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A one-sentence bill worth $300 million to a bank owned by a politically connected family that has doled out hundreds of thousands of dollars in campaign donations is about to get a big push forward.
Set to be approved by the House Financial Services Committee on Thursday, the legislation would help Emigrant Savings Bank of New York sidestep a costly mandate of the Dodd-Frank financial reform law. No other bank in the country would be affected.
The bill was introduced by Rep. Michael Grimm (R-N.Y.), but it’s backed by members of both parties on the financial services panel. Emigrant Bank is owned by billionaire Howard Milstein, a bundler for President Barack Obama’s 2008 campaign and a major Empire State political player.
The bill has drawn no objections so far from bank regulators or the Obama administration, and proponents argue it is narrowly designed to help a community bank unfairly harmed by the controversial Dodd-Frank law.
But it is also an object lesson in how the rich and powerful — backed by a team of high-powered lobbyists — can get Congress to act on their issues, even as Capitol Hill wages partisan warfare on everything else.
At issue is an arcane provision in the Dodd-Frank law setting out how much capital banks are required to have and in what form. Emigrant, the nation’s largest privately owned bank, currently has $10.5 billion in assets, according to its chief regulatory officer, Richard Wald.
But amid the 2008 financial crisis, Emigrant — at the time slightly larger than it currently is — borrowed $2.3 billion from the Federal Home Loan Bank of New York. Bank officials said the move was made out of an abundance of caution, but it put Emigrant beyond the $15 billion threshold in assets as of Dec. 31, 2009.
That triggered a provision of Dodd-Frank that will force Emigrant to “liquidate” some of its assets starting next year.
The Milsteins already have been forced to inject tens of millions of dollars into the bank over the past several years as the New York business and real estate markets soured, according to media reports.
So Congress is being asked to intervene.
Grimm’s bill would allow Emigrant to use an alternate date of March 31, 2010 — when its assets were under $15 billion — as a cutoff date, thus saving the bank $300 million in so-called Tier 1 capital.
That would enable Emigrant to make an additional $4.5 billion in loans, helping the New York economy, bank officials said.