Inside Financial Services

The ICBA’s Weird Obsession With The Big Banks

Cam Fine needs to lighten up. Large and small banks share a larger commonality of interest than he admits.

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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!

16 Responses to “The ICBA’s Weird Obsession With The Big Banks”

  1. Wyld Byll Hyltnyr

    Tom, I know you are a world reknowned banking expert and all that, but I think you are wrong when you write, “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 ….” Losses in bank failures are absorbed by the FDIC deposit fund which is funded by ban assessments rather than tax payer funds.

  2. Wyld Byll Hyltnyr

    Tom, I know you are a world reknowned banking expert and all that, but I think you are wrong when you write, “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 ….” Losses in bank failures are absorbed by the FDIC deposit fund which is funded by ban assessments rather than tax payer funds.

  3. Doug

    Preach on. Recently a Facebook friend posted that he was changing banks and asked for suggestions. I suggested the bank I work for (a “big bank” started and headquartered in our city). You wouldn’t believe the uninformed backlash! A bank that employs 28M people, many full time with full benefits, is somehow damaging to the community.

  4. FSDA

    Fine continues to try to justify his existence to his membership, after having screwed American banks of all sizes with his backing of Dodd-Frank. Though he denies that he did, we all know that he traded a $1 billion deposit insurance benefit for his members, offered by Frank, in return for not opposing financial reform.

    Unfortunately, the cost of Dodd Frank was much greater to his membership, not to mention the broader economy, as higher capital standards render most of the community bank space not profitable enough to cover their cost of capital.

    Why his members don’t demand Fine’s resignation is a mystery wrapped in an enigma.

  5. Spike2013

    Tom is no more a “world renowned baking expert” than I am a rocket scientist. Tom makes his $$ writing about banks that he can make money on. He and the Big Bank crowd don’t like community banks because they:
    1. Can’t completely control the markets
    2. They cannot drive them out of business with market competition.
    So, just like any other overzealous competitor, they turn to the gov’t and try to regulate them out.

    The Wall Street crowd would just as soon see all the small guys out of all lines. That way, these supposed experts can pump their latest Wall Street traded love interest and get the average suckers to believe they are experts working for the suckers’ best interests.

    Having actually worked for both big and small banks as well as dealing with them for business, I truly value the access, service and community support of my local bank. I have an account with a TBTF bank and I can’t even find the phone number for my branch, only a central customer (dis)service number. And forget local decision making.

    I for one appreciate every community bank and applaud every effort for separate them from the Wall Street led group that pose tremendous risk to our economy. The old saying was “so goes GM, so goes the country” but now you substitute any TBTF bank for GM.

  6. tom brown

    Spike, the website is free! i dont make any $$ here.

  7. Spike2013

    Tom is no more a “world renowned baking expert” than I am a rocket scientist. Tom makes his $$ writing about banks that he can make money on. He and the Big Bank crowd don’t like community banks because they:
    1. Can’t completely control the markets
    2. They cannot drive them out of business with market competition.
    So, just like any other overzealous competitor, they turn to the gov’t and try to regulate them out.

    The Wall Street crowd would just as soon see all the small guys out of all lines. That way, these supposed experts can pump their latest Wall Street traded love interest and get the average suckers to believe they are experts working for the suckers’ best interests.

    Having actually worked for both big and small banks as well as dealing with them for business, I truly value the access, service and community support of my local bank. I have an account with a TBTF bank and I can’t even find the phone number for my branch, only a central customer (dis)service number. And forget local decision making.

    I for one appreciate every community bank and applaud every effort for separate them from the Wall Street led group that pose tremendous risk to our economy. The old saying was “so goes GM, so goes the country” but now you substitute any TBTF bank for GM.

  8. Spike2013

    Tom is no more a “world renowned baking expert” than I am a rocket scientist. Tom makes his $$ writing about banks that he can make money on. He and the Big Bank crowd don’t like community banks because they:
    1. Can’t completely control the markets
    2. They cannot drive them out of business with market competition.
    So, just like any other overzealous competitor, they turn to the gov’t and try to regulate them out.

    The Wall Street crowd would just as soon see all the small guys out of all lines. That way, these supposed experts can pump their latest Wall Street traded love interest and get the average suckers to believe they are experts working for the suckers’ best interests.

    Having actually worked for both big and small banks as well as dealing with them for business, I truly value the access, service and community support of my local bank. I have an account with a TBTF bank and I can’t even find the phone number for my branch, only a central customer (dis)service number. And forget local decision making.

    I for one appreciate every community bank and applaud every effort for separate them from the Wall Street led group that pose tremendous risk to our economy. The old saying was “so goes GM, so goes the country” but now you substitute any TBTF bank for GM.

  9. Spike2013

    Tom is no more a “world renowned baking expert” than I am a rocket scientist. Tom makes his $$ writing about banks that he can make money on. He and the Big Bank crowd don’t like community banks because they:
    1. Can’t completely control the markets
    2. They cannot drive them out of business with market competition.
    So, just like any other overzealous competitor, they turn to the gov’t and try to regulate them out.

    The Wall Street crowd would just as soon see all the small guys out of all lines. That way, these supposed experts can pump their latest Wall Street traded love interest and get the average suckers to believe they are experts working for the suckers’ best interests.

