For both Democrats and Republicans, helping community banks is a simple decision. Local banks exist in every congressional jurisdiction and have built trust with local areas. Being on the wrong aspect of community banks can have serious implications for politicians. However the proposal is also representative of an unlucky propensity among politicians to overstate the difficulties community banking institutions face.
While most attention on Dodd-Frank has centered on the initiatives of big banking institutions to drinking water down the financial rules, community banking institutions have obtained an amazing amount of carve-outs and benefits. They’ve done this facing no opposition-conservatives want to use them to argue Dodd-Frank goes too much, liberals falsely hope they can be a countervailing pressure on Wall Street, and politicians want their support.
But in addition to resulting in increasingly bad guidelines, it can undermine the overall work of reform. Community banking institutions, like auto dealers, are everywhere. And like auto sellers, reformers underestimate the significant amount of political power they wield. In the most broken and polarized Congress in year seven, works championed by community banking institutions sail through as standalone legislation or mounted on must-pass bills with barely any notice.
Rather, when compared to a bulwark against the biggest banks, community banking institutions are in the same way likely to support changes that would help the biggest banks while providing no new protections to them. Meanwhile research implies that community banks are doing fine economically, not battling from regulations because so many coverage shows. 10 billion in assets, are either not part of the rules or often specifically exempt from them.
This was by design. 10 billion in assets. 10 billion in assets. But that understates the power of community banks even. A Congress that can barely function under normal conditions is adept and agile as it pertains to addressing problems faced by small banks over the past many years. Take “save to win” programs, where people who save a little amount of money to meet the criteria to win a large monthly raffle provided by a bank or investment company.
3,750; it’s a smart program that uses lottery impulses for the better result of assisting people save. But, since it can appear to be a lottery lawfully, it could run against laws and regulations prohibiting banking institutions from getting involved with lotteries. Or take bills tweaking and clarifying the vocabulary for major pieces of legislation.
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This normal process shut down this year 2010. Famously, Democrats weren’t in a position to amend the Affordable Care Act to make it clear that healthcare subsidies were designed for exchanges established by a state. Normally this would have been set, yet traditional legal activists forced the problem to visit the Supreme Court. This is not the entire case with small banking institutions and insurance providers. When it wasn’t clear whether the Federal Reserve would be forced to apply capital requirements to insurance companies in the wake of Dodd-Frank, Congress passed the Insurance Capital Standards Clarification Act (April 2014) unanimously.
When it wasn’t clear from the evolving regulations whether Federal government deposit insurance would cover various escrow accounts kept at credit unions, Congress handed down the Credit Union Share Insurance Fund Parity Act (December 2014) to ensure it could. Community banking institutions have flexed their muscles in a lot more aggressive ways. The dividend change is worth careful examination. It might be a very important factor if community banking institutions were fighting for a safer and broader financial market.
It’s a dream of reformers to try and have small players rise up and fight the biggest players, forming a broad alliance for a better overall economy. But this hasn’t happened. None of the Independent Community Bankers of America’s Plan for Prosperity, their ideal deregulatory agenda involves tougher rules on the biggest banking institutions. If anything, it pushes for weaker rules on the top players. 50 billion dollar limits for when Dodd-Frank’s rules begin to kick in really, a major present for midsized banks that does nothing at all for community ones. Worse, increasing that limit then creates pressure for increasing higher thresholds for large local banking institutions.
