The Stash

Will the Small Banks Be Happy Now?

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Like a lot of other bloggers, I've puzzled over why small banks are opposed to the proposed consumer financial products regulator, which could in principle given them an edge over megabanks. But they clearly have their concerns, and they don't appear to be softening on them, which made me wonder a few weeks back if we shouldn't just exempt them from the new consumer reg.'s and be done with the problem.

Well, it looks like the House Financial Services Committee did precisely that yesterday:

Democrats showed a willingness to change parts of the financial-overhaul package to make it more palatable to businesses and financial firms that had opposed certain elements. For example, Democrats agreed to exempt almost all community banks with less than $10 billion in assets from being examined by a new federal agency enforcing consumer protection laws. This addresses community banks' concerns that they would overwhelmed by too many bank examiners.

My only question: Was it really necessary to take the exemption all the way up to $10 billion? A bank with a $10-billion balance sheet is a pretty big bank. When I was talking to the former bank executive who first suggested this to me, the figure he tossed out was $1 billion, and even that seemed a little high. If you go by the most recent Fed data, there are only 80 banks in the country that would end regulated by the new consumer agency. (Whereas there are about 500 with a billion or more in assets.)

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