The ICBA’s Wrong-Headed “Deregulatory” Agenda

Ugh. Special-interest lobbying dressed up as free-market proposals.

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When I first picked up the ICBA’s “Regulatory Relief Agenda,” published earlier this year, I couldn’t help but think that this was something I could really get behind. Many of its proposals could have come straight out of Milton Friedman’s playbook: require a cost-benefit analysis to justify new rules, for instance, and eliminate certain unnecessary registration requirements. Also, in a nod to an issue especially close to my heart, the ICBA would reform the Consumer Finance Protection Bureau by, for example, replacing its single director with a bipartisan group of commissioners.

One breath of fresh air after another! Finally, I thought to myself, the ICBA is getting away from its strategy of lobbying-by-divisive-hackery that’s been the standard m.o. of longtime head Cam Fine. Instead, the group is offering ideas that will help not just community banks, but the entire banking industry—not to mention consumers, as well.

Then I got into the details—and quickly saw that the ICBA’s purported deregulatory manifesto is really just another instance of special pleading. Its cost-benefit proposals regarding new rules, for instance, would focus on “the impact on the smallest banks which are disproportionately burden by regulation” rather than to all banks. That’s our Cam! Recommendations for mortgage reform would apply just to banks under $10 billion in assets. Similarly, it wants small banks—and only small banks–to get an exemption for rules related small-business data collection.

Unbelievable. Here the ICBA has come up with some solid ideas for banking deregulation that would help unlock credit and boost the industry profitability, and yet the group undercuts its own free-market bona fides by insisting the new rules apply to only one part of the industry: small banks. That’s not a deregulatory agenda, it’s special-interest jawboning.

But it gets worse.  The ICBA also recommends the government create “a voice for community banks” within the Treasury Department via the creation of a new post the Assistant Secretary for Community Banks. You read that right: part of the ICBA’s deregulatory agenda includes the creation of more bureaucracy.

I’m a big fan of the community-banking sector and believe community banks play a vital role in credit creation in this country. I also believe the group has the right to lobby Congress. But it’s doing it all wrong. The ICBA’s ham-fisted strategy in the lead-up to Dodd-Frank was a disaster; many small banks are likely now doomed on account of the huge new compliance costs the law imposed, after small banks failed to make common cause with large banks in pushing for fewer new regulations. With its new regulatory relief plan, the group is making the same mistake. If small banks are really as competitive as they say they are, they need stop sniping at their larger competitors, unite with them for real regulatory relief, and then go out and compete.

What do you think? Let me know!

rnment create “a voice for community banks” within the Treasury Department via the creation of a new post the Assistant Secretary for Community Banks. You read that right: part of the ICBA’s deregulatory agenda includes the creation of more bureaucracy.

I’m a big fan of the community-banking sector and believe community banks play a vital role in credit creation in this country. I also believe the group has the right to lobby Congress. But it’s doing it all wrong. The ICBA’s ham-fisted strategy in the lead-up to Dodd-Frank was a disaster; many small banks are likely now doomed on account of the huge new compliance costs the law imposed, after small banks failed to make common cause with large banks in pushing for fewer new regulations. With its new regulatory relief plan, the group is making the same mistake. If small banks are really as competitive as they say they are, they need stop sniping at their larger competitors, unite with them for real regulatory relief, and then go out and compete.

What do you think? Let me know!