One of the sad facts of this modern world in which we live is that we are bombarded with “messaging” nearly 24 hours a day. Our senses are overwhelmed with information. We’re on overload—and our memories are very short. And so it is with this most recent financial meltdown.
In the fall of 2007, as the credit markets on Wall Street were going into vapor lock and mortgage-backed securities and the subprime loans that backed them were cratering, the politicians, policymakers and consumer advocates in Washington and around the nation were all screaming that everyday Americans and the economy were suffering because of the “greed” and “overreach” of the “bankers.” All fingers were pointing at “bankers.” It was the bankers’ fault, they said. All bankers were equally culpable in the eyes of the nation.
During those very dark days, I got scores and scores of e-mails (some days several hundred) from community bankers nationwide imploring ICBA to draw a bright line of distinction between community banks and the nonbank financial firms and the mega Wall Street financial firms with their off-balance-sheet assets and so-called structured investment vehicles.
“We are not those guys,” community bankers pointed out. “Make them understand,” they wrote. Community bankers raged about how it was not the little community banks that engaged in the avarice and recklessness that caused our nation’s financial system and economy to melt down. Please, please, please, ICBA members pleaded, make the policymakers understand how and why community banks are different.
ICBA did just that. And we were highly successful in doing so in several ways—from knocking back the FDIC’s 20-cent special assessment to leveling the playing field on deposit insurance premiums, to raising the insured deposit level by two and a half times, to bringing “too-big-to-fail” to heel. Most importantly, for the first time in financial history, ICBA convinced policymakers to create a legal bright line distinction between the business model of a community bank and the business model of a “systemically dangerous” Wall Street bank or nonbank financial firm.
These are historic achievements. No longer will smaller, local community banks be saddled with the same regulatory regime as international behemoths such as Citi or Bank of America. For the first time in financial history policymakers recognize and have acted to affirm that “one size fits all” financial regulation is not appropriate and that regulators should calibrate the country’s banking rules to accommodate for complexity, risk and size.
ICBA heard our members’ pleas for equity and to keep their hometown reputations intact, and ICBA responded with all our energy and achieved historic results for the community banking industry.