If one child misbehaves in a classroom of otherwise well-behaved kids, is it fair to punish everyone?
Most people would probably say no.
Yet Main Street banks – more often called community banks – are having to pay for the excesses of some Wall Street banks that, quite frankly, screwed up.
Nobody can forget what happened last fall when the financial markets were “headed for the precipice.”
Many people feared that their banks were going to fail.
But your money is safe. Your dollars (up to $250,000) are insured by the Federal Deposit Insurance Corp. And thousands of banks across the country put money into that insurance fund.
On Friday, the FDIC estimated that bank failures will cost the fund about $70 billion through 2013. Ninety-two banks have failed so far this year and hundreds more are expected to fall in the coming years largely because of souring loans for commercial real estate, according to the Associated Press.
But with the fund getting depleted, the FDIC assessed a special emergency premium earlier this year, on top of a regular premium hikes, to all banks.
Main Street helping bail out Wall Street.
And now the Obama administration, with the support of some in Congress, are pushing community banks to the edge again by proposing a consumer financial protection agency.
As if health care reform weren’t enough.
One hot-button issue is the CFPA requiring banks to sell “plain vanilla” products alongside other products. The CFPA would define what these products are that banks would be REQUIRED to sell.
The CFPA also would have broad authority to make rules, some of which are overseen by other federal agencies now. The proposed agency would consult with other agencies – but wouldn’t necessarily have to agree with them.
This week, Robin McGraw, chairman and CEO of Renasant Bank, leads a group of about 30 Mississippi bankers who will be going to Washington to talk to the state’s congressional delegation. They’ll also meet with the House Financial Services Committee.
McGraw also chairs the Mississippi Bankers Association and said he hopes Washington is willing to listen to their concerns.
McGraw and other banking leaders say that banking is already the most regulated industry. It’s “shadow banking” including those who pushed sub-prime lending, that needs regulation.
They also say another regulatory agency would add another layer of bureaucracy, and costs, that eventually would hit consumers through higher fees and/or reduced services.
“We’ve been told over and over that Congress knows there’s a difference between Main Street and Wall Street,” he said. “But they seem to forget that.”
And bankers hope to remind them that community banks aren’t at fault for the financial industry’s problems and shouldn’t be punished for the actions of a few.
Dennis Seid is business editor for the Daily Journal. Reach him at 678-1578 or firstname.lastname@example.org.
Dennis Seid/NEMS Daily Journal