Risk, Reward Ahead for Banks in Run-Up to Midterms

Source: American Banker

It's been a historically busy session for Congress, but lawmakers may not be quite done yet as the nation barrels toward a midterm election. 

A final push for cannabis banking? 

This could be the big moment for cannabis banking reform, but souring bipartisan sentiment on Capitol Hill could make the exercise even more perilous than usual.

Make no mistake: The Secure and Fair Enforcement Banking Act is a popular bill designed to address a long-running issue for the legal cannabis market — an overabundance of cash — by creating a regulatory safe harbor for banks to work with law-abiding companies in the sector. First championed by Democratic Rep. Ed Perlmutter of Colorado in 2013, the law has passed through the House of Representatives several times with healthy bipartisan support.

The problem remains the Senate. Analysts are skeptical that lawmakers would throw their support behind the bill anytime before the 2022 midterm election on Nov. 8.

Industry braces for a Durbin card fee redux

The return of a dreaded fight between retailers and the financial services industry over credit card fees has bank advocates on edge, though the reform faces long odds of passing Congress for now.

Illinois Democratic Sen. Dick Durbin introduced the Credit Card Competition Act of 2022 in July, which would require Visa- and Mastercard-issuing banks with more than $100 billion of assets to add a second payment card routing option to cards to lower merchants' card-processing costs. 

The bill is a follow up on a much-reviled Dodd-Frank reform among bankers — the Durbin amendment — which first required financial institutions to provide a second payment card routing option in physical stores. The requirement has not kept up with the rise in online shopping, which are largely dominated today by Visa and Mastercard. 

Analysts are skeptical that the new Durbin bill is ripe for passage in the current session. Unfortunately for banks, Durbin's bill had a notable co-sponsor: Sen. Roger Marshall of Kansas, a Republican. That means that the bill is unlikely to fade away after 2022. 

Stablecoin and overdraft reform face dwindling odds — for now

Other widely discussed legislative efforts from the past year are more likely to take a backseat this fall, analysts say, even as they loom over the 118th session. 

Take overdraft reform, for one — consumer advocates and their allies among the Biden administration's regulators have taken an increasingly harsh look at banks' reliance on overdraft fees, which has prompted many of the country's largest institutions to abandon or significantly reform their nonsufficient-funds-fees programs. 

It remains to be seen whether any lawmakers will formally take up the mantle as a champion of overdraft reform. Analysts say the fight ahead will be trickier in part because of differences in how overdraft fees are used between large and small financial institutions, putting would-be sponsors at risk of alienating their hometown financial institutions. 

Another high-profile legislative effort faces the prospect of limbo until the results of the 2022 midterms become clear: stablecoin regulation, which would set rules for a type of digital asset intended to maintain a steady value to help facilitate other cryptocurrency transactions. Biden administration regulators have repeatedly urged Congress to introduce rules to better police the sector before it becomes a threat to financial stability. 

This fall, policymakers may get their first look at a highly anticipated stablecoin bill between the top lawmakers on the House Financial Services Committee, Chair Maxine Waters of California and ranking member Patrick McHenry. But even if that bill appears, analysts see long odds of it passing through the Senate for now, especially while Chair Sherrod Brown remains in control of the Senate Banking Committee.