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Dodd-Frank Expected to Strain Community Banking

Small banks fear they will not have the manpower to handle compliance requirements.

Patrick Richardson


July 9, 2013 - 12:00 am
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The Dodd-Frank bank reform act was passed in 2010; three years later it has yet to be fully implemented. Supporters of the bill claim the financial services lobby has delayed the regulations from taking effect, while the bill’s critics say they have good reason for such behavior, as Dodd-Frank would require small regional and community banks to adhere to the same rules and regulations as “too big to fail” banks like J.P. Morgan Chase.

That, says Lynn Mitchelson – president and CEO of American Bank of Baxter Springs, Kansas – is the problem:

I think they find it difficult to differentiate between the “too big to fail” banks and community banks. The ability of community banks to effectively lobby and be differentiated from the “too big to fail” banks has not been successful yet.

Mitchelson has more than 50 years of business-lending experience in the Kansas City area. More than 25 years of this were spent in Johnson County following his founding of the Corporate Woods State Bank in 1980, and through subsequent sales of the bank to Bank IV, Boatmen’s, NationsBank, N.A., and Bank of America. Mitchelson stopped short of saying Dodd-Frank is bad legislation, partially because the bill has not been fully implemented:

I think we’re all still sorting it out. I don’t believe there’s a true complete understanding of what Dodd-Frank will entail. I think the biggest concern I hear among community bankers is what it may do to single family mortgage lending. We don’t want this new national regulation to affect our ability to serve the market.

Congressman Steve Pearce (R-NM) says Dodd-Frank’s cookie-cutter approach to regulation is part of the problem:

Dodd-Frank’s one-size-fits-all approach saddles community banks with the same regulations as Wall Street giants — there is no commonsense distinction made to account for differences in how they operate, or their vital role in small communities across the country. Community banks have the power to get our economy going again, by making local loans and jump-starting small business. Instead, they’re being regulated out of existence. In New Mexico, I constantly hear from community banks that the Dodd-Frank act spells the beginning of their end.

Mitchelson agreed that changes need to be made to the regulations to make them more friendly to small banks:

That’s a refinement that has to be imposed on the Dodd-Frank legislation, as there’s a realization that Main Street needs community banks to get this economy going again. That’s where the lending happens for small business. You can’t stifle community bank lending with national legislation and then have Main Street prosper. It’s just not going to happen.

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All Comments   (7)
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my classmate's mother-in-law makes $75 every hour on the internet. She has been fired from work for 9 months but last month her income was $12112 just working on the internet for a few hours. Go to this web site and read more...
40 weeks ago
40 weeks ago Link To Comment
That's the idea. The progressive left is determined to destroy the middle class, the smaller competitors and it's through regulations they will do it. Now what was the occupy Wall Streets upset about again?
41 weeks ago
41 weeks ago Link To Comment
You beat me to it. That's exactly what's going on. All these regulations and taxes are meant to destroy small farmers, small banks, and small business to eliminate competition for the big donors in those same industries. If millions lose their jobs and end up dependent on government as well, so much the better.
41 weeks ago
41 weeks ago Link To Comment
Christopher Dodd with his sweetheart home loan from Countrywide's now disgraced Angelo Mozilo.

Barney Frank doing his utmost to tank the economy through years of diehard insistence on the soundness of Frannie & Freddie, one of which was run at some point by Barney's then boyfriend.

And we're surprised that this duo screwed things up ?
41 weeks ago
41 weeks ago Link To Comment
Kill Obamacare first, then Dodd-Frank after. The Federal government itself is proving to be America's worst enemy.
41 weeks ago
41 weeks ago Link To Comment
IT'S CALLED "DODD-FRANK". Those two jerks were the most active members of Congress who defrauded just about anyone involved in the banking fiasco, including those who tried to tell the truth. Now we are left with their overwhelming "transformation" of our banking/financial systems whose legislation we had to pass to find out what was in it. The community banks will NOT be the only victims. This is just another trojan horse passed by anti-Americans that should be put out to pasture, along with Obamacare, illegal Immigration amnesty and the Farm bill.

We need a constitutional amendment that requires our "elected" officials to demonstrate they have read and understand what they are encumbering us to follow. Something that resembles what we do with all the software we download. If it's good enough for programers, it should be good enough for the leaders of our country. What a novel thought.
41 weeks ago
41 weeks ago Link To Comment
Let's see if I understand correctly. Dodd-Frank was passed in response to the housing crash caused by big banks who bundled tons of bad paper and sold it. The result is to bankrupt the locally owned community banks (who were pretty much blameless) by drowning them in red tape.

Great job, reactionary Congresscritters. Has anyone ever explained to you room temp IQ talking heads the law of unintended consequences?
41 weeks ago
41 weeks ago Link To Comment
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