American Bankers Association

The American Bankers Association (ABA) is a Washington, D.C.-based trade association for the U.S. banking industry. Founded in 1875, ABA today represents banks of all sizes and charters, including community banks, regional and money center banks, savings associations, mutual savings banks, and trust companies, with the average member bank having approximately $250 million in assets.

Like many large trade associations, ABA's principal activities include lobbying, professional development for member institutions, maintenance of best practices and industry standards (for example, routing transit numbers), consumer education, and distribution of products and services. ABA is considered the largest financial trade group in the United States.

History

The origins of the American Bankers Association are in the Panic of 1873, when St. Louis banker James Howenstein found himself in “a tight squeeze,” with only a few hundred dollars in funds and millions of deposits to pay. Relying on help and intelligence from peer bankers in the form of frequent correspondence, Howenstein escaped his dilemma and realized the value of a bankers’ fraternal organization.

Howenstein later recalled:

The 1873 panic was a well spring of subject matter for correspondence and we cashiers availed of it for the general information. We were acquaintances before we had seen more of each other than handwriting; we were friends before we knew it. But the time had now come for something better. With our pens we had wished each other the good cheer of a Merry Christmas and a Happy New Year, and that scarcely discharged the pensiveness of our unrelief of bank work. We wanted to meet each other. The desire possessed us to engage the mind for a season in new and restful and indeed educational objects to mitigate and counteract the despotism of money; to make some dividends out of our lifetime and set apart some days in the year to the extinguishment of bad debts which the eager pursuit of business had imposed on nature, to pause at regular intervals to put aside something to rest-fund.

Howenstein convened a group of 17 bankers in New York City on May 24, 1875; this group planned the first convention for the new American Bankers Association, which opened on July 20, 1875, in Saratoga Springs, New York, with 349 bankers representing 31 states and the District of Columbia. The initial constitution called for the association to:

promote the general welfare and usefulness of banks and banking institutions, and to secure uniformity of action, together with the practical benefits to be derived from personal acquaintance and from the discussion of subjects of importance to the banking and commercial interests of the country, and especially in order to secure the proper consideration of questions regarding the financial and commercial usages, customs and laws which affect the banking interests of the entire country, and for protection against loss by crime.

Among the ABA’s earliest activities was the American Institute of Banking, which was founded in 1903 to provide professional education via examinations and certificates through local chapters. AIB provided an alternative path to careers in banking to collegiate training in finance and law.

The ABA, first headquartered in New York City, organized its activities through sections focused on particular bank types. The trust company section was organized in 1896, followed by one for clearing houses in 1899, savings banks in 1902, and state bankers associations in 1908. The ABA’s growth continued with the emergence of the Federal Reserve System, which required national banks to be members of a Federal Reserve Bank and provided the option to state-chartered banks. In 1915, the ABA organized a section for national banks and an additional section for state banks in 1916. To facilitate advocacy before the Comptroller of the Currency, the national bank section opened the ABA’s first office in Washington, D.C., in 1919. The state bank section also used the Washington office to represent its banks’ interest before the Federal Reserve.

In 1925, to commemorate the ABA’s 50th anniversary with “a gift to economic education in America,” the ABA organized an Educational Foundation, with bankers and state associations contributing an initial $400,000 to provide scholarships to study banking, finance, and economics. The Educational Foundation went on to house the ABA’s youth financial literacy initiatives.

The 1930s saw an expansion of the ABA’s professional development activities led by Harold Stonier, ABA’s executive from 1937 to 1952. Stonier founded the ABA Graduate School of Banking at Rutgers University in 1935 with 220 students. The school later moved to Wharton, and in 2007, the Graduate School was named after Stonier. ABA launched other professional development programs in the years that followed, including for bank marketers, compliance officers, trust bankers, and commercial lenders.

