In the News

Blaine Luetkemeyer crusades for community banks

3/5/2020
Roll Call

The center of Blaine Luetkemeyer’s world can be found on Main Street in tiny Saint Elizabeth, a village of 336 souls and no streetlights in the middle of Missouri, where a small bank and a humble church face one another.

Before he came to Washington in 2008, Luetkemeyer’s life revolved around the Bank of St. Elizabeth and the St. Lawrence Catholic Church. A devout Catholic, Luetkemeyer and his family still regularly fill the pews at St. Lawrence, where his younger brother, Brice, serves as the finance council’s president. Brice is also president of the St. Elizabeth community bank that has been in the Luetkemeyer family since 1964.

As a Republican congressman for his hometown as well as the St. Louis exurbs and the state capital Jefferson City since 2007, Luetkemeyer is a community banker’s community banker, and he isn’t afraid to let people know it.

“I’m probably the only one in this room today that’s actually filled out my [Community Reinvestment Act] exam reports,” Luetkemeyer said at a recent House Financial Services hearing. “One of the problems that we’ve got with CRA — as a former bank examiner and a former banker myself — was the abuse by the regulators of CRA over the last several years.”

His three decades on the front lines of finance make Luetkemeyer one of the banking lobby’s go-to guys on the Hill.

“He really understands the issues firsthand from his background in community banking and really is a leader in Congress in driving many of the issues to help the financial services sector and community banks,” said Paul Merski, executive vice president at the Independent Community Bankers of America.

‘Champion of the community banking sector’

Merski said he can’t think of a time when Luetkemeyer advocated against ICBA’s interests: “Not that I recall. He is really a champion of the community banking sector.”

Luetkemeyer spent decades as an officer and director of his family’s bank, and fellow lawmakers say they rely on that expertise — most recently on the obscure topic of the Financial Accounting Standards Board’s new rule known as CECL, or “current expected credit loss” standard.

“That’s banker language,” said New York Democrat Gregory W. Meeks, chairman of the Consumer Protection and Financial Institutions Subcommittee that Luetkemeyer sits on as ranking member. “That’s a whole different language that he translates for us.”

“Where Blaine has been most effective is working behind the scenes and working with members,” House Financial Services ranking Republican Patrick T. McHenry of North Carolina said. “That’s the finer art form that he is the most engaged in: Working with members crafting policy and pointing us all in the right direction.”

Meeks credits Luetkemeyer, and his banking background, for convincing him that CECL poses a risk. “I get to understand issues in ways that are not based on political rhetoric but rely on real experience,” Meeks said. “He’s gotten me to agree with his basic viewpoint on CECL: That we need a careful analysis of this proposal.”

The rule change, which went into effect for most publicly traded companies in January, requires banks to estimate the expected losses on loans and leases they make, rather than mark down a loss on their balance sheets when a default actually happens. That change forces banks to set aside more capital for anticipated losses, which makes them safer but limits lending.

Bully pulpit

Financial firms, particularly smaller ones, say the accounting change is overly broad, unnecessary, and damaging to the economy — arguments Luetkemeyer has echoed from his bully pulpit.

He has so doggedly disparaged CECL at every opportunity that his colleagues have begun to joke about it. “I think his next grandson is going to be named Cecil, he talks about it so much,” Ohio Republican Steve Stivers said at a recent hearing.

Luetkemeyer introduced a bill in September that would force FASB, a private standards-setting organization overseen by the Securities and Exchange Commission, to follow the same rule-making procedures as federal agencies. A few weeks later, FASB voted to delay CECL’s effective date for private banks and credit unions until January 2023.

But that hasn’t satisfied Luetkemeyer, who says the change needs to be stopped, not just slowed down. At a hearing in January, he grilled FASB Chairman Russell Golden. “At what point do you sit down and say, ‘Whoa, this is too much. We’ve got to scrap this thing and completely do something different?’ ” Luetkemeyer asked.

CECL is an issue that could easily have escaped congressional attention — larger banks have started implementing it without much fuss. But Luetkemeyer has taken every opportunity to sound the alarm, holding hearings on it as a subcommittee chairman in 2018, and raising the matter whenever it has been the least bit relevant ever since.

Luetkemeyer isn’t the only former community banker on the House Financial Services Committee. Arkansas Republican French Hill started a bank and ran it for years before his 2014 election win.

Keeping it in the family

But Hill hasn’t been as vocal on the arcana of accounting as Luetkemeyer has, and he diversified his investments since his bank was acquired by a larger one. Luetkemeyer has largely kept his wealth tied to his family’s bank — an unusual move for a member of Congress.

According to his latest available financial disclosures, Luetkemeyer’s shareholdings in the Bank of St. Elizabeth are worth between $5 million and $25 million, which in 2018 generated between $1 million and $5 million in income.

He doesn’t hide his banking connections — quite the opposite — and there’s no suggestion that he’s ever done anything as a congressman to specifically benefit his family’s bank, as opposed to community banks in general. Helping them simply makes sense, Luetkemeyer says, because community banks provide small businesses credit (approximately 42 percent of their bank loans, according to the Federal Deposit Insurance Corporation), and small businesses employ around half of America’s workers.

“I understand that public service — making sure your community grows, so that your business can grow — is very important, and so I learned early on, being involved in public service is important,”Luetkemeyer said.

“I don’t invest in other things because I don’t want to have to be seen as having a conflict of interest in anything else,” Luetkemeyer said. “My mom and dad bought this bank when I was 12 years old, so I’ve been involved in this for 50 years. It’s not something that I got into after I got elected — I’ve been in it for my entire life.”