The fight over the new financial reform law has increasingly become a battle to win the hearts and minds of small bankers.
At hearings, congressional Republicans have portrayed the Dodd-Frank law as a crippling weight on small banks. But U.S. regulators defending the law say it gives small banks more than just a stone with which to fight banking Goliaths.
The wooing of the financial sector's little guys represents the prevalent view that a good way to weaken or strengthen an aspect of the law is to make small banks your allies.
"It would be difficult to overstate the influence of community bankers," said Dennis Kelleher, a former Senate Democratic leadership aide and president of the Wall Street watchdog Better Markets, Inc. "They're almost all deeply connected to their community and that's why they get listened to by members of Congress, who last time I checked had this inordinate desire to be reelected."
Whose pitch is the most persuasive remains an open question, but early results show supporters of the law have their work cut out for them.
In interviews with several bankers at the Independent Community Bankers of America convention this week, most acknowledged the law directly benefits them in specific ways. They will pay less into the fund that covers the cost of bank failures, as supporters have argued.
They are skeptical, however, that new restrictions aimed only at big banks will not also cost them time and money through more staff training and compliance work.
This skepticism is a frustration for the law's supporters, who argue it ignores the facts, but many bankers said Dodd-Frank is so big and complex it is hard for them not to have a jaundiced view about its impact.
"There is so much of it that we don't understand yet," said Greg Marrs, president of First American Bank in Artesia, New Mexico, who like others said he raises an eyebrow when the government says new laws will help their businesses.
One battleground: The new Consumer Financial Protection Bureau.
Congressional Republicans and the banking industry are hostile toward the bureau and argue it will weigh heavily on community banks.
Meanwhile, Elizabeth Warren, who is charged with setting it up, has been aggressively courting small bankers and credit unions since joining the Obama administration in September.
Her latest pitch came at the ICBA conference where she told the crowd the bureau would benefit them by simplifying mortgage and credit card regulations and cracking down on non-bank competitors such as payday lenders.
Warren argues the small bank business model matches her view of working consumer markets: financial products that are easily understood and can be compared.
"It makes sense to look at the community banks and other businesses who do front-end pricing as allies," she said in an interview.
Bankers who heard Warren's pitch said they liked what she is selling, but are not sold the bureau will make their lives easier when it opens for business in July.
"One concern for small banks is change is expensive," said Mark Mangano, president of Northern Hancock Bank & Trust in Newell, West Virginia.
Tensions have run high in recent weeks over the role small bankers are playing in the Dodd-Frank debate and some frustrated supporters charge they are doing the bidding of their larger competitors.
For instance, small banks have lobbied hard to change a crackdown on the fees banks charge merchants when a debit card is used.
The law explicitly exempts banks with less than $10 billion in assets, but smaller institutions say the carve out will not work and they will lose needed revenue.
"I used to really believe there was a qualitative -- not just quantitative but a qualitative -- difference between community banks and credit unions and the big boys -- the Wall Street banks," Senator Richard Durbin, the author of the fee crackdown, said on March 10. "Over the years, I am sorry to say when it comes to these issues, they are the same."
The American Bankers Association, which represents banks of all sizes and has been critical of the law, has faced charges it is using small banks to promote the interests of big banks.
ABA Executive Director for Financial Institutions Policy Wayne Abernathy called the charge "ludicrous" arguing community bankers have a long track record of being independent.
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