Small Banks Play Big Role In Finance Overhaul
By Ashlie Rodriguez and Christopher Snow Hopkins
Camden Fine
CEO, Independent Community Bankers of America
Camden Fine, CEO of the Independent Community Bankers of America, believes small banks are being punished for the sins of Wall Street. Fine's organization wants Senate Finance Committee Chairman Christopher Dodd, D-Conn., to protect community banks, not saddle them with further regulation, because of the role they could play in the nation's economic recovery. National Journal discussed his thoughts on current regulatory overhaul and the effectiveness of his lobbying efforts. Edited excerpts from the interview follow.
NJ: Could you give us some sense of the current rules and regulations governing banks?
Fine: Independent community banks are regulated in the same manner as any insured institution, so it doesn't matter if you're a $50 million institution or if you're a $2 trillion dollar institution, you come under the exact same regulations from the FDIC, Federal Reserve, or the OCC [Office of the Comptroller of the Currency] as any other FDIC-insured commercial bank. So there is no difference in regulation between community banks and the very largest banks. We believe there should be, but unfortunately at this point there isn't.
NJ: Have you seen anything in the bill that came out yesterday that indicates that there will be a differentiation?
Fine: With respect to dealing with the so-called "too big to fail" banks and how you resolve the failure of a systemically dangerous firm -- one of the systemic risk firms -- Senator Dodd has proposed some fairly stringent measures which ICBA fully supports.But with respect to enforcement of consumer protection regulations and so forth, whether you're a community bank or a Wall Street megabank, all financial firms would be subject to the rule-making of the consumer protection bureau within the Fed, so community banks would be subject to those regulations in the same manner as any other insured bank -- and for that matter, nonbanks -- which, we like that part. We think nonbanks should be subject to consumer protection regulation.
NJ: Do you anticipate that banks would be stymied by these new regulations that enforced or proposed by the consumer protection bureau?
Fine: It depends on what the bureau would propose. The larger question is the harmonization between safety and soundness regulations and consumer protection regulations. There has to be harmony and balance between those two types of regulations or the community banker gets caught out in no-man's land.If you become too focused on consumer protection and sacrifice safety and soundness regulation, then examinations become unbalanced and you could threaten the bank's survival on the safety and soundness side. If the safety and soundness side becomes unbalanced to the detriment of consumer protection, then you could have negative consequences for consumers.
NJ: Do you think the push for a new agency is ill-advised? Would you like to see it modified or just done away with?
Fine: I think it's not focused properly. I think the focus of new consumer protection bureau should be on the nonbank financial industry. That's part of the financial services industry that is not currently examined on a regular and scheduled basis. Nearly all of the consumer abuse occurred outside of the insured commercial banking industry, which already has in place literally dozens and dozens of consumer protection laws.... What they need to do is focus the work of this new consumer protection function on the firms that caused all the consumer abuse to begin with.
NJ: Do you think that your voice has been heard?
Fine: Oh yeah. I think that our voice has been heard, both in the public media and on Capitol Hill. I think there was a time when the community bank voice was not heard, but I'd say that really since the beginnings of this crisis... Main Street community banks have been heard loud and clear by Congress.Many of the provisions dealing with "too big to fail," resolution authority, registering, Wall Street hedge fund and more or less, the whole statutory framework that's been proposed to reign in the activities of Wall Street have all come from the Main Street community banks. We were also successful in convincing the Congress that there should not be a free-standing, separate consumer protection agency -- a brand new bureaucracy, so to speak.
NJ: What advantages might a community bank have over larger firms?
Fine: Well sure. Probably the biggest competitive advantage that a community bank has over a Wall Street megabank is that community banks are very, very close to their customers. There's not a lot of customers off the street that just walk in to [Citigroup CEO] Vikram Pandit's office and shoot the breeze and talk about a loan....Organizationally, community banks are very flat and so they can make decisions rapidly. And so if they see a new technology or they see a new way to deliver products to the customers, they can adopt those new technologies or those new product delivery systems very, very rapidly.
NJ: Aside from bringing this legislation onto your heads, have the megabanks had any other detrimental impact on community banks? Is there kind of a tug-of-war between the two sides?
Fine: For Wall Street, good news for them would be the status quo. They'd be perfectly happy without a bill at all. They wouldn't say that publicly, but I think privately why would they want a bill? Any bill that passes Congress is going to impose some restrictions on the big megafirms that were not there before....On the other hand, Main Street banks, community banks, want a bill because we want those restrictions put in place. We wouldn't have all this turmoil in the economy and we wouldn't have had hundreds of billions of dollars of taxpayer money and community bank money sucked into the Wall Street Banks to prop them up, to keep them open, had there been some of the restrictions that are being talked about today imposed on these banks. So it's in the interest of the community banks to get a bill.
Responded on July 9, 2010 2:25 PM
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Great interview. However, one thing my super conservative grandmother was always worried about was whether or not a local bank was secure. As a woman with substantial wealth that hates risks, she was always nervous about putting too much of her money into a bank even though it was FDIC insured. The reason? She believed that the FDIC was worse off than Social Security.
If you have any time to revist this interview, I'd be interested in your thoughts on the FDIC and its position in relation to other government backed financial assurance programs.
Best,
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It's too bad the big banks are so busy grabbing all they can get with both hands. Then when they bring down the economy, the public has to prop them up and our government goes along with it. If big banks have this kind of control over our economy, then they should be held criminally liable when they cause damage to it. I am sure more bank CEOs would be much more careful if they knew their freedom was on the line.
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I am giving Camden Fine a thumps up because most community banks are exposed to insecurities and regulations that are far much harsher and crude. The sins that are committed at Wall Street should not get past Wall Street because they don’t just make things easier for community banks. - Jordan
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I understand that there are a lot of regulations regarding banks, but from what we saw happen recently there is obvioulsly not enough, or they are not being very efficient enforcing it. I think everyone can admit that there was a breakdown somewhere. The thing is that these institutions have such a profound impact on the rest of the economy that we have to make sure everything is legit.
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