    Having actually worked for both big and small banks as well as dealing with them for business, I truly value the access, service and community support of my local bank. I have an account with a TBTF bank and I can’t even find the phone number for my branch, only a central customer (dis)service number. And forget local decision making.

    I for one appreciate every community bank and applaud every effort for separate them from the Wall Street led group that pose tremendous risk to our economy. The old saying was “so goes GM, so goes the country” but now you substitute any TBTF bank for GM.

  10. financeguy

    Thank you, as always, for providing clarity and insight. This really needed to be said.

  11. mark

    Well of course the failed banks were “no names”. The big guys were/are TBTF. The risk to taxpayers is the money it takes to prop up one of these bloated larda$$e$ when it should instead get a bullet as the “real” banks do. Having said that, Fine does come across as quite a grandstander at times.

  12. Wyld Byll Hyltnyr

    Tom, I know you are a world reknowned banking expert and all that, but I think you are wrong when you write, “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 ….” Losses in bank failures are absorbed by the FDIC deposit fund which is funded by ban assessments rather than tax payer funds.

  13. Batwell

    Tom, you are to smart too use the small bank failures to argue that smaller bank failures cost the federal government more. Bankers face many discretionary decisions on which borrowers to work with and which borrowers to shut down. Regulators have similar discretionary decisions to make. Troubled small banks are systemically irrelevent and it is easier to make the decision to close them. This is exactly what TBTF means. The regulators either give TBTF instiutions the time to let margin pay for loses or midwife a deal. Small banks are shut down precisely because they are too small to matter. We arent talking about the cost of failure, rather the cost of not failing TBTFs.

  14. Ken Greenberg - Austin & Williams

    Tom is right. But I blame it ALL on the Federal government… and some overzealous state banking regulators. I was in banking for 22 years before starting this advertising agency. Now I only get to suffer regulations peripherally working with banks and hospitals. I remember going through “deregulation” in the 70′s: half-assed on only one side of the balance sheet. Does this industry look deregulated to you?

    Do we really need more regulation to prevent a London Whale episode from occurring again (which could happen no matter how many thousand of pages of rules/regs they print) or would Jamie Dimon and the Board of JPMorgan Chase be smart enough to put controls in to avoid another loss? Or does JPMorgan look forward to losing $6 billion or so every few months???

    I’m amazed the the Feds think siphoning $18 billion in various sundry fees (mortgage related, SEC, FNMA/Freddie) will strengthen Chase. After they required the company to absorb other failing entities, absolved them from losses related to those companies, now they changed their minds. This is like the Obamacare news today that while the Feds are requiring insurance companies to cancel “substandard” policies, California Democrats getting nervous are trying to force them not to cancel them. What’s an insurance company to do? It’s their fault, like it’s the banks’ fault. (Incidentally, as a company with 33 employees and a group health policy up for renewal in Feb 2014, we decided to see if we’ll find any joy or relief on the NY Exchange under Small Biz. Guess what? A plan that costs what we pay now (Bronze) has more than double the deductibles, out of pocket, co-pays. Everything double. Skipping up to the Platinum plan, that baby has pretty much our same coverage, but at more than double the premium. And every single plan there requires a primary care physician referral to a specialist – something we haven’t had in our plan for 10 years. If you ask me, this brilliant set of choices is substandard to what w

  15. Ken Greenberg - Austin & Williams

    Tom is right. But I blame it ALL on the Federal government… and some overzealous state banking regulators. I was in banking for 22 years before starting this advertising agency. Now I only get to suffer regulations peripherally working with banks and hospitals. I remember going through “deregulation” in the 70′s: half-assed on only one side of the balance sheet. Does this industry look deregulated to you?

    Do we really need more regulation to prevent a London Whale episode from occurring again (which could happen no matter how many thousand of pages of rules/regs they print) or would Jamie Dimon and the Board of JPMorgan Chase be smart enough to put controls in to avoid another loss? Or does JPMorgan look forward to losing $6 billion or so every few months???

    I’m amazed the the Feds think siphoning $18 billion in various sundry fees (mortgage related, SEC, FNMA/Freddie) will strengthen Chase. After they required the company to absorb other failing entities, absolved them from losses related to those companies, now they changed their minds. This is like the Obamacare news today that while the Feds are requiring insurance companies to cancel “substandard” policies, California Democrats getting nervous are trying to force them not to cancel them. What’s an insurance company to do? It’s their fault, like it’s the banks’ fault. (Incidentally, as a company with 33 employees and a group health policy up for renewal in Feb 2014, we decided to see if we’ll find any joy or relief on the NY Exchange under Small Biz. Guess what? A plan that costs what we pay now (Bronze) has more than double the deductibles, out of pocket, co-pays. Everything double. Skipping up to the Platinum plan, that baby has pretty much our same coverage, but at more than double the premium. And every single plan there requires a primary care physician referral to a specialist – something we haven’t had in our plan for 10 years. If you ask me, this brilliant set of choices is substandard to what w

  16. Ken Greenberg - Austin & Williams

    Ah, I see there’s a little to how much common sense we can share. I’m sorry some of my last post got cut off. No time to retype the balance…

    Tom, you need to check why every post goes in at least twice.

    Warm regards,
    Ken

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