In 2019, consumer advocates began sounding the alarm throughout Washington about a potential merger that aimed to create the nationâs sixth largest bank. Watchdogs warned that a decade after the financial crisis, melding two southeast banking giants would construct another âtoo big to failâ behemoth, likely leading to huge layoffs, worse customer service, and higher customer fees.
But when the proposal to merge SunTrust and BB&T came before a congressional oversight committee that summer, a little-known Republican came to the banksâ aid.
âWe all know that this is a political hearing,â Rep. Ted Budd (R-N.C.) said during the session, denouncing the oversight as unnecessary and praising the banksâ community service.
The second-term lawmaker â now running for U.S. Senate â had already been an early sponsor of legislation to exempt large banks from post-crisis limitations on mergers, insisting such regulations were forcing banks to remain âtoo small to succeed.â At that hearing, Budd gushed to the CEOs of SunTrust and BB&T that âboth of your banks are strongâ â even though both had been subject to multiple enforcement actions and penalties by federal agencies.
The merger â which was soon approved by federal regulators â looked like just the kind that Budd wanted to accelerate. But the warnings quickly proved true: In January 2021, the new megabank called Truist simultaneously reported $1.2 billion in profits and more than 1,300 layoffs. The bank has since shuttered hundreds of branches and faced a widespread customer backlash, racking up thousands of Consumer Financial Protection Bureau (CFPB) complaints.
While many North Carolinians say theyâve been harmed by the merger, things have turned out rosier for Budd: Since the deal went through, he reported two new loans from Truist, at least one of which carries an interest rate that appears to be lower than whatâs publicly advertised on the companyâs website. Heâs also received tens of thousands of dollars of campaign cash from the bankâs donors. Meanwhile, a bank industry lobbying group linked to Truist just launched a last-minute barrage of television ads boosting Buddâs Senate run.
That race in North Carolina â now deadlocked in the polls â could singularly decide control of Congressâ upper chamber. If he wins, Budd could be vaulted into an even more powerful role overseeing â or further deregulating â his bank donors at a time when some say the financial system is once again teetering.
Indeed, American Banker â the industryâs leading trade publication â recently said his race was the second most important in America because âgiven his place on the House Financial Services Committee, itâs likely Senate Republican leadership will consider Budd for the Senate Banking or Financial Services committee if he wins.â
Neither Truist nor Buddâs congressional office responded to a request for comment.
The High Cost of Bank Mergers
Since the 1980s, thanks largely to mergers, the number of banks in the United States has plunged from more than 18,000 to fewer than 5,000.
Critics have long warned of the high price that bank consolidation can entail for both consumers and workers, raising the cost and decreasing the availability of credit while sending unemployment climbing in impacted neighborhoods.
The economy-wide dangers of âtoo big to failâ banks, meanwhile, were illustrated with devastating clarity by the 2008 financial crisis, which created some belated and limited momentum for Democrats to construct guardrails on an out-of-control financial system, via their 2010 Dodd-Frank Wall Street reform law. Among other changes, the law required regulators reviewing mergers to consider whether they could pose a threat to the countryâs financial stability.
The Trump era quickly brought back a renewed charge towards deregulation â and Budd was one of its most aggressive standard-bearers. As a newly-minted congressman in 2017, Buddâs first speech on the House floor was a passionate appeal to remove caps on the debit card processing fees charged by banks, earning him denunciation as a âpawnâ of Wall Street from the likes of the National Retail Federation, a lobbying group for retailers.
As a member of the powerful House financial services committee, Budd has pushed relentlessly for the rollback of key post-crisis reforms, repeatedly introducing legislation to abolish the Treasury Departmentâs Office of Financial Research, which is tasked with analyzing risks to financial stability. He also introduced legislation to delay enhanced capital reserve requirements for banks and launched a series of wide-ranging attacks on the recently established Consumer Financial Protection Bureau â including a measure to change its name to the âConsumer Financial Opportunity Bureau.â
Budd also championed an earlier, more radical version of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, the banking deregulation bill that ultimately paved the way for a new wave of mergers, beginning with the creation of Truist. Weaker regulatory standards freed up funds for regional banks like SunTrust and BB&T to pursue mergers and acquisitions â without having to worry about triggering enhanced supervision, as David Dayen reported at the time for The Intercept. SunTrust lobbied heavily on the bill and its implementation, federal records show.
