120 Year Old Kentucky Bank Faces Greatest Challenge Yet
Posted by on December 05, 2013

Since 1893, Owingsville Banking Company (OBC) has served the citizens of rural Bath County Kentucky. The bank endured the Great Depression, the stagflation of the 1970s and, most recently, the Great Recession. Today, however, OBC faces a new challenge -- not the difficult market conditions of this tepid economic recovery, but an avalanche of Washington regulations. 

In the above video (at the 4:50 mark), fifth generation banker Thomas Richards testified that the "frightening" regulatory environment created by Dodd-Frank and enforced by the Consumer Financial Protection Bureau (CFPB) could wipe OBC out of existence in ten years. Unfortunately, Owingsville Banking Company isn't alone.

Accelerated by the aggressive regulatory onslaught of the Dodd-Frank Act, small community financial institutions across the country are disappearing at an alarming rate while big banks grow even bigger. The Wall Street Journal reported earlier this week that the "number of federally insured institutions nationwide shrank to 6,891 in the third quarter after this summer falling below 7,000 for the first time since federal regulators began keeping track in 1934, according to the Federal Deposit Insurance Corp." That decline, according to the WSJ, comes "entirely in the form of exits by banks with less than $100 million in assets." 

Part of this problem stems from the inability of Washington elites to understand the characteristics and unique needs of local communities across America. Consider, for example, an area like Bath County Kentucky -- a county of two stoplights and a large Amish population. No reasonable person would classify this county as anything other than rural. In fact, Charles Vice, the top-banking regulator in Kentucky, testified that Bath County is one of the most rural places in the Commonwealth.

To the CFPB, however, the above map of Owingsville in Bath County could look just as much like a sprawling urban metropolis as it does a rural county seat surrounded by forests and fields. Relying on the “Urban Influence Codes” developed by the Department of Agriculture’s Economic Research Service, which are, in turn, derived from the definitions of “metropolitan” and “micropolitan” developed by the Office of Management and Budget (OMB), the CFPB does not classify Bath County as rural for the purpose of exempting it from Dodd-Frank's Qualified Mortgage rules. Such a misguided classification could leave many in Bath County without access to affordable credit. 

That's why the Financial Institutions and Consumer Credit Subcommittee held a hearing on Wednesday focused on legislation introduced by Rep. Andy Barr that would provide relief to financial institutions in rural areas like Bath County, Kentucky. "H.R. 2672 is a simple, pragmatic, and bipartisan solution this problem," said Rep. Barr. "It’s about inviting individuals to participate in their government and provide input on matters of local knowledge. It’s about making the federal government more accessible, more accountable, and more responsive to the people who know their communities best, so we can help create jobs in our local communities." 

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