Okay, so today’s article not only touches on banking in the San Francisco Bay Area, but impacts the nation as well. A recent on line survey by the San Francisco Business Times asked the question, “Regulations, settlements, fines- Have banks been punished enough?” Many respondents replied, no way! The author feels the same way with respect to those bad actors; they should pay for the economic carnage their greed and avarice fostered. The guilty should pay up for the error of their ways and spend some quality time soul searching in the Big House, not Club Fed. The San Francisco Business Times is a highly respected weekly, but they, like many other media outlets lump all “banks” together. When someone says banks, what do you think of; nationwide banks, investment banks, mortgage banks, shadow banks, community banks or all of the above? Comingling all banks together does a great disservice to community banks. Community banks make up 95% of banks in this country and the Bay Area is rich with quality community banks that had absolutely nothing to do with the Great Recession. Community banks are highly regulated; many receive a Safety and Soundness Exam from state and federal regulators annually. This insures that they are in compliance with the multitude of regulations under which they currently operate. Community banks were created to meet local banking needs. As a rule, they don’t offer subprime borrowing, no documentation loans, collateralized debt obligations, hedges or other esoteric products that drive the average person, and the average community banker, to a dictionary. So, if community banks played by the rules during the most recent period of economic mayhem, one wonders why should they be punished through regulatory overkill? How are they being punished? As mentioned earlier these banks are already highly scrutinized by a combination of the following federal and state regulators, the Office of the Comptroller of the Currency, The Department of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank. “That’s a lot,” you say and you are right. Now, thanks to Dodd Frank, a 2,000 page law which has seen one third of its regulations enacted, including the creation of a new regulatory agency, the Consumer Financial Protection Bureau, one third of Dodd Frank is still being worked out and a full third haven’t even been addressed. The author has spoken with many community bankers in the Bay Area and spoke with them on the condition of anonymity. The message is the same; one regulatory size doesn’t fit all. A palpable sense of being worn down is also evident in their remarks. More and more express the feeling that as community bankers they are no longer working for their customers, communities, shareholders and employees, they are working to be in compliance with the regulatory maelstrom. Some in the accounting industry are interpreting the tea leaves and their prognostications are sobering. Some accountancies point to a time in the near future when Bay Area community banks and many around the country who are under $500 million dollars in assets size will be unable to meet the increasingly oppressive regulatory burden and shutter their doors. Some might say, “Well, this is economic Darwinism and if they can’t compete, too bad!” What will the small business and consumer be left with? Regional and large banks who say they are small business and consumer specialists, but find new ways to charge numerous fees, don’t do creative lending and can’t know the economic and social fabric of Hayward, Vallejo, Petaluma, Scotts Valley and Pescadero. Their marketing hyperbole rings hollow. The dollars community banks have poured back into their communities to improve the quality of life for all residents are enormous, the jobs created are significant and the service is neighbor to neighbor. Discover your local Bay Area community bank. You will find service oriented employees, lenders who look for ways to make a loan instead of ways not to and a bank that actively supports its community through capital donations and volunteer work. They don’t deserve to be placed on the endangered species list.
To read an exceptional article on "Too Big To Fail Banks", how they put tax payers at risk and smaller banks in jeopardy, check out Richard W. Fischer of the Dallas Federal Reserve Bank, go to: http://www.dallasfed.org/news/speeches/fisher/2013/fs130116.cfm. Simplicity in regulations, not complexity; great idea.
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