American Sentinel

About the Author:  Born in Boston, I lived and worked in the D.C. area for a time, but have spent most of my life in Tennessee, where I graduated from the University of Tennessee. My political philosophy could best be described as eclectic, though mostly right of center. Read more from this author

It’s a tough time to be a banker lately.  People keep confusing you with mortgage investors and insurers.  Worse, some of those people are in Congress and attempting to fix your problems for you.  Of course, in this tight economy, there are banks that are in trouble, but the vast majority of them, something like 98%, are properly capitalized and in fine financial health.  In order to stay that way, they do need the investors and insurers to stay afloat, but they also need the rampaging legislators to stand down just a bit.

Banks are rarely helped by overly tight investors or severely stunted interest rates, and they are positively never helped when people, such as Harry Reid, who know absolutely nothing about banking start fiddling with banking legislation.  What started as an expensive but uncomplicated bailout of deeply troubled companies has turned into a laundry list of populist proposals.

Among the proposals that have been tossed about, though as of this writing the final legislation has yet to fully take shape, are bankruptcy cram down provisions and rules that would eliminate state oversight on community banks and move that to a federal issue, adding all the additional regulatory burdens normally reserved for the gigantic national institutions.

This and the unfair lumping of banks with the troubled companies has inspired a massive effort in the banking community to get the word out to Congress that they are treading on thin ice.  The following letter is a sample letter that the ABA encouraged its members to send to their legislators:

I am a community banker who is deeply concerned about the recent developments on Wall Street and the bailouts that our government has undertaken. The great, great majority of banks in this country never made one subprime loan, and ninety-eight percent are well-capitalized. We are working every day to serve our communities and provide loans to consumers and small businesses. Banks have paid tens of billions of premiums to fund the FDIC insurance fund, and we know we are going to have significantly increased premiums for years to come. We accept that, and we don’t ask for or need a bailout.

Bear Stearns, Fannie Mae, Freddie Mac, and AIG are not banks. Yet we hear constant talk about “bank problems” and “bank bailouts.” Now Congress is going to vote on legislation to consider a fund with billions of dollars in it to buy distressed assets and some want to add amendments that will hurt my bank – such as changes in the bankruptcy laws and new regulatory burdens. Such changes will only damage community banks like mine that have been an asset to your district.

My bank is trying to serve its community and make loans, but it cannot do that when policy-makers are adopting policies that may make it hard to lend, and increase regulatory costs. While a stable financial system is essential, these measures cannot be done at the expense of community banks like mine. I implore you to please consider the impact of these proposals and to oppose any effort to include bankruptcy provisions or to impose additional regulatory burdens or costs on community banks.

And all around people are getting suspicious of all the toss-ons to this legislation.  There is a “kill the bailout” movement afoot that most banks, frankly, would agree with.  After you have saved Fannie Mae, Freddie Mac and the major insurers, all the rest of it is mostly throwing away money (redistributing future funds) and causing a panic.  This is the exact sort of knee-jerk, populist governance that got us into the bailout to begin with, but apparently some never learn.

The latest word as I write this is that, perhaps, Congress is listening and scaling back their proposals, but I’ll believe it when I see it.  They can’t even give you the definition of a bank.

• The Real Cost Of Social Engineering
• Requesting a bit of sanity on the bailout bill
• Save Fannie Mae and Freddie Mac, but let the banks go under
• As The Bottom Drops Out
• Supreme Court LIBERALS Blocked States From Regulating Financial System

This entry was posted on Wednesday, September 24th, 2008 at 12:40 pm and is filed under Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.