Thanks for your help, Congress, but no more, okay?
I can deal with change. I can deal with hope. I can deal with hope and change.
But as I wake up a day after the United States Senate has signed off on the so-called Dodd-Frank Wall Street Reform and Consumer Protection Act, I’m having a hard time dealing with this particular brand of change.
And as for hope? I sure hope this one gets reversed in a hurry.
Calling this 2,400-page monstrosity “financial-services reform” isn’t simply an Orwellian abuse of the language; it’s George Orwell in a clown suit and fright wig, reflected in a funhouse mirror.
Let’s take a moment to review:
First, government intervention, in the form of the Community Reinvestment Act of 1977, alters the home-lending landscape and begins pressuring banks and mortgage companies to make loans that would have previously been considered too risky to make.
Next, home-ownership demand skyrockets for 30 years, and property values—doing what prices do when demand soars—go up even faster. That created for many Americans an illusion of wealth they’d never imagined before.
In 2008, the whole house of cards comes crashing down, exposing the two quasi-governmental giants of Fannie Mae and Freddie Mac as key enablers in the home-equity binge the nation had been on.
Wall Street gets blamed—in some respects, rightly so—for the cocktail of derivatives and other exotic financial instruments that underwrote the whole home-mortgage fiasco.
So, naturally, to address the causes of a near-meltdown in this nation’s economy, who does Congress turn its guns on?
Why of course: Community banks, like those that grease the wheels of economic activity, growth and job creation in this region. As a result, regional bankers say, hundreds of the small banks that provide vital financial services in Missouri and Kansas are likely to close their doors voluntarily, risk shutdown at the hands of regulators, or consolidate with larger institutions because they can’t afford the enormous costs of complying with Dodd-Frank.
It defies the imagination that the key offenders who sparked calls for reform skated here. Good grief: The day this bill won early House approval, stocks of the nation’s biggest banks actually went up. So somebody in those companies knew who the real losers in this were going to be, and it wasn’t anyone with a Wall Street address.
We at Ingram’s just concluded our annual Banking Industry Outlook, an assembly of some of the region’s brightest financial minds. This is generally an upbeat group.
This year’s assembly, though, was an airing of deep concerns about the regulatory overreach of Dodd-Frank. It says something about how bad this legislative effort was when the best thing that bankers can say about it is, “At least the deliberations are finished, so we can finally begin to understand what’s in it.”
Participants agreed that any bank would be challenged to meet the new regulatory requirements without the staffing of an institution with at least $1 billion in assets. Nearly 80 percent of the banks in the two-state region and throughout the country fail to meet that threshold, and are thus at risk.
The real irony? Losing community banking ranks means the largest banks—some the biggest offenders—could gain market share without lifting a finger.
Particularly galling in this process was the now-infamous comment from Senate sponsor Christopher Dodd, to the effect that “no one will know until this is actually in place how it works.”
Think about that for a moment. Then think about this: The $700 billion TARP program—how’d that work out for the big banks? Any unintended consequences? The $787 stimulus bill that passed just a few months later—are you feeling stimulated? Federal majority ownership of General Motors and Chrysler (the latter through outright robbery in the trampling of bondholder property rights)—is that helping with the hiring in Detroit? Then the intervention into health-care and insurance markets, injecting a whole new level of economic uncertainty into running a business. And now this.
We’ve all heard that elections have consequences. But the consequences—intended or unintended—of our national choices in 2006 and 2008 are far more than I’d bargained for.
Much as I’d like to see a new wave of change with the mid-terms this fall and the presidential contest in 2012, I’m not sure this country’s economic foundation will hold out that long.
Let’s hope the next big change in Washington comes in the form of a new wave of bright leaders who can exercise some restraint, so that we can restore industry and our economy to acceptable levels once again. 
Joe Sweeney
Editor-In-Chief & Publisher
JSweeney@IngramsOnLine.com