Jan. 26, 2011
When I was a young banker, I once challenged my employer’s policy that prohibited facial hair, except for a neatly trimmed mustache. During vacation I grew a beard anyway, fully intending to return to work with it.
I changed my mind after a chance encounter with the executive vice president. I told him that I saw no basis for the rule. His response was that my opinion did not matter and cited the example of the double dribbling rule in basketball—athletes could debate its logic, but they still had to comply.
I got the message and returned to work clean-shaven.
The many rules in our world can interfere with common sense, and banks certainly face plenty. When I started in banking in 1970, compliance was relatively easy. Since then, my former employer has gone from zero compliance employees to a full department devoted to this task.
All 7,800 banks throughout the nation have had the same experience, adding up to significant costs. The problem is, in order for banks to compete in the marketplace for capital, their rates of return on investment must be competitive. Thus banks have to pass on these costs to their customers in order to survive.
More than 300 new rules will emerge from passage of the Dodd-Frank Act. That’s more than 300 new sets of expenses to pass on to the consumers who allegedly benefit from the Act.
It’s going to be a lot more difficult than shaving my beard!
– S. Joe DeHaven