Federal-level advocacy became increasingly important to ABA members over the 20th century. The landmark 1933 Banking Act established the Federal Deposit Insurance Corporation, separated commercial banking from investment banking under the Glass-Steagall provision, and the Bank Holding Company Act of 1956 brought additional Federal Reserve oversight to bank holding companies. With these changes in the industry, the ABA consolidated its operations in its current Washington, D.C., location in 1971, closing the New York office.

The ABA achieved a major goal with the passage of the Gramm-Leach-Bliley Act in November 1999. Noting that “bankers urgently needed new competitive tools to serve their customers,” ABA’s executive vice president at the time, Donald Ogilvie, attributed the law’s passage to “the deliberate actions of many bankers asking their members of Congress to take action now” and the ABA and state bankers association officers and leaders who “patiently lobbied, cajoled, and bargained with one Congress after another to help make financial modernization a reality.”

In December 2007â€"eight years after an earlier, abortive attemptâ€"the ABA merged with America’s Community Bankers to form the largest trade association in the financial industry, representing at that time 95 percent of the banking industry’s assets. Over several years, the merger saw the combination of many activities, including the merger two for-profit subsidiaries that provided products and services to members and the integration of the ABA’s Education Foundation with the affordable housing activities and Habitat for Humanity partnership of ACB.

Leadership

The ABA's activities are overseen by a board of directors consisting of several bankers, representing institutions of all sizes, from community banks to larger regional banks to nationwide banks like JP Morgan Chase and Bank of America. The association is led by four volunteer banker officers and a paid president and CEO. The offices of chairman, chairman-elect, and vice chairman rotate annually. The 2013-2014 officers are chairman Jeff Plagge, president and CEO of Northwest Financial Corporation; chairman-elect John Ikard, president and CEO of FirstBank; vice chairman Dan Blanton, president and CEO of Georgia Bank & Trust; and treasurer Gary Hemmer, president and CEO of the First National Bank of Waterloo, Illinois. Former Oklahoma governor Frank Keating was named president and CEO in November 2010.

Previous notable ABA officers include:

• Lyman J. Gage, ABA president from 1883 to 1886 and U.S. Treasury Secretary from 1897 to 1902.
• Joseph C. Hendrix, U.S. Representative from 1893 to 1895 and ABA president from 1897 to 1898.
• Robert Maddox, Mayor of Atlanta from 1909 to 1911 and ABA president from 1918 to 1919.
• Walter W. Head, ABA president from 1923 to 1924 and national president of the Boy Scouts of America from 1926 to 1946.
• Melvin Alvah Traylor, ABA president from 1926 to 1927 and co-founder of the Bank of International Settlements.
• W. Randolph Burgess, ABA president from 1944 to 1945 and Permanent Representative to NATO from 1957 to 1961.
• Frank C. Rathje, ABA president from 1945 to 1946.
• Joseph Dodge, chairman of the predecessor to Comerica and ABA president from 1947 to 1948.
• Sam M. Fleming, ABA president from 1961 to 1962 and chairman of SunTrust Nashville.
• Mark W. Olson, ABA president from 1986 to 1987, Federal Reserve Board governor from 2001 to 2006, and chairman of the Public Company Accounting Oversight Board from 2006 to 2009.
• Elizabeth A. Duke, the first and only female ABA chairman from 2004 to 2005 and Federal Reserve Board governor from 2007 to 2013.

Prior to 2002, ABA officers were known as "president," "president-elect," and "first vice president," and the association's chief executive was known as the "executive vice president."

Membership

According to their website, ABA members include banks of all sizes and charters. Its members â€" the majority of which are banks with less than $125 million in assets â€" represent over 95 percent of the industry's $13.5 trillion in assets and employ over 2 million men and women.

Professional Development

ABA provides members with professional development opportunities including conferences, telephone briefings, diplomas and certificates, schools, online training, e-learning and certification from the Institute of Certified Bankers (ICB).

