Area bank execs wary of new federal bank rules

Execs with banks based or active in the Fort Smith area are concerned that recently approved legislation presumably overhauling the nation’s financial will result in more regulations and higher costs for banks and bank customers.

Known formally as the Dodd-Frank Wall Street Reform and Consumer Protection Act, HR 4173 will become law one day after Obama signs it. The bill is intended to provide greater oversight of the U.S. financial system and to install new protections for American consumers.

The bill is active in stages, anywhere from three months to five years. Like health care, there will be a ton of agency regulations to be decided during the next 18 months.  According to one non-partisan analysis, there are 243 rules to be made and 67 studies to be completed to full enact the Dodd-Frank measure. Proponents of the bill say it prevent the type of financial collapse that pushed the U.S. economy into the deep recession.

Opponents, mostly Republicans, say otherwise. U.S. Rep. Tom Price, R-Ga., recently said "anyone who claims this bill ends bailouts and too-big-to-fail is simply wrong" and that "Washington will now have broad, permanent authority to bail out failing companies with taxpayer money. And Fannie Mae and Freddie Mac, the insolvent entities still benefiting from the biggest taxpayer bailout of all, are not even addressed."

Sam T. Sicard, a vice president at Fort Smith-based First National Bank, isn’t as passionate as Price, but is not completely sold on the new legislation.

“We are pleased that several provisions in the bill exclude community banks (banks under $10 billion in assets), who are not responsible for the “too big to fail” financial bailout. However, we believe several provisions in the bill may further increase our regulatory burden and add additional costs on our business,” Sicard noted in a statement. “The impact on our organization will depend on how regulators enforce this new legislation. Regardless of any new legislation, we will continue to focus on what we can control, providing excellent service to our customers and supporting our local community.”

Joe Edwards, president and CEO of Fort Smith-based Benefit Bank, has not completely analyzed the final bill, but says he is instinctively wary of government fixes.

“I am looking forward to researching the passed legislation. However, it has been my experience that in most cases this type of legislation creates as many problems as it tries to solve,” Edwards told The City Wire.

Arvest Bank’s new Fort Smith area president, Craig Rivaldo, was reluctant to offer comment. He said there are too many rules and regs yet to be written to fully understand the new law.

“It is still early to fully understand the impact but you have to assume added restrictions and regulations can hamper production,” Rivaldo explained.

Aubrey Patterson, chairman and CEO of Tupelo, MIss.-based BancorpSouth, issued this statement: “While there are some good reforms in the Act which deal with systemic risk, too-big-to-fail, and the shadow banking system, an unfortunate truth is that the Congress and the Administration included a large number of new regulations which will clearly lead to a burden on the industry and cost to the consumer. Main Street banks which had nothing to do with the financial crisis were targeted with much of the thrust of these new regulations, an unhappy outcome. As always, bankers will deal with these issues to ensure that our clients and communities continue to receive the quality of service they deserve.”

The new law could slow economic recovery, according to the non-partisan and respected Kiplinger Report. Jerome Idaszak, an associate editor with Kiplinger, said the initial effect of the law will be to tighten access to credit.

“Less credit will obviously be a drag on the economy, though the gradual phase-in of most of the bill’s provisions will mitigate the harm. Longer term, the economy should benefit from the reduced risk and protections written into the bill to guard against another round of contagion,” Idaszak noted in a recent report.