The bill was introduced by Michael Grimm and backed by members of both parties. Bill would give bank a $300M benefit

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.

The bill was first reported on by American Banker, a trade publication, but otherwise has received scant media attention.

Rep. Barney Frank (D-Mass.), ranking member of Financial Services and co-author of the 2010 financial reform law, complained recently that Republicans tried to bring the bill to the House floor without even a hearing. Frank hasn’t said which way he’ll vote, but the outspoken Massachusetts Democrat hasn’t objected to the measure so far.

“I was asked if we could do this in a way that would move quickly, and my answer was, ‘Yes, I’d like to move quickly, but I think it’s important that it be done in the light of day,’” Frank said at a sparsely attended hearing May 18 at which the Grimm bill was discussed. “Frankly, I think if it had not been done this way, someone might have drawn adverse inferences about the legislation, which aren’t justified.”

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.

Grimm, who is under investigation by the Justice Department over his own fundraising, said his bill is about jobs, not helping the Milsteins. The couple donated $2,500 to Grimm’s reelection committee in March, according to campaign records.

“Emigrant Bank is a local community bank with over 150 years of service to New York’s families and small businesses. In taking prudent measures to protect customer funds during the financial crisis, the bank has been inadvertently caught up in a Dodd-Frank provision meant for larger banks,” Grimm said in a statement. “This bill corrects a situation that put the bank in a category in which it never belonged, and that could cause it to lose billions in lending capacity that would otherwise be used for small business loans.”

A Republican aide on the Financial Services Committee said bank regulators and Sen. Susan Collins (R-Maine), who inserted the capital requirement provision into the Dodd-Frank law, have no problems with the bill.

“We’re trying to do the right thing here,” the aide said. “So long as it’s a good idea, it shouldn’t matter who is for it.”

Howard Milstein, the owner of Emigrant Bank — his family bought it in 1986 for $90 million — is one of the most wealthy men in the country and a lightning rod in his own right.

Forbes estimated two years ago that the Milsteins, who made their fortune in real estate and banking, were worth $3.8 billion. Occupy Wall Street protestors marched on their home recently to protest undeveloped parcels Howard Milstein owns in downtown Niagara Falls, complaining that Milstein failed to live up his promise to boost the economically depressed area.

He is a force in New York state politics. Aside from his fundraising for Obama four years ago, Milstein has been a prominent financial backer of Gov. Andrew Cuomo. The Democrat tapped Milstein last year to head the New York State Thruway Authority despite complaints by watchdog groups that having a real estate mogul run the agency would be a conflict of interest.

Even Diana Cantor, wife of House Majority Leader Eric Cantor (R-Va.), worked for a Milstein-owned trust that catered to the needs of high-income customers.

The Milsteins, along with business associates and other family members, have donated hundreds of thousands of dollars to both GOP and Democratic lawmakers over the past decade. Along with Grimm, New York Democratic Reps. Carolyn Maloney, Carolyn McCarthy and Gregory Meeks — all co-sponsors of the bill — have received $11,500 in donations from the Milsteins this cycle.

“H.R. 3128 is all about credit availability in underserved communities throughout New York City,” Emigrant said in a statement to POLITICO. “There was considerable support for the bill at the committee hearing and Rep. Barney Frank, one of the principal authors of the Dodd-Frank Act, stated at the hearing that he anticipated he would have no objection to the legislation.

The Milsteins have retained high-powered lobbying help to bolster their push for congressional action, at a cost of several hundred thousand dollars over the past two years.

New York Private Bank and Trust, another Milstein bank, hired Robert Raben, a former Frank aide, to lobby the Financial Services Committee on the Dodd-Frank provision. Other K Street hires include Fierce, Isakowitz & Blalock, Elmendorf Ryan, and Harriett Melvin, a former House GOP operative.

Recently, the Milsteins signed on Park Strategies, whose partners include former Sen. Al D’Amato (R-N.Y.) and Rep. Vito Fossella (R-N.Y.), who once represented the same Staten Island district as Grimm until he resigned from Congress in 2008 during a sex scandal.

CORRECTION: The original version of this story incorrectly reported that the Milsteins would have to spend $300 million of their own money to liquidate Emigrant Bank assets if the House bill is not enacted.

CORRECTION: Corrected by: Hadas Gold @ 05/30/2012 11:19 PM CORRECTION: The original version of this story incorrectly reported that the Milsteins would have to spend $300 million of their own money to liquidate Emigrant Bank assets if the House bill is not enacted.