Wall Street Reform Hurts Main Street Banks; Hometown Lenders Didn't Cause the Financial Meltdown

Article excerpt

Byline: Rep. Blaine Luetkemeyer , SPECIAL TO THE WASHINGTON TIMES

For more than 60 years, my late father, Bill, spent every day looking into the faces of family farmers and ranchers hoping to realize their dreams as they walked into his bank in St. Elizabeth, Mo. My father understood the importance of community banking the day he started in 1940, and he passed that understanding to me when I later joined him in the family business. In a town of 300 that lacks both a stoplight and significant financial resources, the community always came first in the role of our small bank.

Now the federal government is redefining the role of a community bank in the name of Wall Street reform. Few people I talk to at home, Republican or Democrat, would argue there is not a need for financial reform, but to achieve real improvements, we must take the time to differentiate between firms whose actions have national and international implications and real systemic risk, and those that service communities by funding small businesses and lending to local families. The American financial sector will be reformed, but it should not be at the expense of our local institutions.

People on Main Street understand that community banks did not cause the financial crisis and that they already carry daunting regulatory burdens. The regulatory reform legislation proposed by the administration will subject all banks, regardless of size, to the potentially overreaching rules of another new government agency, placing new rules that have very little to do with correcting the deficiencies that led to the financial crisis. This new bureaucracy would have sweeping examination and enforcement authorities and the ability to restrict consumer access to credit. Big banks may be able to weather the regulatory storm, but some smaller community banks will be unable to stay afloat. The impact of this ill-conceived and dangerous plan will destroy jobs by making it more expensive and difficult for hardworking Americans to thrive in a modern economy built on access to affordable and available credit. In my view, we do not need another layer of regulation. We need the existing regulators just to do their job, and if they will not, then we need to clean house.

If Congress is going to pass meaningful reform legislation in hopes of preventing another financial meltdown, we need to focus more on what is broken and less on changing what already is working. First and foremost, we have to scrap the idea of more government bailouts and the notion that certain institutions are too big to fail - implying that community banks are too small to save. It's my belief that large, failing firms should be unwound by declaring bankruptcy - just like the rest of us - so we are not forced to rely on regulators and taxpayer-funded bailouts to maintain financial stability. …