Regulation is killing community banks, Public Banks can revive them

171107_Bank_for_Savings_Ossining_NY_1026.jpgPublic Banking Institute Chair Ellen Brown writes how Public Banks can revive the fast disappearing community banks that cannot meet onerous regulation hurdles imposed on banks by the 2010 Dodd-Frank Act and the 2001 Patriot Act. Many believe this mass concentration of more assets in fewer institutions to be an intended consequence of Dodd-Frank. How can we preserve and nurture community banks? We can look to a state where they are still thriving: North Dakota. Their secret? The state's century old Public Bank.

Ellen Brown:

In a September 2014 article Richard Morris and Monica Reyes Grajales noted that “a full discussion of the rules would resemble an advanced course in calculus,” and that the regulators have ignored protests that the rules would have a devastating impact on community banks. Why?

The authors suggested that the rules reflect “the new vision of bank regulation – that there should be bigger and fewer banks in the industry.” That means bank consolidation is an intended result of the punishing rules.

Killing off the community banks with regulation means killing off the small and medium-size businesses that rely on them for funding, along with the local economies that rely on those businesses. Community banks service local markets in a way that the megabanks with their standardized lending models are not interested in or capable of. …

Matt Stannard of Commonomics USA writes: "The Bank of North Dakota, the nation’s only public bank, directly supports community banks and enables them to meet regulatory requirements such as asset to loan ratios and deposit to loan ratios. . . . [I]t keeps community banks solvent in other ways, lessening the impact of regulatory compliance on banks’ bottom lines.

"We know from FDIC data in 2009 that North Dakota had almost 16 banks per 100,000 people, the most in the country. A more important figure, however, is community banks’ loan averages per capita, which was $12,000 in North Dakota, compared to only $3,000 nationally. . . . During the last decade, banks in North Dakota with less than $1 billion in assets have averaged a stunning 434 percent more small business lending than the national average."

[Read the full article]


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