about the nomination of a permanent Director of the CFPB and whether that
individual would share her vision for the Bureau. She did not comment on the timing or the individual
who would be nominated for the permanent Director, but hoped that her vision would be shared. She did
state, however, that the CBPB must begin examination and enforcement of the banking profession (> $10
billion in assets) by mid-year, but the examination of and enforcement against the non-bank financial
service industry must (by statutory requirement) wait until a Director has been approved by the Senate.

CBAI thanks Professor Elizabeth Warren and her staff, Leandra English and William Sealey, and the
CBAI community bankers for participating in this important Roundtable Discussion!

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