Saturday, December 1, 2012

An Iowa banker on Dodd-Frank

More on the massive weight of Dodd-Frank on community banking with a bit of commentary below:

Specifically, community banks like the ones most Iowans rely on every day have become subject to provisions of federal legislation called the Dodd-Frank Act. Unfortunately, many of the new regulations are a reaction to poor lending practices outside of Iowa, outside of community banking, and on Wall Street, yet Dodd-Frank mandates more than 400 new rules and requirements that apply to all insured financial institutions. Keeping up with those rules has become a significant challenge for small banks.

By Nov. 1, 224 of those 400 new rules had been written. The more time and resources banks must devote to analyzing and complying with this new wave of rules, the less time and fewer resources they have to do what banks are in business to do — whether it’s developing a new product to help consumers save or making a loan to support the expansion of a local business, hospital or other job provider.

Our bank created a list of the rules, regulations, acts and reporting requirements that apply to our bank and our customers. Just the names of these rules and regulations takes eight pages, single spaced — and that was before federal regulators issued any Dodd-Frank Act rules.

This expanding multitude of rules is why consumers have to sign so many documents when opening an account or applying for a loan. It is also why some banks have decided not to offer certain types of consumer loans and more accommodating repayment terms. A recent survey of Iowa bankers reveals that 89 percent of respondents say the regulatory environment has impacted their ability to provide credit; 81 percent say it has hurt their customers’ ability to understand financial products; and 68 percent say it has caused them to consider eliminating financial products.

Once heavy new banking regulation became inevitable, Wall Street and the Democrats insured that the government would make the big banks even bigger by driving the small banks out of business. One might argue that these were "unintended" consequences. We respectfully submit that these consequences were so predictable, akin to the timing of the rising of the sun or at least tomorrow's weather, that they were, in fact, intended.

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