Dodd-Frank Expected to Strain Community Banking
Moreover, community banks did not have a hand in the financial meltdown of 2009, as Mitchelson points out:
There's not what I would call a good level of understanding on the part of the American public as to what caused the crisis, what part of it was caused by banks and which banks were involved. To the extent the banking industry was involved it was those banks that dealt in derivatives, and that's a business most community banks ... aren't in. There's nothing evil in derivatives in and of themselves, they are a useful tool for mitigating interest rate risk if used properly.
Mitchelson says the problem lies with the "superbanks," which are "too big to fail, too complex to manage, and too powerful to regulate."
Community banks are disproportionately affected by increased regulation because they are less able to absorb additional costs. The majority of community banks today have $250 million or less in assets, according to the GAO -- which often translates into a one- or two-person compliance department.
American Bank has only three branches, all in Kansas: a main office in Baxter Springs, one in Galena, and one in Columbus. It epitomizes the community bank. They employ two people -- upper-level employees -- who spend the majority of their time on compliance issues:
What has happened is the "too big to fail" have not been regulated because they're too big to regulate. [But] they're not hesitant to tell someone our size [what to do] because we're not considered an essential element of the national economy.
Mitchelson reiterated that it's simply too early to tell if the regulations will be good or bad for the industry, but noted that as of now the bill looks damaging:
It looks like overkill to begin with, but maybe if it gets modified it'll be good regulation.