Regulation Is Not Ethics

Article excerpt

At a holiday party last month, an acquaintance asked a pointed question about banks. A well-informed person, she was aware of banks' arguments that overregulation was keeping them from making loans, but she was somewhat skeptical of that argument. When told that indeed such was the case, she responded: "Well, how can banks be made to act ethically without regulations?"

It was a brief conversation, but we made two points in response:

1. Banks are not opposed to regulation. What they object to is excessive regulation and regulations that are misdirected or overly broad.

2. The vast majority of bankers--based on the many we have known over the years--are ethical. As with any large group, of course, some will fall short of the mark.

It's no stretch to say this person's view is more typical than atypical. She was not someone with an axe to grind. In an article in this issue, ABA President Frank Keating cites a study showing that only 18% of the public have a positive view of banking. He also notes that roughly 80% of the public have a positive view of their bank. Clearly the second point is a strong positive, yet he maintains that it matters if people at large don't like or don't trust the industry, because individual institutions are affected by the perception of the whole. No bank, he says, can afford to be silent in the face of negative, often inaccurate, views of what they do and how they operate. (The article about Keating begins on page 32.)

The question cited above is a good example of a perception that can't go unchallenged. …