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The House Financial Services Committee is set to vote on a bill that would benefit just one institutions: Emigrant Bank, whose CEO Howard Milstein has made contributions to many of the bill's co-sponsors. And people wonder why Americans are cynical about politicians.
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A $2.3 billion loan temporarily pushed Emigrant's total assets over $15 billion. Because it was briefly above that threshold, the bank will be subject to a provision of the Dodd-Frank Act that prevents banks from counting trust preferred securities as part of their Tier 1 capital. Emigrant is asking Congress for an exemption.
May 18
WASHINGTON — A House panel approved a bill Thursday that would allow Emigrant Bank of New York to avoid higher capital standards imposed by the Dodd-Frank Act.
The 35-15 vote by the House Financial Services Committee followed a story by
Rep. Michael Grimm, the bill's sponsor and the recipient of $2,500 in campaign contributions from the Milsteins, said prior to the vote that he would not be deterred by the negative press coverage.
"It's called doing the right thing regardless of what papers want to do to make news," said Grimm, R-N.Y., during the committee's deliberations. "That's what leadership is about."
The legislation would change a provision of Dodd-Frank — authored by Maine Sen. Susan Collins — that prevents banks with more than $15 billion in assets from counting trust preferred securities as part of their tier 1 capital.
The tighter capital standards apply to banks that were over $15 billion in assets on Dec. 31, 2009. Grimm's bill would push that date back by three months, a change that would allow Emigrant Bank, which is the nation's largest privately held bank, to avoid the restrictions.
No other banks would be affected by the legislation.
Emigrant and its allies on Capitol Hill note that the New York City lender was above the $15 billion mark only temporarily in 2008 and 2009, and only because it took out a $2.3 billion advance from the Federal Home Loan Bank of New York during the financial crisis. That was a cautionary move designed to guard against the risk of uninsured deposits leaving the bank.
Grimm initially sought to bypass a hearing and committee vote on the legislation, but Rep. Barney Frank, D-Mass., objected to that parliamentary move, arguing that a bill designed to help a single company should receive public scrutiny.
The Financial Services Committee subsequently held a hearing on the bill, which sparked the press coverage.
During Thursday's committee meeting, Frank said that he had achieved what he set out to do, and that he planned to vote for the legislation.
"I think that the substance is reasonable," said Frank, the committee's top Democrat.
Rep. Gregory Meeks, D-N.Y., one of the bill's co-sponsors, said that while he supports the Collins Amendment, the impact of that provision on Emigrant Bank will affect lending in his Queens congressional district.
Meeks told members of the committee that Emigrant was only above the $15 billion threshold because it was exercising prudence, and that the bank, which lends to small businesses in his district, is worthy of his support.
"Yes, they will have a friend in me, as long as they're doing the right thing," said Meeks, who has received campaign contributions from the Milsteins.
Also speaking on behalf of Emigrant was Rep. Carolyn Maloney, another co-sponsor of the bill and a recipient of contributions from Milstein.
Maloney, D-N.Y., said that she does not believe Dodd-Frank was meant to punish banks, such as Emigrant, that exercised caution during the financial crisis.
"They are a smaller community lender doing exactly what banks should be doing," Maloney said.
Also supporting the legislation was Financial Services Committee Committee Chairman Spencer Bachus, R-Ala.
"I think when we find ourselves in these situations we should be responsive to mitigating unintended consequences," Bachus said prior to the vote.
Bachus suggested that some in the media were overreaching to portray the actions of Congress in a negative light. But he also said, "I think the press was doing their job to point out that this would benefit one institution."
Following the vote, Grimm continued his attack on the media's coverage of the legislation.
"This is sound policy and good for the hard-working families and businesses in New York," Grimm said in a
The committee's bipartisan support for the measure should bolster its chances of passage by the House. But the bill faces an uncertain fate in the Senate, where numerous House-passed changes to Dodd-Frank have yet to get a vote.
"It is possible that the Emigrant Bank bill may have to wait until the post-election, lame duck session to get consideration in the Senate," Brian Gardner, a research analyst with Keefe, Bruyette, & Woods, Inc., wrote Thursday in a note to clients.
