Sen. Shelby Seeking 'Doable' Banking Legislation

By Victoria McGrane And Ryan Tracy 

        WASHINGTON--With the financial services world following his every move, Alabama Republican Richard Shelby is flexing his muscle as chairman of the powerful Senate Banking Committee.
        In a speech on Wednesday, Mr. Shelby revealed a willingness to play hardball with Democrats over a bill designed to ease rules for small and midsize banks. He is also holding the Obama administration's feet to the fire over two open seats on the Federal Reserve's governing board, refusing to move one White House nominee until the president chooses someone to fill the other post.
        "We are going to do what's doable," Mr. Shelby told a gathering of about 1,000 community bankers in Washington Wednesday. "Because just to try and do nothing, that's no good. We want to give you some relief." The group--which collectively plans to hold 300 meetings with lawmakers to push for legislation in the next few days--rewarded the lawmaker with not one but two standing ovations during his speech.
        Mr. Shelby has spent the months since Republicans took control of the Senate working on a legislative package that could ease small and midsize banks' regulatory burden, including possible exemptions to mortgage-underwriting rules, capital rules and stress tests. Other measures are on the table as well, including changes to the structure of the Federal Reserve. Mr. Shelby has sought to negotiate a bipartisan compromise with the panel's top Democrat, Sen. Sherrod Brown of Ohio.
        Mr. Shelby didn't offer details on his bill, saying he was still shopping it to colleagues. He said he hopes to have "four or five" Democrats signing on to the Republican-led legislation
        Nonetheless, a deal between the two sides remains out of reach just weeks before a May 14 deadline set by Mr. Shelby for the committee to debate and vote on sending his legislation it to the full Senate.
        Congressional staff familiar with the discussions said he has struggled to reach a compromise with Democrats, some of whom will be needed to move the legislation through the Senate.
        "Democrats have made it clear that they're interested in providing regulatory relief to community banks and credit unions, and Republicans are talking about a broader approach," said a person familiar with the committee's Democrats. "If Republicans insist on a grab bag of Dodd-Frank rollbacks Democrats aren't interested, but Democrats really don't know what the Republicans are planning."
        This person said Republican and Democratic staffs haven't met in two weeks and Democrats also haven't seen a draft or an outline of what Mr. Shelby's bill might include.
        Mr. Shelby appeared to put pressure on Democrats on Wednesday, urging community bankers to lobby their "friends on the Democratic side...because we've got some people on the Banking Committee [who] don't want to change anything. They like Dodd-Frank. Can you imagine that?"
        Democrats bristle at that charge, saying they have said publicly and privately they are amenable to passing legislation to ease the regulatory burden facing small financial institutions.
        "Democrats are ready, willing, and able to provide regulatory relief for community banks and credit unions," Mr. Brown said in an emailed statement.
        Proof of Mr. Shelby's interest in getting a bipartisan measure can be seen in what he hasn't pushed, lobbyists say.
        He convened a series of hearings on issues that could be part of his bill, but didn't hold one on the Consumer Financial Protection Bureau--even though he would like to replace the agency's single director with a board and subject it to the congressional appropriations process. Most, if not all, Democrats consider any changes to the bureau to be a non-starter.
        Mr. Shelby's staff also didn't include in negotiations with Mr. Brown so-called "Audit the Fed" legislation, popular on the right, that would open the central bank's monetary policy deliberations to the Government Accountability Office, according to people familiar with the matter.
        But Mr. Shelby has been trying to influence Fed policy in other ways. In recent weeks, he informed the White House he won't schedule a hearing for Allan Landon, a former Bank of Hawaii chief executive nominated as a Fed governor, until the president nominates a candidate for the other open seat at the Fed.
        The delay doesn't appear fueled by any GOP objections to Mr. Landon himself. Republicans as well as Democrats had been pushing the White House to embrace a candidate with community banking experience and none has publicly raised any complaints about Mr. Landon's background.
        Independent Community Bankers of America President Camden Fine said at his group's event Wednesday that Jeff Zients, director of the National Economic Council, told him he is actively vetting candidates. "From our view, the ball is in the [White House's] court," said Mr. Fine, whose group lobbied for years to secure a Fed nominee with community banking experience.
        "As is standard when we have vacant positions, the White House is conducting a comprehensive search for experienced and highly qualified individuals," a White House spokeswoman said about the other vacant Fed governor slot. "When we are prepared to make an announcement, we will do so."
        Mr. Shelby, meanwhile, seems eager to remind Democrats there is more than one path to getting something done in Congress. In his speech to community bankers, noted that last year lawmakers made a change to Dodd-Frank through budget legislation when they couldn't move it forward on its own. "It might take that this year because we are not giving up," he said.
        Many of those watching the action in the Senate banking panel warn it is too early to conclude that Mr. Shelby won't get his way.
        Mr. Shelby "knows how to pull every lever and push every button to get legislation enacted," said Jaret Seiberg, an analyst with Guggenheim Securities. "You underestimate Richard Shelby at your own peril."
        Write to Victoria McGrane atvictoria.mcgrane@wsj.com and Ryan Tracy at ryan.tracy@wsj.com
        Corrections & Amplifications
        Sen. Richard Shelby told a group of bankers Wednesday he is targeting legislation to give regulatory relief to small and midsize banks. An earlier version of this story incorrectly said it was on Monday. (April 29, 2015)
        Write to Victoria McGrane at victoria.mcgrane@wsj.com and Ryan Tracy at ryan.tracy@wsj.com
        (END) Dow Jones Newswires

        April 29, 2015 17:08 ET (21:08 GMT)

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