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Happy Anniversary to the Regulatory Wolves of Wall Street
Four years after the enactment of Dodd-Frank, small banks are speaking out against the punishing regulations that were included in the 2010 financial reform legislation. In a hearing on Tuesday, the House Financial Services subcommittee on Financial Institutions and Consumer Credit considered several bills that will hopefully alleviate some of the regulatory costs imposed on these struggling banks.
One of the bills discussed was H.R. 3913, which would require federal banking agencies to consider whether a regulation will “promote efficiency, competition and capital formation” before implementing it. This bill and the others considered were attempts at providing a regulatory reprieve for community banks hurt by the passage of Dodd-Frank.
According to new research by AAF, four years after its passage Dodd-Frank’s 398 imposed regulations have added upwards of $21.8 billion in regulatory costs and 60.7 million in paperwork burden hours. These costs hit small banks especially hard. According to the Washington Post, in the past four years many local banks and credit unions have merged with one another due to increased regulations.
The hearing on Tuesday also included consideration of a bill that would review President Obama’s “Operation Choke Point,” a campaign executed by the Justice Department and federal banking regulators that pressures banks to cut services to businesses “the administration considers objectionable.” The bill reviewed on Tuesday says that federal banking agencies cannot restrict an “insured depository institution” from providing financial services to a business that is licensed to offer a product or service, registered as a money transmitting business and can demonstrate the legality of its business. In other words, the federal government is overstepping its bounds with this operation.
The hearing on Tuesday was a positive step in considering legislation that will reign in burdensome federal regulations and the costs that they impose. As noted previously by the Cost of Government Center, the regulations in Dodd-Frank that were meant to prevent another financial crisis only kill jobs and force banks to spend more of their resources implementing regulations and less on running profitable businesses. With a significant portion of the law still left to implement, these small banks can expect to see their costs rise if legislation that cuts back these regulations is not passed soon.