We Listened: What Small Banks and Small Businesses Are Saying About the Dodd-Frank Act
Posted by on October 10, 2012


Some Washington politicians and supposed media “fact checkers” have been falling over themselves the last few days busily defending the Dodd-Frank Act.  But rather than rely on what the politicians and Beltway pundits think, Republicans on the House Financial Services Committee actually did something quite remarkable by Washington standards:  we asked small town community bankers, financial institutions and small business operators what THEY think about the Dodd-Frank Act.  After all, they are the ones who have to live under Dodd-Frank’s more than 400 new regulations.

Since Republicans assumed the majority on the Financial Services Committee in January 2011, the Committee has held 62 hearings on the Dodd-Frank Act and received testimony from more than 300 witnesses. 

Here are some of their voices:

“The regulatory costs are overwhelming in our industry right now…Virtually everyone in our bank now is involved to some extent or another in complying with regulations, and so it has taken away from their ability and their resources to work with both existing customers and also to go out and solicit new customers, helping other people get businesses off the ground.” John A. Klebba, President and Chief Executive Officer, Legends Bank

“Among some of the provisions of the Dodd-Frank Act, the new CFPB perhaps carries the most risk for community banks. We are already required to spend significant resources complying with consumer protection rules. Every hour I spend in compliance is an hour that could be spent with a small business owner or a consumer.” Greg Ohlendorf, President and Chief Executive Officer, First Community Bank and Trust

“And I charge you with this, 40 years ago I did not see problems in banks and banks falling like flies, and yet the level of regulation and the cost of regulation was far, far less than it is today. As I see it from my standpoint, we will see community banks continue to decline. We simply cannot afford the high costs of federal regulation. And as one banker I will tell you this, my major risks are not credit risks, risks of theft, risks of some robber coming in with a gun in my office; my number one risk is federal regulatory risk. And I have a greater risk of harm to my bank, my stockholders from the federal government than I have anything else in this whole world. That is obscene. ” Les Parker, Chairman, President and Chief Executive Officer, United Bank of El Paso de Norte

“Over the last several years, banks have faced increased regulatory costs and will face hundreds of new regulations with the Dodd-Frank Act. These pressures are slowly but surely strangling the traditional community banks, and handicapping their ability to meet the credit needs of their communities.” Matthew H. Williams, Chairman and President, Gothenburg State Bank

“There’s no question that the current regulatory and examination environment is an impediment to the flow of credit that will create jobs and advance the economic recovery.”  Mr. Marty Reinhart, President, Heritage Bank

“As one who has worked in community banks for over four decades, I maintain that despite policymakers’ good intentions in implementing regulations, they
are ultimately detrimental to banks’ ability to grow and create capital in other communities and to build communities through job creation. Without community banking, we will no longer be the America that created the largest economy in the world. We have already lost over 11,000 community banks since 1985; we cannot afford to lose anymore.” Ignacio Urrabazo, Jr., President, Commerce Bank

“There is no doubt that the increasing amount of new laws and regulations that credit unions face have become overwhelming. As the credit union president, I spend many hours reading each new law and regulation. I can’t afford to hire lawyers to interpret them for me. Most of these laws and regulations are created to address a problem caused by organizations other than credit unions. Yet, the regulators continue to impose the same requirements on small credit unions as they do on the largest financial institutions in the country. This just doesn’t make sense.” Maria Martinez, President and Chief Executive Officer, Border Federal Credit Union

“The greatest challenge facing many credit unions is cumulative impact of the rapidly growing number of regulatory burdens in the wake of the financial crisis. While any one single regulation may not be particularly burdensome, the layering of new regulation on top of old and outdated regulation can completely overwhelm small financial service providers like credit unions. Unfortunately, every dollar spent on compliance, whether stemming from a new law or outdated regulation, is a dollar that could have been used to reduce cost or provide additional services or loans to members. It is with this in mind that NAFCU continues to urge the Committee to move forward with legislation that will provide regulatory relief from outdated laws and regulations for credit unions.” Ed Templeton, President and Chief Executive Officer, SRP Federal Credit Union

“And I totally support the idea that there should be smart—you have to have regulation.  But we are regulating community banks particularly down to the point where there is barely room to breathe. That is not how you get the economy going. And that is not how you lend money out.” Tim Zimmerman, President and Chief Executive Officer, Standard Bank

“The amount, intensity and uncertainty of new Federal regulations, chiefly the Dodd-Frank Act, have forced banks to allocate an enormous amount of time and resources to compliance, and away from our primary mission of serving our customers.” Todd Nagel, President, River Valley Bank

“To community banks like mine, regulation is a disproportionate expense, burden, and a real opportunity cost. My compliance staff is half as large as my lending staff. This is out of proportion to our primary business: lending in our communities to support the local economy.” Salvatore Marranca, President and Chief Executive Officer, Cattaraugus County Bank

