Newspaper article Sarasota Herald Tribune

Bank Series Shows Value of Regulation

Newspaper article Sarasota Herald Tribune

Bank Series Shows Value of Regulation

Article excerpt

Reading the Herald-Tribune's investigative series about failed Florida banks run by bad bankers convinced me of one thing.

It isn't that bankers are all crooks, though that notion makes for a fun conversation starter.

What I'm now sure of is that we have to stop keeping bad banking a secret.

The series should make clear, too, that any pitch for reduced regulation or claims that regulators are destructive meddlers in an otherwise honest, job-creating, economy boosting industry that does fine without hall monitors deserves to be seen as an attempt to sell snake oil.

Closer to the truth: If ineptly run, or worse, any bank can turn into Ponzi scheme. And taxpayers are among the potential victims.

When they dare and bother to do their jobs, bank regulators can thwart bankers who are robbing their own banks through self-serving deals. But when bankers are allowed to break rules without serious consequences even when caught at it, it invites dangerous scheming by others.

The rules so flagrantly broken, as investigative reporters Michael Braga and Anthony Cormier showed, are supposed to ban high- risk loans that bankers know are stupid, or don't care enough to check, and which they would not make if risking their own money.

Regulations are supposed to prevent ridiculously large loans to bankers' friends, family, or to each other in tit-for-tat schemes, and loans made only to hide other bad loans by handing more money to business people who have already shown they can't pay it back. Or won't.

But people passing for responsible and respectable community bankers include some more like con men, poker players or thieves. The massive losses they cause have had to be covered by the banking system again and again.

My own most intimate contacts with banks usually involve an ATM outside by the sidewalk. But the series went inside some of the worst Florida banks and made clear, in example after example, why regulators need to be more serious about what is done inside. Otherwise, we invite more bank disasters to play havoc with livelihoods, retirement funds and futures.

But one point seems so obvious I can't fathom how any politician could deny it without blushing. …

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