Bankers Feel Laws Hurt Loan Making, Competitiveness

By Titus, Nancy Raiden | THE JOURNAL RECORD, February 3, 1993 | Go to article overview

Bankers Feel Laws Hurt Loan Making, Competitiveness


Titus, Nancy Raiden, THE JOURNAL RECORD


At first glance, those outside the banking industry in Oklahoma may find it hard to find sympathy for bankers who complain that excessive federal regulation has put a stranglehold on their ability to function in the marketplace.

After all, most Oklahoma banks reported strong, even record, profits during 1992.

But those on the outside looking in also complain that banks are not making the kind of loans they once did. On that one point, both sides agree.

Bankers say they are still in the business of making loans, but loan demand among qualified borrowers is soft. Individuals and companies both are concerned with paying off debts, not incurring more. Historically low interest rates also give banks very little incentive to book new loans that don't meet high standards. This has led to an unusually high percentage of bank assets that have been placed in no-risk government securities rather than in loans.

Small business owners, by contrast, have said their demand for loans has not lessened. They want and need loans, but bankers won't make them. They say the only ones who can get loans are those who can document that they don't need them in the first place.

Character lending is what many small business owners seek. This is the traditional type of lending in which bankers extend credit based on the judgment of the individual as well as other risk assessment factors.

However, banks often are prohibited from operating with that human touch. Regulators require many loans to be backed by a secondary source of repayment and at least three years of demonstrated business experience. Those requirements can be deadly for the entrepreneur or the successful new business owner who needs to expand to meet the demands of his growing customer base.

The restoration of character lending is one thing Oklahoma bankers are calling for as they participate in the industry's national "Cut the Red Tape Week."

They also seek to be more competitive with other types of financial institutions which are not required to comply with so many regulations.

Enactment of the laws creating many of the rules governing banking is rooted in part in what happened in Oklahoma between 1982 and 1992 when the bottom fell out of the economy. Banks, like everyone else, crashed and burned right and left. What had been inconceivable in the heady days of the boom _ a bad real estate loan, oil prices plunging _ soon became hard, cold reality.

The severe economic problems brought to light the excesses of the likes of Penn Square Bank and numerous savings and loans until outraged politicians created laws to make sure those abuses never happened again.

Out of that environment came such laws as the Financial Institutions Reform, Recovery Enforcement Act of 1989, known to bankers as FIRREA and to the public as the "savings and loan bailout bill" and then the Federal Deposit Insurance Corp. Improvement Act of 1991, for which regulations are still being written.

These laws and many before them have mandated to a large extent what banks can do and how they can do it. They tell banks when they have to have appraisals, when they have to get new appraisals, who can do the appraisals, which bank policies must be formalized in writing, how much money and under what circumstances they can lend to a business owner who sits on the board, when to report cash transactions to the Internal Revenue Service and what information to include, how to track loans that have been funded, how to disclose credit terms and even where the FDIC logo must be displayed.

Some of the laws go to the heart of the safety and soundness of the individual banks, the banking system and the government backing that their deposits have. Others are sidelights to those fundamental issues.

A study conducted for the Independent Bankers Association of America by the Grant Thornton accounting firm categorized 13 federal regulatory areas which the nation's 9,682 locally owned and operated institutions found most onerous. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Bankers Feel Laws Hurt Loan Making, Competitiveness
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.