Q&A WITH SCOTT MEACHAM
Dodd-Frank Act regulations to affect ways banks do business
Q: What are the biggest immediate concerns about regulation that you're hearing from bankers?
A: With the creation of the Bureau of Consumer Protection under the Dodd-Frank Act, there is a lot of concern with respect to the regulatory path this new banking regulator will follow. In the past, consumer compliance regulation was handled almost exclusively by banks' primary regulators. Now, a new “super” regulator has been added to the mix with respect to consumer regulation that lacks any real understanding of the business of banking or the issues bankers face every day as they conduct the business of banking. It remains to be seen whether the bureau will seek to be pragmatic in its approach to regulation or will be more academic and issue regulations without consideration of the potential impacts on the business of banking. If the bureau is too heavy handed, bankers may be forced to stop offering certain consumer financial products if they can no longer be offered profitably due to significant regulatory burdens and costs.
Another big concern is the apparent shift in the philosophy of the regulators. Historically, the banking regulators have sought to apply the laws passed by Congress and have adopted regulations and practices to enforce those laws. In recent years, regulators have moved into the arena of trying to make law as well as enforcing it. Over the past couple of years, we have seen regulator-made laws with respect to areas such as banks' overdraft programs and practices as well as mortgage foreclosure practices. In several instances, it seems as if the banking regulators have migrated from industry regulators to consumer advocates.
Q: Do bankers that you deal with feel like they are somewhat under siege with new federal mandates and their attending responsibilities and potential liabilities?
A: Community bankers feel as if Congress and other participants in the political system blame them for the recession of 2008-2009. There seems to be a complete lack of ability to differentiate politically or from a policy standpoint between a handful of the largest financial institutions in the world whose speculative practices led to the financial collapse and the community banks who just went about their business as usual despite the financial world collapsing all around them. The way the community banking sector held up during the collapse is actually a testament to how well-run our community banks are today.
Politicians always look for scapegoats whenever there are problems. They seldom bother to look into the mirror. The latest financial crisis was no different. The politicians were desperate to show the country they had “fixed” the problems that led to the crisis. Since they really had no understanding of the forces that led to the crisis or even how to control those forces, they instead did what they always do and passed a massive piece of omnibus legislation that they immediately declared as the solution to the problem. This legislation was Dodd-Frank. No one knows the long-term implications of Dodd-Frank. Although it undoubtedly will do some good, I am convinced it will do more harm, primarily to community banks.
Q: Are there other banking issues you're dealing with that our readers should be aware of?
A: Despite the very uncertain and negative regulatory environment bankers are facing today, we are actually seeing improvement and more of a return to normalcy in the banking sector in Oklahoma. We are starting to see bank acquisitions again. In fact, I am currently working on two. Also, we are starting to finally see an increase in loan demand. It has been widely reported that bankers have been unwilling to lend since the crisis. My experience has been just the opposite. Borrowers have been unwilling to borrow because of all of the uncertainty in the economy. Now we are finally seeing the borrowers starting to return. That is a good sign for Oklahoma bankers and the Oklahoma economy.
DON MECOY, BUSINESS WRITER