GOP candidates say Dodd-Frank kills small banks. The banks beg to differ.
The 2012 Republican field hates Dodd-Frank. But when asked what they particularly detest about Obama’s Wall Street bill, the candidates don’t tend to get very specific. They blast Dodd-Frank for killing the economy through regulations and attack the Democratic authors of the legislation.
“If you want to put people in jail, I want to second what Michele (Bachmann) said, you ought to start with Barney Frank and Chris Dodd,” Newt Gingrich said during a debate last month.
What they don’t usually do is delve into detailed explanations of what’s wrong with the legislation. But there’s at least one concrete criticism that they bring up, time and again: that Dodd-Frank is “a killer for the small banks,” as Mitt Romney pronounced at another debate last month—a claim that both Gingrich and Herman Cain repeated in Detroit last night.
But despite the GOP field’s comments, small and community banks aren’t uniformly, unequivocally opposed to Obama’s Wall Street reform. In fact, even the country’s biggest lobbying group for community banks praises Dodd-Frank for helping to level the playing field by reining in big banks, while also criticizing specific provisions of the legislation.
Shortly after Dodd-Frank passed Congress last year, the Independent Community Bankers of America applauded the law for helping to “level the regulatory and competitive playing field for community banks.” Specifically, the group praises new rules that force bigger banks to pay more in deposit insurance, which the ICBA estimates will “save community banks $4.5 billion over the next three years. The group also praises higher capital and liquidity requirements for the biggest banks, the Volcker rule, and the Consumer Financial Protection Bureau, which the group says “will reduce the unfair competitive advantage” from non-bank competitors.
Though the ICBA neither supported nor opposed the legislation while it was being deliberated, the group boasts of its efforts to help secure such provisions in Dodd-Frank. Legislators intended Wall Street reform to better regulate the biggest, riskiest banks behind the 2008 financial collapse, the biggest changes under Dodd-Frank often don’t apply to smaller institutions. The ICBA doesn’t like how the law empowers the Federal Reserve to set rates for debit-card fees for banks with more than $10 billion in assets. But 98 percent of the nation’s 7,000 community banks have assets of less than $10 billion, as the New York Times points out.
To be sure, Republicans may be channeling some criticisms and concern that community banks have about Dodd-Frank. The ICBA describes new regulations on insider trading, executive compensation, and other provisions as “harmful and distracting.” The group is lobbying heavily to carve out further exemptions for community banks as Dodd-Frank gets implemented, as the industry has succeeded in doing for new rules restricting derivatives and mortgage underwriting. Meanwhile, bigger industry groups like the American Bankers Association—which also represents big banks—blast Dodd-Frank for burdening community banks with new regulations and forcing them “to hire additional compliance staff to review the new rules.” A few individual banks have spoken out as well. “The Dodd-Frank Act will add an additional, enormous burden, has stimulated an environment of uncertainty, and has added new risks that will inevitably translate into fewer loans to small businesses,” Thomas Boyle, Vice Chairman, State Bank of Countryside, told House Republicans.
But, on the whole, the community banking industry isn’t pushing to repeal Dodd-Frank. Instead, it’s lobbying to change parts of the law, which contains some provisions that groups like the ICBA support. So while Republicans cite their criticisms as part of their attack on Wall Street reform, community banks themselves don’t seem to be on quite the same page as the GOP.