Banking Law

The push to craft federal legislation to allow privately-owned community banks to write off commercial real estate loan losses over a ten-year period got an apparent shot in the arm in Colorado. Democratic Rep. Ed Perlmutter and Republican Rep. Mike Coffman are reportedly working on a bill that would allow not only banks but credit unions to do that just that for regulatory capital reporting purposes. Perlmutter's a freshman, but he's on the House Financial Services Committee, which helps. It also helps that he styles himself as a "centrist." He comes from a well-known Colorado family that's been hip-deep in the real estate development business in Colorado for decades, so, he understands what's at stake.

?It?s what we did in the ?80s for the agricultural lenders,? Perlmutter said at a business education event held April 9 at Moye White LLP in Denver. ?If we operated under the same rules in the ?80s that we?re operating under today, we probably would have lost almost every bank in Colorado.?

He also understands that this type of temporary "forbearance" is distasteful to some federal banking regulators.

?What they fear is that we?re postponing the inevitable by allowing it to be stretched out,? Perlmutter said. ?But we?re beginning to see the light at the end of the tunnel, and I want people to get to that light.?

As Perlmutter asserts and as we discussed in a prior post, there's precedent for this approach.

Barbara Walker, executive director of Independent Bankers of Colorado (IBC), said that amortization would allow banks more leeway to work with struggling borrowers. The IBC, along with related community banking organizations, has been lobbying Congress for similar legislation since December.

?Temporary amortization kept family farms and ranches across Colorado and our country alive in the late 1980s during that economic crisis, and we believe it will work to sustain Main Street today,? Walker said.

I'm pleased to see that the IBC has been working with other community banking trade associations and community banks on this effort for the last few months. I wish a few more would jump on the bandwagon.

Coffman's a former Marine who took an unpaid leave of absence from the Colorado House to serve in combat during the First Gulf War. He's also ran a successful property management firm in Colorado for over twenty years, and serves on the House Small Business Committee. He appears to be a politician with a solid understanding that community banks are the major lenders to small businesses, which, in turn, are the major engine of job creation in this country. Perlmutter and Coffman appear to grasp the fact that for every dollar of capital a bank with a 10% Tier 1 capital requirement loses, that's $10 less money available for lending. They also appear to be the type of guys who can put aside poisonous partisan bickering for the greater good. We need more of them. Many more of them.

I hope this deal is for real. The following paragraph near the end of the article gives me pause.

It?s not known when the forbearance bill would be introduced, if at all, according to Leslie Oliver, a spokeswoman for Perlmutter. It?s still a work in progress, and no further details were available.

Eight more community banks bit the dust last Friday. There's no time to lose, guys. Keep pushing forward.