So there you have it, the Dodd-Frank Act, formerly known as the Restoring American Financial Stability Act. “After great debate, we have produced a strong Wall Street reform bill that will fundamentally change the way our financial services sector is regulated,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn., after the conference committee staged an all-night marathon to meet its June 25 deadline. (see One Giant Step for Reform.)
Unfortunately, Main Street bankers, who will have to live with many of these reforms as well, aren’t feeling much like celebrating. Indeed, unwelcome after-effects for community banks and their customers and communities are seen by the American Bankers Association and the Independent Community Bankers of America.
After acknowledging that creating a systemic risk council, ending too big to fail, closing gaps in regulatory oversight and enhancing consumer protection are “laudable goals that the industry supports,” ABA President and CEO Ed Yingling suggested that they are overshadowed by a number of other provisions that run far afield from Wall Street reform and ultimately will harm Main Street. “The consequences involved are very real and will have a very negative effect on traditional banks, on consumers and on the broader economy,” he said. “Above all,” Yingling added, “the capability of traditional banks to provide the credit needed to move the economy forward has been undermined in numerous ways.”
Yingling predicted that the bill would add well over 1,000 pages of new regulations for even the smallest bank. “As a result of this volume and the new restrictions, many small banks are telling us they will simply have to sell out to larger institutions that have the staff to deal with the massive volume of new reports and rules,” he said.
ICBA spokesmen singled out the interchange language and Consumer Financial Protection Bureau for criticism, while also acknowledging some positive aspects of the bill. “Now is not the time to change a proven interchange system just so big-box merchants can reap higher profits and pass their costs of doing business on the America’s consumer,” said ICBA President and CEO Cam Fine and Chairman Jim MacPhee, CEO of Kalamazoo County State in Schoolcraft, Mich. The CFPB, they argued, should “focus on those too big to fail and shadow institutions that were at the heart of the financial crisis.”
The ICBA was pleased that the bill includes “powerful language” that will help rein in megabanks and nonbanks responsible for the 2008–2009 financial crisis. The Volcker rule, said Fine and MacPhee, “will help prevent major financial firms from putting customers, taxpayers and the financial system at risk by conducting risky activities solely for their own profit.”
After much controversy, intense lobbying and political shenanigans, the conference committee appears to have achieved a result foreseen by Neil Milner, president and CEO of the Conference of State Bank Supervisors. Speaking at the Tri-State Summit of Colorado, Montana and Wyoming bankers last month in Jackson Hole, Wyo., he predicted the final bill would contain “whatever will get 60 votes in the Senate.”
Bill Poquette is editor-in-chief of BankNews.
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