Magazine article Independent Banker

Fine Points

Magazine article Independent Banker

Fine Points

Article excerpt

One Snowflake Too Many

The world is full of bad actors. Headlines scream about mutual fund managers playing funny with markets to benefit a few at the cost of many, the CEOs who raided the corporate treasuries to profit themselves, the poor widow who lost her house due to an unscrupulous lender. These wrongdoers should be punished. No question about it. But the response in Washington is to create new laws and regulations.

How can anyone expect a new law will suddenly make a bad actor who cavalierly ignores existing laws suddenly see the light and get religion? Why not use existing laws to punish the bad guys rather than create a new rule that saddles everyone with regulatory burden?

To make matters worse, we all carry the burden of the additional cost of a new rule (there's no free lunch). A new rule may do absolutely nothing to stop the bad guy, but the good guys make every effort to comply- at a cost consumers pay.

Even though each new requirement may have been designed to address a particular problem, over time it all adds up to an unwieldy burden. Remember, a new rule is not just a new requirement for the bank. There's a lot more to it.

The rule has to be understood and interpreted. Procedures and software systems have to be changed and adapted. Bank employees have to be trained. New audit programs have to be implemented to assure compliance.

How does the average community bank keep up? It's getting more and more difficult. The typical community bank has $75 million in assets and about 25 employees. During its exams, the FDIC reviews 26 separate consumer compliance rules. …

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