“The bigger banks can absorb it, the smaller banks can’t. I would not be surprised to see half of the community banks in this country go out of business if we don’t give some relief from Dodd-Frank for them. I think that Dodd-Frank is a terrible piece of financial legislation. It didn’t address any of the causes of the crisis that we just went through. It won’t prevent the next crisis. It’s heaped volumes and volumes of regulations. What they’re missing here is that when you require banks to capitalize for a depression, it’s going to be awfully hard to get this economy moving. Loan growth has almost been non-existent for the past three years. It’s hurting the people who need the money the most. It’s hurting small business. I think it is impeding economic growth.” Bill Issac, Former FDIC Chairman and Chairman of Fifth Third Bancorp

“Each new rule requires significant time and money and builds upon volumes of existing regulations. This is putting an enormous strain on our staffs, and for community banks, which are disproportionately affected due to their more limited resources, diminishing revenue streams, and with limited access to capital—it is becoming a nearly insurmountable burden. When you add to this the more than two dozen proposals established under Dodd-Frank for a whole new class of regulation – mostly to be issued by yet another regulator– combined with the uncertainty and legal risks—it is plain to see how difficult it can be to achieve the right balance between satisfying loan demands and regulatory demands.” William Bates, Jr., Executive Vice President and General Counsel, Seaway Bank and Trust Company

“Community banks have been the life blood of this country, and they’re responsible for more small business successes than any other resources including government programs. What’s troubling to me and to my bank is the impact of government regulation that has been based not upon common sense but on politics.” George Hansard, President, Pecos County State Bank

“If Dodd-Frank is allowed to stand and proliferate as a monster regulatory overhaul, only the largest institutions will be able to navigate its requirements, and the community institution model will continue to diminish. The cost of regulatory compliance is simply staggering. I’m not talking about efforts to keep an institution out of trouble; I’m talking about a well-meaning community institution that has no intention of being unfair to members of their own town. These smaller institutions spend a disproportionate amount of money and time to just meet the reporting and manpower requirements of this new regulatory overkill.” Cliff McCauley, Executive Vice President, Correspondent Banking, Frost Bank

“Most banks in the Midwest did not participate in the underwriting practices that contributed to the recent recession. Sadly, however, we are paying for the past through costly new regulatory burdens, anxious examiners, and customers that are unwilling to borrow. These remedies are hitting all hearts of our financial statements, as costs are going up, opportunities to earn revenue have been curtailed, and the amount and cost of capital we need is increasing.” G. Courtney Haning, Chairman, President and Chief Executive Officer, Peoples National Bank

“The challenge is they’re estimating it could result in over 5,000 pages of regulations.  There already is a fairly significant compliance burden, which in smaller institutions like ours and others is difficult as every other cost is rising. Part of the challenge, as well, is because of the uncertainty of what will those regulations end up being?” Dorothy Savarese, President, Cape Cod Five Cents Savings Bank

“We know that there will always be regulations that control our business – but the reaction to the financial crisis has layered on regulation after regulation that does nothing to improve safety or soundness and only raises the cost of providing credit to our customers. As a banker, I feel like Mickey Mouse as the Sorcerer’s Apprentice in Disney’s famous cartoon Fantasia. Just like Mickey with bucket after bucket of water drowning him, new rules, regulations, guidances, and requirements flood in to my bank page after page, ream after ream. With Dodd-Frank alone, there are 3,894 pages of proposed regulations and 3,633 pages of final regulations (as of April 13) and we’re only a quarter of the way through the 400-plus rules that must be promulgated. While community banks pride themselves on being flexible and meeting any challenge, there is a tipping point beyond which community banks will find it impossible to compete.” William Grant, Chairman, President and Chief Executive Officer, First United Bank & Trust

“But the role of community banks in advancing and sustaining the recovery is jeopardized by the increasing expense and distraction of regulation drastically out of proportion to any risk posed by community banks. We didn’t cause the recent financial crisis, and we should not bear the weight of new, overreaching regulation intended to address it.” Samuel Vallandingham, Vice President and Chief Information Officer, First State Bank

“Once again, community banks will suffer for the problems created by big banks and investment houses. Dodd-Frank, while attempting to "fix" the financial services industry, has come up short in correcting the problems that created today's economic uncertainty. Thousands of pages of new compliance requirements stemming from this legislation and from the Consumer Protection Act will continue to burden many financial institutions dedicated to serving local communities and supporting Main Street businesses.” “Some community banks will find it financially impossible to operate independently and competitively while complying with the host of expected regulations, and that will lead to consolidation among smaller banks. And that will mean hardships for many small businesses that depend on their neighborhood bank. Many of our small business customers tell us that they left large banking institutions because of their inability to obtain credit and the high service fees charged by these banks. Few deals were sealed with a handshake -- one of the hallmarks of community banking.” Douglas C. Manditch, Chairman and CEO, Empire National Bank

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