Inside Financial Services

The FDIC Lays an Egg

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Here’s one for your mental “Regulatory Follies” folder. Last week the FDIC retroactively downgraded the “Satisfactory” CRA rating it had given Bancorpsouth back in 2013 to “Needs to Improve.” Why? Because, this past June, the company entered into a consent order with two other regulators, the CFPB and Department of Justice, over purported violations of the Equal Credit Opportunity Act and Fair Housing Act.

If the logic of the FDIC’s move eludes you, you’re not alone. Why should the agency reverse a decision it made three years ago based on a years-later action by two other regulators? If the FDIC really did find back then that Bancorpsouth.’s practices were acceptable, then its review process is either a) serious flawed or b) totally subjective. Neither is a good option. Regardless, the agency has so little confidence in how it does things that it seems to be awfully easily swayed by other regulators’ actions. At the very least, the FDIC might have done a quickie sham exam prior to the downgrade  to at least convey the illusion that it thinks it knows what it’s doing.

Anyway, the FDIC’s move last week is further proof, if anyone needed any, that banking regulation isn’t based on established rules and regulations the way it should be, but instead on the apparent fact that regulators can do whatever they want, whenever they want. Pathetic.

What do you think? Let me know!

5 Responses to “The FDIC Lays an Egg”

  1. Steve

    Par for the course. Too many regulations are based on ideas and political agendas than facts and data. I’d like to be optimistic and say this will end soon but the general public educates itself and forms opinions from headlines and through facebook. Until that changes and the voting majority wake up to just how large and intrusive the government has become, we’re in for a ride.

  2. Ed

    Further evidenced by something we have all seen, which is “do it this way”–2014 exam, “no, you are doing it wrong–do it this way instead”–2015 exam and strangely enough the comment was directed at the same topic!!!

  3. Anonymous

    The CRA examinations, done primarily by telecommuting second-rate examiners are a joke anyway.

  4. Doc

    I always suspected “Too Big To Fail” was code for “Too Big To Regulate”. Big outfits scare the regulators because their mistakes/failures will be very visible when one of the bigs tips over.

    • Wayne Abernathy

      Are you saying that Bancorp South is “too big”? This is a $14 billion bank. Is a $14 billion bank, in your view, “too big”, in an $18 trillion economy?

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