Community banks may be an “endangered species”.
My “Regulators Gone Wild“ article was an attempt to relate how regulations are having severe, unintended consequences on employment and on our economy. The results are not hypothetical or theoretical. They have been real and direct. They are just starting. As an employer and small business person, they have impacted me personally and have put severe constraints on my ability to provide employment and to spend, making it impossible for me to provide a positive contribution to a recovery. Indeed, my contribution has been exactly the opposite. I have had no choice but to severely trim my work force and drastically limit spending in order to meet the arbitrary income to expense requirements of the new regulations and thereby have my loans renewed. Those loans have always been paid on time, but are now subject to recall if we don’t meet the new formulas. Tens of thousands of small businesses find themselves in similar or worse predicaments.
Banks, which provide the lifeblood of a recovery, have the largest cash reserves they have ever had; they are actually prevented from loaning that money by the very regulations in the Dodd-Frank Wall Street Reform and Consumer Protection Act that were supposedly designed to protect us. Most of the political spin regarding banks has been misleading at the very best. Banks are easy scapegoats. They have been maligned and trashed. One of the commentators, to whom I listen for snippets of useful information, constantly refers to “banksters”, a combination of banker and gangster, as his contribution to their vilification. The huge banks that caused the problem (and which have political influence) have continued to escape significant regulation and scrutiny and the smaller banks, the solid, local banks that would normally provide the key to our recovery, have suffered the full wrath of bureaucracy. As suggested in “Regulators Gone Wild”, we will simply not have a viable economic recovery without correcting the problems that have been created by virtue of the Dodd-Frank Act, which would be more appropriately named the Economic Recovery Destruction Act.
To have any hope of correcting the problem, we need to fully understand what has been happening. Small banks are not the villain. Moreover, they do not escape paying “their fair share” of taxes and it is not just a local problem. Here is the full text of one reply that I received in response to my article:
“I am an investment broker and a local banker that owns a minority interest in a Nebraska bank.. The only things that I would add to what you have already said is that we are taxed at a 34% federal rate plus a state of Nebraska assessment. I think these rates are considerable higher than what Warren Buffet is worried about. We have a mortgage lending department and it now takes approximately 36 signatures to sign all of the disclosures required under Dodd-Frank, of which no-one reads. How could they? They simply want a loan and trust it is as they are told. I started as a broker in the investment business in 1999. At that time the application to open an account was 1 page front and back (2 pages), today the same application is 34 pages long due to lawsuits, government regulation and Dodd-Frank hasn’t even kicked in yet. We bought the bank in 2007 just before the financial collapse, so much for good timing, at the time we purchased it there were 8 employees and $30,000,000 in assets, today we have $80,000,000 in assets and 18 employees. This is the same industry that our President is constantly bashing and we are paying 40+% in taxes. We are tired.”
I personally have no financial interest in any bank other than by virtue of my contribution to their coffers through loan repayments. Those loans have enabled me to establish businesses and employ help; without them I can do and could have done neither. Even if you are not a business owner, you have indirect interests in the banking community because we all benefit from a thriving economy. Returning to that thriving economy requires viable banks that are enabled to loan money rather than prevented from so doing. These are the banks that help new businesses start and help existing businesses continue to operate or to expand. These are the banks that, given the chance, will help businesses develop new ideas and provide services; those businesses are the very businesses that hire you, your neighbor, and your adult children. These are the banks that we in danger of losing. The Dodd-Frank Act that is strangling small banks and small businesses needs to be revised or repealed. You can voice your concern by contacting your representatives in Congress, who for South Dakota are …………..
Sen Tim Johnson Sen John Thune Rep Kristi Noem
A couple other conversations about this subject would be worth your time as well:
No More Friendly Bankers and a Conversation with the Unknown Banker
***Gary A. Howie MSc, PhD*** is a business owner/rancher
