Dear White House: Here's What Community Banks and Credit Unions Are Saying About Dodd-Frank

Washington, August 10, 2016 -

Like Captain Renault, Americans are shocked – SHOCKED – that a report by the White House says a law supported by the White House doesn’t hurt community banks, no matter what.

Well, over the last few years Republicans on the House Financial Services Committee have asked community bankers, credit union leaders, and small business operators what THEY think about the Dodd-Frank Act.  After all, as our nation loses one community financial institution each day, they are the ones who have to somehow comply with Dodd-Frank’s crushing regulatory burden.

Here are some of their voices:

“Community banks are resilient. We have found ways to meet our customers’ needs in spite of the ups and downs of the economy. But that job has become much more difficult by the avalanche of new rules, guidances and seemingly ever-changing expectations of the regulators. This—not the local economic conditions—is often the tipping point that drives small banks to merge with banks typically many times larger. The fact remains that there are 1,200 fewer community banks today than there were 5 years ago—a trend that will continue until some rational changes are made that will provide some relief to America’s hometown banks.” - Tyrone Fenderson, President and CEO of Commonwealth National Bank

“Managing this tsunami of regulation is a significant challenge for a bank of any size, but for a small bank with only 17 employees, it is overwhelming. Today, it is not unusual to hear bankers—from strong, healthy banks—say they are ready to sell to larger banks because the regulatory burden has become too much to manage. Since the passage of Dodd-Frank there are 80 fewer Texas banks. These banks did not fail. Texas has one of the healthiest economies in the country – we call it the Texas miracle. These were community bankers – and I have talked to many of them personally – that could not maintain profitability in an environment where the regulatory compliance costs are increasing between 50 and 200 percent.” - Dale Wilson, Chairman and CEO of the First State Bank of San Diego

“The regulatory costs are overwhelming…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 CEO, Legends Bank

“The growing regulatory burden on credit unions is the top challenge facing the industry today. All credit unions and their members are being impacted. This burden has been especially damaging to smaller institutions that are disappearing at an alarming rate.  The number of credit unions continues to decline, as the compliance requirements in a post Dodd-Frank environment have grown to a tipping point where it is hard for many smaller institutions to survive. Those that do are forced to cut back their service to members due to increased compliance costs.” - Peggy LaMascus, President and CEO of Patriot Federal Credit Union

“To put the question of size in further perspective, consider that each of the four largest banks in the United States has total assets greater than the combined assets of the entire credit union system.  The rules that the CFPB has promulgated so far have not taken this disparity -- and disproportionate burden -- into consideration as much as we feel it can or should under the law.  This is one of the primary reasons that small financial institutions are disappearing at an alarming rate.” - Patrick Miller, President and CEO of CBC Federal Credit Union

“In recent years, Centennial Bank has experienced a sharply increasing regulatory burden. The nature of our business has changed from lending and investing in our communities to compliance with ever-changing rules and guidance… In the past 10 years our compliance costs have grown from approximately five percent of overhead to 15 to 20 percent today.  I believe this increase in regulatory burden has contributed significantly to the decrease of 1,342 community banks in the U.S. since 2010.” – David Williams, Chairman and CEO of Centennial 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 CEO, First Community Bank and Trust

“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 CEO, 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

“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.” - 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 CEO, 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.” - Ed Templeton, President and CEO, SRP Federal Credit Union

“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 CEO, 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 CEO, 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 heaped volumes and volumes of regulations…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 CEO, Peoples National 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.” - William Grant, Chairman, President and CEO, First United Bank & Trust

“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 CIO, First State Bank

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