Arkansas bankers unhappy with Dodd-Frank financial reform law

A room full of 300 state bankers and business leaders gathered at the Peabody Hotel in Little Rock to discuss the ramifications and potential repercussions of the wide-ranging financial reform overhaul known as the Dodd-Frank Act.

Curt Bradbury, COO of Little Rock-based Stephens Inc., said Dodd-Frank is an "empty shell" as he cited the 230 regulations, 41 reports and 71 studies the bill calls for during the next 10 years, according to this report from Talk Business.

He said he’s asked often what the major regulatory outcomes of the bill will be.

"I really don’t have any idea," Bradbury told the business forum which was organized by the Federal Reserve Bank of St. Louis.

He suggested that the minutiae that will unfold as Dodd-Frank progresses will be the "new version of the great American legal lottery to catch banks on technicalities.”

Bradbury blamed the overreach of the federal government for creating even more uncertainty in the business landscape. He said the number of bailouts, new regulations, and government interference has built an atmosphere that has paralyzed business owners, especially in the companies that Bradbury monitors through conversations with CEOs and CFOs of around 320 smaller, private firms.

"Those things scare the beejabbers out of American business," said Bradbury. "I have never in 38 years seen businesses of this size range so scared and so confused about what our government might do next."

"If people are scared to death, money will hunker down," he added.

Bradbury warned that the regulatory aspects of Dodd-Frank, which will be under development for years, will be largely controlled by major Wall Street investment firms.

"The lobbyists are engaged and its happening outside of the sight of the American people," Bradbury said.

Reynie Rutledge, chairman of First Security Bancorp, recounted the process he undertook to persuade lawmakers to not enact Dodd-Frank. During the last year, Rutledge was the chair of the Arkansas Bankers’ Association, the state’s trade group representing Arkansas financial institutions.

He said he and other bankers lobbied federal lawmakers hard to make changes and ultimately vote against the sweeping financial reform law. Rutledge noted that 3 of 4 Arkansas representatives voted against the House version, but U.S. Sens. Blanche Lincoln and Mark Pryor, both Democrats, supported the final measure.

"I apologize to you. We failed," Rutledge said.

Rutledge added that there was "no way any banker could talk positively about new regulation," but he did cite some positives regarding Dodd-Frank.

He said increased insurance limits for depositors, the recalculation of FDIC premiums for community banks, and the Fed’s additional powers and ability to monitor systemic risks and curtail threats to the overall economy were all good outcomes of the new law.

However, he argued that too much new regulation for smaller banks and the soon-to-be-powerful Consumer Financial Protection Bureau will hurt banks in Arkansas.

Banks under $1 billion in assets will not be able to keep up with new compliance standards, he said. Dodd-Frank will harm community banks that it is supposed to protect, he argued.

"Bankers are concerned and afraid of government," said Rutledge. "There are many risks out there affecting community banks," he said noting credit risk, interest rate risk, and liquidity risk. "However, the one risk that our management team and I are losing sleep over almost every night is compliance risk."