I’m at a loss to understand why Cam Fine, head of the Independent Community Bankers of America, persists in his rhetorical jihad against the big banks. Here he is again (sigh) in American Banker, railing against the big banks’ supposed “too-big-to-fail” government subsidy:
[T]he GAO should focus on the gross benefit of being “too big to fail,” not the benefit net of fines, penalties, and regulatory burdens. The fact is community banks have a proportionate disadvantage to taxpayer-subsidized megabanks as the crushing burden of regulation meant to stop the abuses of Wall Street rain down excessively on Main Street.
After bringing us fraudulent and destabilizing mortgage-backed securities, ,Libor rigging, the London Whale trading fiasco, and more, Wall Street and its proponents should not be allowed to engage in a bit of numerical sleight of hand. We can only hope that, after all that our nation has been through in the past five years the GAO will see through the smoke and mirrors. [Emph. added.]
Oh, baloney. First, if Fine is so upset that small banks are having to labor under a “crushing burden of regulation” as a result of Dodd-Frank, he only has himself to blame. Back when the law was being debated, the ICBA might have made common cause with the big banks, and lobbied with them against the bill in its entirety. But the ICBA didn’t do that. Instead, it actually supported Dodd-Frank–in return for a provision exempting banks with less than $10 billion in assets from the Durbin amendment limiting debit-card fees. And now Fine complains that the law imposes too heavy a regulatory burden? That’s beyond rich. Thanks to Cam Fine’s savvy negotiating, banks with less than $500 million in assets-that is the very banks he’s supposed to be looking out for–are widely believed to be no longer economically viable on account of the new high regulatory spending Dodd-Frank imposes. Brilliant.
And yet Fine persists in demonizing the big banks. He thunders that too-big-to-fail represents an intolerable risk to taxpayers. But if you look at which banks have actually cost taxpayers money, you’ll see that they are (or, ahem, were) almost all Cam Fine’s banks. Here is a list of bank failures going back to 2000. What’s that you say? You don’t recall reading about the demise of Pisgah Community Bank? Or Douglas County Bank? Or Parkway Bank? Scroll down the list: the fact is that the vast, vast majority of bank failures last cycle were small banks. And Fine can rail all he’d like about the “fraudulent and destabilizing mortgage-backed securities” concocted by the big banks. He may even have a point. But he should admit, too, that community banks also played a key role in puffing up the housing market via their massive, profligate lending to builders.
The interests of large banks and community banks often do diverge, of course. But they don’t always-not by a long shot. Cam Fine ought to understand that and pick a target that’s more of a threat than the big banks are. Until he does that he’s doing his community-bank constituents a disservice.
What do you think? Let me know!