Advocacy

The banking industry, financial crisis, Doddâ€"Frank Act

The financial crisis of 2007â€"2010 led to a "sweeping overhaul of the United States financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression." The Doddâ€"Frank Wall Street Reform and Consumer Protection Act introduced by Chris Dodd and Barney Frank, is a 1,500-page law, passed in 2010, changed the Commodity Exchange Act, Consumer Credit Protection Act, Federal Deposit Insurance Act, Federal Deposit Insurance Corporation Improvement Act of 1991, Federal Reserve Act, Financial Institutions Reform, Recovery, and Enforcement Act of 1989, International Banking Act of 1978, Protecting Tenants at Foreclosure Act, Revised Statutes of the United States, Securities Exchange Act of 1934, Truth in Lending Act. OECD analyst explained how through the financial crisis and the regulatory measures introduced post-crisis, questions regarding the role of state versus market in regulation have arisen. The banking industry in general and ABA in particular promote the market approach. Because of the crisis it became clear that innovative but complex financial products or instruments were not benign on consumers, markets and the system as a whole, and they require adequate surveillance. Innovation will continue and financial products will continue to become more sophisticated and more widely accessed.

The ABA began lobbying the government when Obama announced his intentions for reform. The ABA spent $4.38 million on lobbying to Congress in the first two quarters of 2011 alone. Consecutively spending $2.36 million for the second quarters of 2010 and 2011. According to Yahoo.com Finance "In the April-to-June period, in addition to Congress, the ABA lobbied the White House; the departments of Agriculture, Treasury and Labor; and regulators such as the Federal Reserve, Commodity Futures Trading Commission and Securities and Exchange Commission, according to the report, filed with the Secretary of the Senate on July 19."

As soon as the Doddâ€"Frank Wall Street Reform and Consumer Protection Act was signed into law by president Obama on July 21, 2011, the American Bankers Association announced it would call for revisions. They declared they would continue to lobby for fewer regulations on the Volcker Rule, Derivatives Regulations, and other pieces of the bill.

In his book (2013) entitled Act of Congress: How America’s Essential Institution Works, and How It Doesn’t, Washington Post editor Robert G. Kaiser revealed events that led over a period of 18 months to the Doddâ€"Frank Act

State bankers associations

The ABA partners with 53 independent state bankers' groups through the State Bankers Association Alliance. The first state-based association was founded in Illinois in 1880, and by the time the Rhode Island Bankers Association was incorporated in 1915, there was an association in every state.

Legislation

On November 12, 2013, the ABA published a letter in support of the bill To enhance the ability of community financial institutions to foster economic growth and serve their communities, boost small businesses, increase individual savings (H.R. 3329; 113th Congress). The bill would direct the Federal Reserve to revise certain regulations related to small bank holding companies (BHCs). Current regulations allow BHCs with assets of less than $500 million that satisfy other tests to incur higher amounts of debt than larger institutions in order to acquire other banks. H.R. 3329 would apply the less-stringent standard to more BHCs by raising the asset limit to $1 billion, and the bill also would allow savings and loan holding companies to qualify. The ABA said that the legislation "would provide much needed regulatory relief for hundreds of community banks and thrifts." They argued that under an increased BHC threshold, "more banks and thrifts will qualify for coverage under the BHC and will be exempt from certain capital and regulatory guidelines that do not provide materially more safety and soundness protection in the context of these community banks."

On December 4, 2013, Thomas N. Richards testified before the United States House Financial Services Subcommittee on Financial Institutions and Consumer Credit about the bill To amend the Federal Home Loan Bank Act to authorize privately insured credit unions to become members of a Federal home loan bank (H.R. 3584; 113th Congress). The bill H.R. 3584 is a bill that would amend the Federal Home Loan Bank Act to treat certain privately insured credit unions as insured depository institutions for purposes of determining eligibility for membership in a federal home loan bank. Richards testified that the ABA has "concerns about privately-insured credit unions being allowed to join a Federal Home Loan Bank." According to Richards, "the issue of concern is the financial viability of the private insurer to a failure of a non-federally-insured credit union that has a significant level of secured advances from the Federal Home Loan Bank."

