Dodd-Frank Damages: Community bankers sputtered in disbelief when Sen. Elizabeth Warren suggested recently that the Dodd-Frank Act hasn't done them harm. Now Richard J. Parsons, a former Bank of America executive turned financial writer, says he can prove the ill effects of new regulation on small banks. Drawing from the latest Federal Deposit Insurance Corp. data, Parsons shows how the number of community banks has dwindled while their regulatory costs have risen since Dodd-Frank was passed in 2010. His open letter to the Massachusetts Democrat received a warm response from American Banker readers, although one commenter warned that community banks seeking regulatory relief should avoid teaming up with big banks. "Big banks have no political goodwill," writes "countrybanker," so small ones should either push for changes that apply only to them or else support former FDIC chair Sheila Bair's proposal to empower regulators to exempt banks with less than $10 billion in assets from current and future rules. But another BankThink post this week by Mercatus Center researcher Hester Peirce argues that exemptions don't do enough to give small banks regulatory relief, since "requirements often trickle down from big to small banks."
Yellen Takes Heat: Federal Reserve Chair Janet Yellen hung the central bank's general counsel Scott Alvarez out to dry at Congressional hearings on monetary policy this week, writes American Banker Washington Bureau Chief Rob Blackwell. He says Yellen should have risen to the defense of Alvarez when Sen. Elizabeth Warren criticized him for past comments expressing the central bank's concerns with the Dodd-Frank swaps provision. "If such attacks on staff are allowed to go unanswered, it will only embolden Fed opponents further," Blackwell writes. Commenter "gsutton" is more worried about the implications of Warren's criticisms, writing that she seems to suggest that "regulators should not raise issues or point out problems that arise in implementing laws passed by Congress." But reader "masaccio" says Warren is right to worry about the Fed's commitment to Dodd-Frank: "The Fed has always acceded to the demands of the banks it regulates."
Bitcoin Skeptics: Bitcoin can't achieve the status of a true currency without stronger governance, according to Kenneth A. Posner of Capital Bank Financial Corp. Meanwhile, Redditors fumed at comments about Bitcoin's pseudonymous ledger made by financial-crime writer and Bitcoin critic Jeffrey Robinson in a video interview with American Banker. "This guy is of the philosophy that government is the arbiter of privacy," one said. "This is in total opposition to the 4th amendment of the Constitution. The Constitution is a contract whereby people grant the government the privileged of doing things in their name." Another threw down a challenge to Robinson, the author of the oh-so-subtly titled "BitCon": "Let's put cams with open wifi all over in his house, if he has nothing to hide he should be OK, no?"
Also on the blog: The finance and technology industries should take some of their enthusiasm for mobile payments and redirect it toward developing cutting-edge solutions for small-dollar lending, according to MagnifyMoney's Nick Clements (formerly of Barclays and Citigroup).
Community banks are being dragged down by needlessly complex and time-consuming underwriting processes for small business loans, writes management consultant Claude Hanley.
A House bill that would allow Puerto Rico's debt-ridden public agencies to be eligible for Chapter 9 bankruptcy makes good sense, but it should apply only to future transactions, to avoid leaving current creditors in the lurch, according to bankruptcy expert John McMickle.
Bank executives have to be held responsible for the misdeeds of their institutions, no matter how big their operations may be, according to banking consultant J.V. Rizzi. "When we allow managers to plead ignorance as a defense for wrongdoing, we encourage further ignorance and illegal activity," he writes.
President Obama's proposed bank tax on financial institutions with more than $50 billion in assets could more accurately be called a loan tax, opines former U.S. Sen. John Kyl. The reason? "The tax applies to the liabilities of these financial institutions including their deposits. Of course, that is how banks fund their loans." Therefore banks would wind up reining in lending to consumers and businesses, he writes.
Mayra Rodríguez Valladares writes that the poor quality of big banks' risk data renders stress tests and capital reviews unreliable, and makes it impossible for risk managers to judge their institutions' ability to survive a crisis.
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