American Bankers Association President Frank Keating complains on the pages of today’s Wall Street Journal that banks are over regulated. You have to admire his nerve. Keating represents an industry that was wildly deregulated in recent years, then promptly drove itself off a cliff with reckless practices, crashing the world economy and putting millions out of work.
The ABA public relations staff is savvy enough not to lead with the complaints of its principal constituents, the likes of Citicorp, Bank of America or J.P.Morgan. We taxpayers still feel the sting from the trillions of bailout dollars allocated to these giants. So Citicorp’s trade association leads with Jimmy Stewart figures from Bedford Falls, in this case an unnamed banker from the heartland of Nebraska. Keating leads off with the example of a single Nebraska banker who claims that he has more staff working on regulatory compliance than lending. From this starting place, Keating launches into a broad rant about regulation, claiming it’s the main problem in the economy now.
Yet Keating’s own op-ed reveals the true business problem small bankers face: minimal loan demand.
As he cites, a recent National Federation of Independent Business poll found that owners’ top concern is “poor sales . . . not access to credit. . . . In fact, 92% of small-business owners reported either that all their credit needs were met or that they were not interested in borrowing.” Moreover, an August survey by the National Association of Business Economics finds that 80 percent of business economists consider the current regulatory environment in the U.S. to be “good” “for American businesses and the overall economy.”
So the biggest problem in the economy is lack of consumer demand. It’s important to remember the origin of that problem, since Keating is conveniently silent on the issue. The Alan Greenspan era of deregulation allowed Wall Streeters like Keating’s big banks industry to run wild with mortgages and other credit instruments inflating housing prices well beyond sanity. The inevitable rupture has now left millions unemployed, forced thousands from their homes, required retirees to return to the workforce, and darkened the career opportunities of recent college graduates. In other words, low consumer demand is caused by unemployment and the foreclosure crisis – problems that were caused largely by Keating’s big banks, operating without good regulatory oversight.
The Dodd-Frank law largely aims to prevent another bailout. The new Consumer Financial Protection Bureau it creates will police “unfair, deceptive and abusive” tactics by bankers that resulted in reckless credit-making. The ABA fought the Dodd-Frank Act and now it’s fighting implementation of the law. The reason is that deregulation, although it has destroyed the economy, harming hundreds of millions of ordinary Americans, including small business owners, was highly profitable for the big bankers.
Keating should let the small Nebraska bankers speak for themselves, or through their own trade association, namely the Independent Community Bankers of America. ICBA has praised the key components of Dodd-Frank. During the July 21 anniversary of enactment, for example, ICBA commented: “ICBA earned several wins for community banks in the Dodd-Frank Act, namely . . . stricter oversight of too-big-to-fail institutions and the inclusion of nonbank financial firms under consumer compliance regulation and supervision.”
Big banks “keep pumping out poison after poison and it just scares the willies out of” community bankers, said Camden Fine , president of the ICBA. “They just read the headline and say, ‘Oh my God, this is what’s going to happen and this is terrible,’ but not a thing has happened to a community bank related to Dodd-Frank yet.”