Before that deregulation measure was introduced in the Senate, Budd was a cosponsor of the Financial CHOICE Act, an even more sweeping bill that would have created a âregulatory off-rampâ for banks to escape supervision altogether in favor of voluntary commitments. Budd gave opening statements during his committeeâs initial markup of the bill, which he said represented the worldview âthat banks need freedom to better serve their customers.â
That bill passed the House in a party-line vote in 2017 but stalled in the Senate. When the pared-down banking legislation began moving in the upper chamber again the following year, the existence of Budd and his cohortâs more extreme legislation gave corporate Democrats cover to vote for the regulatory slash-and-burn effort.
While Budd and other Republicans on the House finance committee vowed to keep fighting for their preferred measures, Budd celebrated on Twitter with one of his favorite lines when the banking bill passed the House in May 2018. Rather than ending âso-called âtoo big to fail,ââ Budd wrote, the 2010 Dodd-Frank law âinadvertently created âtoo small to succeedâ financial institutions. This legislation moves to change that.â
The Mergerâs Congressional Champion
Within months of the deregulation billâs passage, BB&T and SunTrust pounced: The two banks submitted merger applications to the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), the two agencies whose sign-off the banks would need. That wouldnât necessarily be a tall order: From 2006 to 2017, the Federal Reserve did not reject a single one of the nearly 4,000 merger applications it received.
However, it was the largest proposed bank merger since before the financial crisis â so it represented a key test of whether bank regulatorsâ attitude had changed since the meltdown.
Those regulators are subject to heavy pressure from industry, and frequently hail from its ranks. Then-FDIC Chair Jelena McWilliams arrived at the agency from her position as an executive president at Fifth Third Bank; before that, McWilliams worked for the former Republican chair of the Senate banking committee, who had also previously employed SunTrustâs head lobbyist. Federal disclosures show that BB&T lobbied the FDIC ahead of the proposed merger.
This kind of regulatory capture makes it especially important for Congress to âbring some transparency and accountability to the processâ of mergers like Truistâs, said Matt Kent, a competition policy advocate at Public Citizen, which submitted testimony against the plan for the July 2019 congressional hearing before the House finance committee. The hearing took place at the behest of chairwoman Maxine Waters (D-Calif.), who asked federal banking authorities to delay a decision until her committee had a chance to review the matter.
With the bank executives in the hot seat, some House Democrats questioned them about SunTrustâs alleged past record of âsystemic mortgage servicing misconduct,â per a 2014 settlement, or the potential risks of creating a bank twice the size of Countrywide Financial when it collapsed in 2008.
Budd used his time differently. He first addressed BB&T CEO Kelly King, who had at the time personally donated at least $3,000 to Buddâs campaigns, on top of $10,000 from the bankâs PAC in 2018.
âI know that BB&Tâs contributions to our local economy and charitable causes have helped a lot in a lot of parts of our state,â Budd told King. âSo, the name means a lot to our community and I am happy to have you here.â
Budd also gave King the opportunity to address fears about potential job losses, which he insisted were a non-issue in the merger.
âYou talked about there not being expected layoffs because you could give them opportunities either in another branch or maybe even somewhere else in Truist,â Budd said to King, who went on to become Truistâs first CEO.
âThat is exactly what happens,â King responded. âEven if we consolidate branches, we pool the employees together because we still have the business. Then sometimes they relocate, but they have jobs.â
In April, Truist reported that it had cut its workforce by 14 percent since the merger in December 2019, representing the loss of more than 8,000 jobs, as part of a plan to achieve $1.6 billion in cost savings by the end of 2022.
During the hearing, the BB&T and SunTrust CEOs also described a community benefits package they would deliver, including a commitment to open at least 15 new bank branches in low-to-moderate income neighborhoods.
But the agreement was completely non-binding, and a 2021 review by the Committee for Better Banks (CCB), an advocacy group for bank workers, found that not only had Truist failed to keep that specific pledge, but the bank actually significantly reduced branch openings in diverse neighborhoods while boosting its brick-and-mortar presence in whiter, wealthier neighborhoods.
In written comments submitted to Congress in September, Truist said that it planned to deliver on its community benefit commitments by the end of this year.
But Nick Weiner, organizing lead at CCB, told The Lever that without mechanisms to hold banks like Truist accountable, the commitments made ahead of winning merger approval may amount to little more than lip service.
