WASHINGTON, D.C. – U.S. Sen. John Kennedy (R-La.) today introduced the Reforming Finance for Local Economies Act. This legislation will drastically help local financial institutions, especially smaller community banks and credit unions, which are suffering under the weight of the Obama administration's Dodd-Frank regulations.
“Community banks and credit unions were not responsible for the 2008 financial crisis. However, they are wrongly bearing the brunt of the regulatory burden imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,” said Sen. Kennedy. “My bill, the Reforming Finance for Local Economies Act, seeks to rectify this injustice by exempting community banks and credit unions with assets of less than $10 billion from Dodd-Frank's regulations. Our community financial institutions need to get back to doing what they do best, which is helping our local economies grow.”
Dodd-Frank was enacted to prevent another 2008-like banking crisis by strengthening federal government regulation of finance. Yet smaller banks are being smothered under the weight of Dodd-Frank. Community banks are paying $4.5 billion annually in compliance costs because of Dodd-Frank, causing more than 1,700 U.S. banks to close since 2010. The cost of these regulations has driven small banks to sell to or merge with larger banks. That eliminates jobs at the community institutions and reduces capital available to job creators.
Sen. Kennedy's bill, the Reforming Finance for Local Economies Act, would simply exempt community banks and credit unions with assets of less than $10 billion from Dodd-Frank. Sen. Kennedy details his bill further in his op-ed for The Wall Street Journal.
A Plan to Give Community Banks Relief From Dodd-Frank
Smaller institutions didn't cause the financial crisis, but are drowning in compliance costs.
By U.S. Sen. John Kennedy
“Every politician says he is for jobs. But you can't be for jobs if you are against business. And you can't be for business if you are against giving job creators access to capital. Yet that is exactly the conundrum Congress legislated when, in 2010, it made the Dodd-Frank Wall Street and Consumer Protection Act applicable to small banks and credit unions. Dodd-Frank has been a loan-killing, anti-job disaster for these vital institutions.
Dodd-Frank was supposed to prevent another 2008-like banking crisis by strengthening federal government regulation of finance. Maybe the law makes sense for too-big-to-fail banks. Maybe not. What surely doesn't make sense is to cripple America's smaller community banks, which did nothing to bring about the 2008 meltdown.
When Federal Reserve Chair Janet Yellen appeared before the Senate Banking Committee on Feb. 14, I asked her the following question: “What did the community banks do wrong in 2008?” Her response: “Well, community banks were not the reason for the financial crisis.”
Yet smaller banks are being smothered under the weight of Dodd-Frank. The Federal Reserve Act of 1913 is 32 pages. The Glass-Stegall Act was 37 pages. Dodd-Frank is 2,300 pages, with an astounding 22,000-plus pages of rules and more on the way. That's why so many community banks no longer exist, and those that have survived have seen their costs go up, their profits go down, and their ability to make small-business and consumer loans curtailed. It's all because of the heavy hand of government.”
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