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Subject:  Re: banks Date:  10/9/2012  11:19 AM
Author:  Hawkwin Number:  1822471 of 2206891

How is it hurting small banks?

Although the Dodd-Frank Wall Street Reform and Consumer Protection Act's (Dodd-Frank Act) reforms are directed primarily at large, complex U.S. financial institutions, regulators, industry officials, and others collectively identified provisions within 7 of the act's 16 titles that they expect to have positive and negative impacts on community banks and credit unions. Industry officials told us that it is difficult to know for sure which provisions will impact community banks and credit unions, because the outcome largely depends on how agencies implement certain provisions through their rules, and many of the rules implementing the act have not been finalized. Thus, regulators and industry officials also have noted that the full impact of the Dodd-Frank Act on these institutions is uncertain. Nonetheless, some regulators and industry officials expect some of the act's provisions to benefit community banks and credit unions and other provisions to impose additional requirements on community banks and credit unions that could affect them disproportionately relative to larger banks.


So let's summarize. We passed Dodd-Frank without fully understanding what impact it would have on small banks. Additionally, it was passed with many of the rules having not been finalized. Lastly, small banks could have disproportionate requirements. All this from the GAO.

Now for your second question.

His plan is to repeal and replace...but replace it with what?

Something hopefully more thought-out than Dodd-Frank. Since we passed Dodd-Frank without knowing all the harm it might do to small banks, it makes sense that Romney take a little more time coming up with a better solution. Doing that in the middle of a campaign is not likely going to get the best result.

It is not common for the full details of a plan to come out during a campaign. We did not even learn what was in Obamacare until it was already passed (hat tip Nancy Pelosi).


Since its passage, the Dodd-Frank Act has spawned over 6,500 pages of proposed and final rules and regulations. For any bank, managing such a massive amount of regulation is a challenge, but for a small bank, it can be overwhelming.

Dodd-Frank has far-reaching consequences for community banks, and, according to the American Bankers Association, there are 12 critical issues for community banks to consider:

• Capital

• Consumer Financial Protection Bureau

• FDIC coverage and assessment base

• Housing: mortgage finance

• Housing: qualified mortgage and qualified residential mortgage

• Interchange

• Municipal advisers

• Office of Thrift Supervision’s merger into Office of the Comptroller of the Currency

• Preemption

• Savings and loan holding companies

• Swaps

• Volcker rule11

Critics of the Dodd-Frank Act have responded by going so far as to say the legislation will “harm” smaller banks by imposing higher operating costs to comply with many new rules and by placing limits on capital. American Bankers Association Chairman-Elect Albert “Kell” Kelly, an Oklahoma community banker, testified for Congress on the matter of community banks, saying, “The Dodd-Frank Act will raise costs, reduce income and limit potential growth, all of which drives capital away from banking, restricts access to credit for individuals and business, reduces financial resources that create new jobs, and retards growth in the economy.”12

Kelly warned “the lack of earnings potential, regulatory fatigue, lack of access to capital, limited resources to compete, inability to enhance shareholder value and return on investment, all push community banks to sell.”13


And, ZIRP is doing little to nothing to help small banks. They don't have a large and active trade desk to take the free money from the government and invest it overseas for a nice little spread. They have to risk it on loans and if no one is borrowing, all that free money isn't doing them much good. The $40 billion in new money each month is going almost exclusively to the benefit of large financial institutions - yet it is the small banks that continue to fail.
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