âWhoâs monitoring, whoâs enforcing?â Weiner said. âRight now, the enforcement is up to the community groups alone.â
Deregulation Pays Dividends For Buddâs Campaign
In June 2019, as the Truist merger was still pending, Budd introduced legislation to delay implementation of new accounting standards applied to the reserves banks must hold on their balance sheets to offset potential losses from risky loans â a highly technical but fiercely contested issue, given its implications for banksâ lending behavior.
Budd personally thanked the North Carolina Bankers Association, a state-based lobbying group, for introducing him to the issue during his first term, saying the organizationâs CEO âdeserves much of the credit for making this bill even possible.â
Truist is now the second-largest member of the North Carolina Bankers Association, while BB&Tâs King previously chaired the organization.
The state bankersâ association has repeatedly joined its parent organization, the American Bankers Association, in airing ads promoting Buddâs campaigns. The national bankersâ association reported $125,000 in outside spending for Budd in 2018, and is currently in the midst of an eleventh-hour ad blitz for his Senate run.
During his 2020 House re-election campaign, Budd also received more than $20,000 in direct contributions from Truist executives and the companyâs political action committee. Truist has delivered more than $23,000 for his Senate bid, making him the bankâs top recipient of campaign cash in the 2022 election cycle, according to data from OpenSecrets. Another former BB&T CEO, John Allison, contributed $20,000 to the Club for Growth PAC, Buddâs top source of cash in this yearâs race.
An Uptick In Loans To Budd From Truist
Buddâs personal financial disclosures reveal another, less-often scrutinized channel of potential influence: a series of loans from Truist and its predecessor, BB&T.
A landmark 2016 study from the Institute for New Economic Thinking found evidence that âlenders may create political connections with finance committee members in an attempt to obtain regulatory benefits.â According to the study, members of Congress serving on the House and Senate finance committees tend to receive more lending after their committee appointments â and relative to members of Congress not tasked with overseeing the nationâs financial institutions.
Lawmakers on these committees may also receive more favorable lending terms, according to the study, a scenario exposed a decade ago when the House oversight committee uncovered a âFriends of Angeloâ program at Countrywide Financial â named after the lenderâs founder and CEO Angelo Mozilo â that offered sweetheart loans at discounted rates to powerful members of Congress.
In the wake of that scandal, the Senate began including loan rates and terms in its disclosure forms, but this information is still omitted from House disclosures.
That means the interest rates on Buddâs loans werenât available until last year, when Budd began filing candidate reports with the Senate. This yearâs report shows two new debt liabilities from Truist after its merger, including a personal line of credit, worth between $50,001 and $100,000, made in 2021 at a 6.75 percent interest rate.
That rate appears to be substantially lower than the rates advertised publicly by Truist on its website that year. According to the website, the annual percentage rates on Truistâs personal lines of credit could range from 8.69 percent to 13.24 percent, depending on the prime interest rate â which remained stable through 2021 â and the creditworthiness of the applicant.
Buddâs candidate disclosures also list a new family revolving charge account â a form of credit that typically carries flexible payoff terms âworth $15,001 to $50,000, from Truist this year at a 10.4 percent interest rate.
In 2017, his first year in Congress, Budd received from BB&T a business line of credit, worth $100,001 to $250,000, at a 3.5 percent interest rate. The high variability in terms and interest rates for these types of lending makes it difficult to evaluate Buddâs terms.
Neither Truist nor Budd responded to The Leverâs questions about the loans received by the candidate.
Without available interest rate data on loans made to other House members, itâs impossible to say definitively whether Budd received better terms from Truist than those offered to members who donât happen to sit on the finance committee. The lack of data also underscores a substantial weakness in the federal ethics regime.
âThe entire intent of these forms and giving the public this insight into membersâ finances is to create accountability and to monitor for potential conflicts of interest,â said Alex Baumgart, a researcher at OpenSecrets. âNot having this basic information on the House forms makes it all the more difficult to differentiate mundane financial dealings from unethical behavior and even possible legal violations.â
In May 2020, Buddâs family business, the Budd Group, also received a $10 million Paycheck Protection Act loan through Truist. Soon after, the American Bankers Association and North Carolina Bankers Association ran ads on Buddâs behalf, thanking him for his support for the PPP.
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