Editor’s note: Frank D. Scott Jr. is a banker, state highway commissioner and a board member of the Little Rock Port Authority. Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.
Last year, I wrote about the Consumer Financial Protection Bureau’s Ability-to-Repay (ATR) as an example of the extreme regulatory overreach baked into the Dodd-Frank Wall Street Reform and Consumer Protection Act.
This overreach hurts community banks, consumers, and entrepreneurs. A year later, Dodd-Frank continues to hurt these pillars of our economy.
Community banks have a harder time lending to small businesses and supporting their local communities because of regulatory pressure to comply with rules that were meant for the big banks engaging in activity that proved too risky for the economy. Because of this pressure, community banks have spent resources hiring compliance staff –money that could have been used to hire bankers to partner with families, business owners, and communities in working to pursue their dreams, create opportunities, and grow their local and ultimately our nation’s economy.
Over the course of the 2016 presidential campaign, Former Secretary of State and now Democratic presidential nominee Hillary Clinton has swatted away accusations of being too close to the banks by doubling down on Dodd-Frank, committing to veto any attempts by Republicans to weaken it, and proposing further legislation that would hold the largest banks responsible for risky behavior.
The reality is that any move to double down on Dodd-Frank could further exacerbate the pressure community banks are under to comply with onerous regulations when what we really need community banks to do is provide capital to jumpstart their local economies.
One example of this potential pressure is in Clinton’s push to achieve greater bank transparency by increasing the amount of information banks disclose to the Securities and Exchange Commission (SEC). Community banks do not have the massive teams the big banks can pull together to ensure compliance with such legislation. Without the resources of the big banks, community banks could find themselves forced to redirect more resources away from their customer-facing roles in order to ensure compliance and avoid costly penalties.
Clinton has campaigned as being the best candidate for small business. In particular, she has committed to unlocking access to capital for small businesses, primarily through increased support for community development financial institutions and the State Small Business Credit Initiative.
There are few institutions better equipped to unlock capital for small businesses than community bankers. As State Bank Commissioner Candace Banks has said, “A community banker knows the entrepreneur opening a new business around the corner. A community banker also knows the local real estate market and the home buyer seeking a mortgage loan. These relationships allow community bankers to offer personalized solutions designed to meet the specific financial needs of the borrower.”
It is critical that former Secretary Clinton ensures this is reflected in her Wall Street reforms and small business commitments.
Regardless of the outcome of this election, community banks, small businesses, and consumers could suffer if our nation’s leaders do not take a serious look at the portions of Dodd-Frank that could have an adverse effect on the ability of these stakeholders to help grow our economy.
We must absolutely deal with risk-taking among the big banks, but it would be a shame for this to come at the cost of a struggling Main Street.