LITTLE ROCK — Sen. Blanche Lincoln of Arkansas is supporting a legislative move in Congress that would currently benefit only one bank in the state, Arvest Bank of Fayetteville. Her provision would be part of a proposed major overhaul of the financial system.
An amendment to a Senate bill would eliminate the use of trust preferred securities, similar to promissory notes, as capital. With the elimination of such securities as assets, banks with assets totaling $10 billion or more would have to raise more capital.
The overhaul effort has been prompted by concerns that the nation not fall into a crisis, as it did in 2008. Insufficient assets to back home loans sent the financial sector to the brink of collapse.
Lincoln, a Democrat, is seeking to increase the amendment’s threshold to $15 billion.
The only bank in Arkansas with more than $10 billion in assets is Arvest,owned by the Walton family, which owns 45 percent of Wal-Mart stock. Arvest has $11.3 billion in assets.
If the asset threshold is set only at $10 billion, Arvest would have to raise about $115 million to meet requirements.
Arvest has about $115 million in the affected securities, well within current limits of 25 percent of total capital.
The next largest banks in Arkansas have about $3 billion in assets - Home BancShares of Conway, Simmons First National of Pine Bluff, First Security Bancorp of Searcy and Bank of the Ozarks of Little Rock.
There are about 20 banks in the country in the $10 billion to $15 billion range, The Wall Street Journal reported Wednesday. There are about 8,000 banks in the United States.
Lincoln is running for reelection in November against Republican John Boozman,the 3rd District U.S. representative.
Arvest Bank Group’s political action committee has given $11,500 to Lincoln since 1999, Arvest said. Wal-Mart Stores employees and Wal-Mart’s political action committee have given $85,700 to Lincoln, the Journal said, citing the Center for Responsive Politics.
Ken Hammonds, president of the Arkansas Bankers Association, said Wednesday that he asked Lincoln in a conference call with other Arkansas bankers, including an Arvest representative, on Monday to support raising the threshold to $15 billion.
Bankers in the state want an even higher level for allowing trust preferred securities to be used as capital, possibly $25 billion or higher, Hammonds said.
A higher limit would “cover Arkansas banks and their growth,” Hammonds said. “A couple of those [Arkansas banks with $3 billion in assets] had only $2 billion two years ago.”
“This didn’t have a thing to do with Arvest,” Hammonds said of the conference call. “[Lincoln] never mentioned Arvest, and neither did [the bankers on the call]. It has to do with the growth of our banks in the next few years.”
Lincoln supports the provision in the House of Representatives version of the bill to exclude all banks from meeting these requirements, said Marni Goldberg, a Lincoln spokesman.
Failing that, “she believes the threshold should be high enough to ensure no bank in Arkansas - no matter its owner - is subject to these new [proposed] rules on existing capital, which would hinder their ability to generate lending for consumers and businesses at a time when access to credit is already difficult to come by,” Goldberg said. “These banks did not cause the near collapse of our financial system and should not be punished for Wall Street’s actions.” Scott Grigsby, an executive vice president and regional manager for Arvest, declined to comment when asked whether the bank had spoken with Lincoln about the matter.
In a prepared statement, Grigsby said that Arvest representatives “may have [had] discussions directly with legislators or their staffs to better understand the proposed laws and to provide background information.”
The $10 billion threshold “is totally arbitrary,” Grigsby said in the statement.
“To change the rules midstream is fundamentally unfair to hundreds of banks who have long-term capital plans in place of which trust preferred is an important part,” Grigsby said.
Arvest currently exceeds the federal requirements to be well capitalized and “intends to remain so,” Grigsby said, meaning Arvest will raise additional capital if it is required to do so.
The Walton family acquired what is now Arvest Bank in 1961. The family, which owns about 45 percent, or $85 billion worth, of Wal-Mart Stores Inc. stock, owns almost all of Arvest Bank Group Inc., Arvest Bank’s holding company.
Most Arkansas bankers oppose the overall thrust of the proposed legislation. Other provisions in the bill include formation of a new regulatory agency and limiting fees banks charge merchants for accepting debit and credit cards.
“Legislation such as this will have a significantly negative effect on smaller banks,” said Larry Wilson, chairman and chief executive officer of First Arkansas Bank & Trust in Jacksonville, which has about $600 million in assets. “We’re the 20th-largest bank in Arkansas, and I’m not sure we’ll survive.”
In other developments, House and Senate Democratic leaders failed at a meeting Wednesday morning to persuade Lincoln to soften a provision she wrote that would force banks to abandon the lucrative business of derivatives trading.
Lincoln rejected the entreaties, according to a person who attended the meeting.
“We’re listening to what people’s concerns are,” Lincoln said later Wednesday.
Information for this article was contributed by Binyamin Appelbaum of The New York Times.
Front Section, Pages 1 on 06/24/2010