Archive for the ‘too big to fail’ Category

One Voice - A Community Banking Voice

Friday, July 31st, 2009

There are some bankers that believe our industry would be better off politically with a single, unified voice.  One does not have to venture any farther than the halls of Congress to dismiss that belief as a tired old myth.

Who, after all, wants to shackle their hands and ankles to the “too big to fail” banks and their unregulated affiliates and subsidiaries and jump off the 14th Street Bridge into the Potomac?  But that’s precisely what some bankers and their trade associations would have you do; dismissing the efforts of the community banking lobby as nothing more than a “distraction” and chastising us for our divide and conquer mentality to protect our unique interests. They would go as far as making claims that a unified industry with a unified message is the only true way to move a political football.

Tell that to Barney Frank, Chairman of the House Financial Services Committee.  In a recent Washington Post article describing how community banks are central to the current regulatory reform proposal, Chairman Frank describes the big bank lobby this way:  “The larger financial institutions have the opposite of political clout today.  They’re radioactive. The only way the big banks can win is if they get the community banks to be their troops.”  And the Chairman is not unique in his views.  Texas’ Congressional delegation understands it too.  I know because I hear it in every office we visited in Washington this week and every time we make calls in the wake of this whole economic mess.  “You guys are the good guys in the industry,” they tell us.  “We would like to find a way to make sure we don’t disenfranchise the community banks as we debate this.”

The current Obama regulatory reform proposal is enough to scare the crap out of any of us.  All we need is another regulator to get a broad legislative mandate to regulate products and services in the name of consumer protection, relegating us to “cookie cutter” and “plain vanilla” products and services.  That proposal, courtesy of the unregulated “shadow” banking industry would translate into nothing more than socialized banking designed to eliminate customer convenience and choice while raising costs. That’s not how the greatest economic system in the world has evolved, nor how it will be strengthened in the future.  You can bet if we can carve community banks out from under this Consumer Financial Protection Agency, we damn sure will do it.

So don’t tell us to get in line and leave the lobbying to groups that have divided interests and hope that somehow you will fairly represent the interests of community banks.  We didn’t cause this mess and we are tired of helping the big banks clean it up in the form of higher regular and special FDIC assessments, suffocating new regulations and bad industry public relations.

We will continue speaking with one voice…a community banking voice.

Posted in Barney Frank, Consumer Financial Protection Agency, FDIC, ICBA, Independent Bankers Association of Texas, Texas Community Banking, bank regulators, community banks, special assessment, systemic regulator, too big to fail, wall street | No Comments »

Preserving the Dual Banking System

Thursday, May 28th, 2009

Early this month I had the opportunity to hear Treasury Secretary Tim Geithner speak to the ICBA Washington Policy Summit. He was clear in his intent at that time that this administration was in the final planning stages in releasing their recommendations for reconstituting the bank regulatory system.

Yesterday’s Wall Street Journal article by Paletta writes “the new bank regulatory agency could prove controversial because it would consolidate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and strip supervisory powers from the FDIC and the Federal Reserve.” The Federal Reserve would likely be deemed “the systemic regulator” and the FDIC would be relegated to receivership and insurance.

Another set of eyes?

Paletta goes on to report that the Administration has no intent to eliminate the dual banking system and stir controversy among the more than 5,000 state chartered banks. State charters and state regulators would be preserved but a single federal regulatory agency would have jurisdiction rights to examine the state banks and provide what the administration calls “another set of eyes. This approach would also prohibit “financial institutions from “shopping” for the best regulator.

Wait a minute. What would be the point of having a state charter and a state regulator if you also have to open your doors to the new OCC? Our dual banking system has served this country well for decades. One has to ask if this isn’t a back handed approach to create one super regulator for all banks who are systemically unimportant. Charter choice is not about “shopping” for the best regulator. It is about personal choice.

The Administration instead should be focusing on is preserving the existing regulatory structure as we know it and establishing a bifurcated regulatory system by establishing a community bank state or national charter and a commercial state or national charter along permissible banking power activities. Regulatory structure should be commensurate with risk depending on which charter choice you choose. Our current financial crisis was not caused by community financial institutions sticking to basic banking principles. It was caused by large commercial banks that expanded their reach into risky commercial enterprises.

A single federal regulator with jurisdiction over all systemically unimportant national and state banks would destroy, in this bloggers eyes, the dual banking system as we know it. It is not the current system that is broken, just the current one size fits all application of bank regulation.

Let’s all hope the Administration goes back to the drawing board, or in the event they advocate this new plan, Congress will see fit to ensure community banks are not further penalized for the sins of others.

Posted in FDIC, IBAT, ICBA, Independent Bankers Association of Texas, Texas Community Banking, Timothy Geithner, bank regulators, community banks, comptroller of the currency, federal reserve, office of thrift supervision, state bank charter, systemic regulator, systemically important, systemically unimportant, too big to fail, treasury | No Comments »

Systemically Unimportant?

Thursday, April 2nd, 2009

It’s like drinking from a fire hose.

Everyday there seems to be a new announcement from Treasury on the latest initiative to restore the financial system. Last week we learned that the Treasury and Administration would like to have visitation rights and new regulations imposed on “systemically” important non-bank institutions.

Soon, the Treasury will announce their plan for regulatory reform of the banking system. They are expected to announce that the Federal Reserve will be the regulator to oversee “systemically important” financial institutions.

I resent the constant reference to systemically important and systemically unimportant financial institutions. I recognize that the government has replaced too big to fail with too big to close or systemically risky to close.

In my way of thinking there is no such thing as a systemically unimportant financial institution, regardless of its size. Community banks after all are systemically important to their communities. Just see what happens to small business agriculture and consumer lending if the local banks goes down. It has a chilling affect on the economic well being of the community for years to come.  Community banks after all, are nothing more than a mirror image of the markets they serve.

Just ask any of the local folks who have seen their dreams realized thanks to their local community bank.

Posted in IBAT, Independent Bankers Association of Texas, Texas Community Banking, business agriculture, community banks, federal reserve, systemically important, systemically unimportant, too big to fail, treasury | 1 Comment »