Education and Public Outreach Programs

The American Bankers Association website described the Association's many outreach programs that support low income, disadvantaged communities. The Programs the ABA support includes the ABA Education Foundation and the ABA Housing Partners Foundation.

ABA Housing Partners Foundation

The American Bankers Association website describes their ABA Housing Partners Foundation was formally created in 1991, to help open a soup Kitchen in Washington, D.C., where the headquarters of the ABA are. On the ABA Housing Partnership webpage they state "The Foundation has been enriching the communities that have hosted our annual conventions for 20 years. Throughout that time, the Foundation has honed its mission to promote and provide affordable housing in our local communities across the country." The Foundation also partnered up with Habitat for Humanity in 2001. The ABA has fully funded and help build homes in the cites of New Orleans, San Francisco, Las Vegas, San Diego, Washington, D.C., Orlando, Chicago, Boston and San Antonio. The cities that host their conventions.

Hurricane Katrina and Bankers-Helping-Bankers Program

In 2004 Hurricane Katrina struck the United States, reaching the southern states that were along Gulf of Mexico coast. The hurricane had inflicted significant damage to the gulf coast region, including the destruction of much of the City of New Orleans. The hurricane also Destroyed 81 Habitat for Humanity homes through flooding and other hurricane related damage. The New Orleans Chapter of Habitat for Humanity lost their office space, Copier, Records and all the other things that create a business. The American Bankers Association website describes their project to help Habitat, the ABA launched a "New Orleans Habitat for Humanity fund" giving the Habitat Affiliate $25,000 to help rebuild their office's. On January 23, 2006 the ABA gave another $58,000 to the Habitat Chapter to help begin the rebuilding process of New Orleans.

Bankers-Helping-Bankers

This was another program in response to the Hurricane Katrina disaster. This fund was specifically created to help bank employees with emergency expenses that came up because of the hurricane. The program granted up to $1000 to defray expenses on food, shelter, evacuation travel expense or home repairs. The American Bankers Association website describes their described their program off with $25,000 by mid-February 2006 the fund had raised $115,000 for 300 bank employees in need.

ABA Education Foundation

The ABA Education Foundation's mission is to help bankers make their communities better through financial education. The foundation operates two national financial education programs for bankers, Teach Children to Save and Get Smart About Credit.

The American Bankers Association website describes their publication The Spirit of Banking, a monthly e-mail bulletin about financial education, advocates for banker-delivered financial education, such as in-school banks, and represents bankers within the financial education arena, specifically as part of the Jump$tart Coalition for Personal Financial Literacy's Board of Directors.

The American Bankers Association website describes their how, through its national programs, the ABA Education Foundation has helped more than 72,000 bankers teach personal finance skills to nearly 3.3 million children and young adults. Founded and funded by bankers, the foundation works closely with a board of bankers and is a subsidiary of the American Bankers Association.

The American Bankers Association website describes how their foundation also sponsors a Consumer Information page, with information about banking services, personal finances and more.

ABA Nasdaq Index

The ABA NASDAQ Community Bank Index (ABAQ) is a market value-weighted index composed of community based financial institutions. The index was launched in December 2003 to bring greater visibility to community banks, and in turn, promote greater market liquidity and fairer valuations. Calculated on both a total return basis and on a price return basis under the symbol ABAQ, it is the most broadly representative stock index for community banks.

Publications

• ABA Banking Journal
• Community Banker
• ABA Newsbytes
• ABA provides over 30 newsletters available to members only.

Affiliates

• ABA Education Foundation
• ABA Housing Partners Foundation
• ABA Marketing Network (ABAMN)
• ABA Securities Association (ABASA)
• ABA Business Solutions
• American Bankers Insurance Association (ABIA)
• American Institute of Banking (AIB)
• Bankers' Association for Finance and Trade (BAFT)
• Corporation for American Banking (CAB)
• The Institute of Certified Bankers (ICB)

References