Editor’s note: The following op-ed was published in the Pioneer Press in May 2018 as a part of ICBM’s work to muster public support for the Economic Growth, Regulatory Relief, and Consumer Protection Act. It is also a part of the association’s wider effort to advocate for community banks to the general public.
By Jim Amundson, president/CEO of the Independent Community Bankers of Minnesota.
The American public has paid again and again for Wall Street bank scandals, deceits, manipulations and poor decisions. Recent examples — like Wells Fargo’s account opening, auto insurance and mortgage lending abuses — abound. Congress has passed laws designed to prevent and punish banks for these kinds of misdeeds. So why does Wall Street continue to take advantage of the American people? The answer is simple: Right now, they win either way.
If you look at it from the Wall Street banks’ point of view, there’s really no reason to stop. If they take advantage and don’t get caught, they make a lot of money. If they do get caught, they can afford new regulations. Their competition — community banks — cannot. What the big banks lose in compliance cost, they gain in reduced competition.
Consider recent history. When the mortgage meltdown came in 2008, we realized too late that certain mortgage lenders — chiefly Wall Street banks — had gambled with our economy and caused the financial crisis. Since the Dodd-Frank Act was signed into law by President Obama, regulators have created hundreds of new rules and regulations with the goal of reining in Wall Street.Dodd-Frank, though, has proven far more effective at hindering small banks than at deterring bad behavior from Wall Street.
Regulatory burden has contributed significantly to the loss of relationship-based, small, local, community banks — Wall Street banks’ most staunch competition. During the last 10 years, their numbers have dwindled by roughly a third to 5,500. While community banking organizations represent 17 percent of all U.S. bank assets, they make more than half of all small business loans. These small businesses, in large part funded by community bank credit, account for more than half of all U.S. employment and nearly two thirds of all employment growth.
Our communities suffer most when there are fewer banks owned by members of the community. Deposits in a community bank are invested and create wealth in the local economy. In the big-bank model, most of the money — deposits, loans and even dividends — becomes part of a banking system that extracts wealth from the local area. Add their misdeeds to the mix and it’s hard to overstate just how unfortunate it is for a community to only have access to our nation’s largest financial institutions.
What can Minnesotans do about it? Put an end to Wall Street’s win-win scenario by asking federal lawmakers to exempt community banks from regulations created for big banks.
The owners and managers of small, local banks from Minnesota were in Washington, D.C., recently to ask their representatives for regulatory exemptions. They believe the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) is a good step in that direction. This legislation has already passed the U.S. Senate and—given the president’s support for reducing counterproductive regulation — now only needs to clear the House of Representatives to become law. After years of stagnation in the Senate on regulatory relief, S.2155 is the most viable relief measure in more than a decade.
Now is the time for Minnesotans to contact their congressional representatives to support the institutions that are so vital to our state’s continued prosperity. And don’t stop there, support the local economy in another way — bank locally.