Just 20 banks of 8,000 now control over three quarters of our nation’s assets and over 60 percent of its deposits. Community banks are at a 0.40 to 0.60 basis-point disadvantage to their mega bank brothers when it comes to the costs of regulatory compliance—and community bankers scratch their heads and wonder how all of this happened.
Well, look no further than Wall Street and its army of Washington, D.C. lobbyists and trade groups. Sadly, many community banks blindly follow the “we must all speak as an industry” siren song written by the best public relations people Wall Street can buy.
And when the song has been sung to Wall Street’s satisfaction and this regulatory reform bill is finished, community banks will again find themselves on the short end of the stick, laboring under staggering regulatory burdens, scrounging for capital, struggling with narrowing margins and facing more bailouts of Wall Street titans. And all the while, the “shadow” banking industry will skate, and Wall Street will add however many hundreds of staff are needed to comply with new regulatory burdens imposed by the existing agencies. They will continue to pay themselves ever greater bonuses based on their burgeoning profits, while community banks are assessed higher and higher premiums to pay for Wall Street’s sins.
Such is the world as it is and as it will be without financial reform of Wall Street. I hope that those community banks that are singing out of the Wall Street hymnal stop in time to save themselves.
At ICBA, we represent Main Street, not Wall Street and we want a bill to stop the reckless practices of Wall Street that got us into this mess from ever happening again.