Monday, July 21, 2014, marked the four-year anniversary of the implementation of the Dodd-Frank Act. While it does not seem possible that this overreaction to the financial crisis could have been in effect for four years, the resulting regulatory burden cast upon banks of all sizes and stripes certainly has left an indelible mark on the business of banking and on its customers, shareholders, employees and the communities they serve. Numerous surveys and studies have been unveiled in the past several days about the Act.
The American Action Forum reports that the Act has imposed 398 new regulations on the banking industry at a cost of $21.8 billion, consuming 60.7 million hours of paperwork burden – the equivalent of 30,370 full-time employees! What is scary is that these statistics represent only about 75 percent of the effect of implementation, as 25 percent of the Act’s rules have yet to be written. Interestingly the number of employees in banks has grown by 2.9 percent – nearly all coming from banks with 250 or more employees – while the employment growth at the federal regulatory agencies, excluding the Consumer Financial Protection Bureau, has increased 16.2 percent. Apparently it takes many more regulatory staff to monitor fewer bank staff. As for the CFPB, it currently employs about 1,800 people.
Despite these outlandish costs, likely voters are not convinced that the policies from the Act have succeeded in accomplishing their goals. A recent poll conducted by a Democratic-leaning firm, Greenberg Quinlan Rosner Research, shows that Americans believe that the stock market is rigged, and that very little has been done to reform Wall Street. The study was commissioned by Better Markets, a financial reform group, which notes that “American voters still distrust Wall Street and big banks and strongly support tough financial regulation.” Among the study results:
- 64 percent of all voters and 62 percent of voters who own stock believe the stock market is rigged for insiders and for people who know how to manipulate the system;
- 55 percent believe that Wall Street and big banks hurt everyday Americans;
- Nearly 90 percent of voters are dissatisfied with the federal government’s actions to date in regulating Wall Street;
- Stricter regulation of Wall Street and of large banks finds wide bipartisan support, including 74 percent of Democrats, 56 percent of independents and 46 percent of Republicans.
My interpretation of this data is that, whether aligned with a big bank or small, bankers have to do a better job of providing the public at large with facts about the business of banking – the effect of regulation on banks’ ability to provide desired products and services, the factors that determine pricing of those products and services, and the real costs banks pay to comply with regulations that often fail in their intended purpose. Ample information is available from a variety of sources, including Amplify, a free grassroots advocacy tool available to all bankers. Much can be done inexpensively through strategic use of social media and by arming bank employees at all levels with facts to discuss within each of their circles of influence. It will not be easy, it will not be fun, and it will be a lot of work. But it will pay dividends to each bank that speaks up for this industry, and it will benefit the banking business in general.
With the aforementioned data, it is eerily apparent that there exists a wide gap between the huge price that bankers have paid and the belief among consumers that little has been done to rein in abuses, whether real or imagined. No one can close this gap but bankers themselves.
- S. Joe DeHaven