The Wall Street Journal, The New York Times, The Washington Post and just about every other newspaper in the country are calling the “Wall Street Reform Bill” a win for community banks.
So why am I receiving e-mails, calls and letters from community bankers worried that the world as we know it is coming to an end?
Did all those newspapers get it wrong?
Well, within the context of this bill, not really. In addition to all the evil and terrible things we’ve all heard so much about, there are actually some good elements in the bill—if you are a community bank, that is. If you’re a Wall Street mega-bank, not so much.
What’s there to like?
The list is longer than this blog permits, so let me touch on just three provisions; you can read about the rest online.
- First there’s the change to the FDIC assessment base that will save community banks $4.5 billion over three years. And these assessment savings will only compound over time now that banks are paying regular assessments.
- Then there’s too-big-to-fail.
- ICBA has been leading the fight to end too-big-to-fail long before the current crisis erupted. Safely unwinding those behemoths is crucial to our nation’s economic well-being.
- This bill will go a long way toward reining in the mega-banks, leveling the playing field and focusing systemic-risk regulations and Systemic Risk Council efforts on the mega-institutions.
- Yes. The pre-funded dissolution fund was dropped from the final bill, but the FDIC is authorized to impose fees on the mega-firms to help fund their failures.
- And we won exemptions for banks under $10 billion from the examination and enforcement authority of the Consumer Financial Protection Bureau. Hey, that beats CFPB examiners marching into your banks on a fixed schedule.
But more important is the major national policy shift in how community banks are regarded in Washington. This legislation sets a precedent in recognizing that community banking is a distinct banking model from the Wall Street financial model and thus should not be treated in the same way. That is a huge policy shift and bodes well for community banks in future financial legislation and regulatory treatment.
It means that, going forward, community banks have gained the right to be treated differently, to be held to our own measure, not Wall Street’s. To finally be regarded as equals with Wall Street in the financial services sector – priceless!