March 2, 2011
Last week’s blog, “A Promising Start,” focused on Elizabeth Warren, who has been appointed by President Obama to set up the structure of the Consumer Financial Protection Bureau (CFPB), mandated by the Dodd-Frank Act (DFA). Coincidentally, two days ago Professor Warren telephoned to seek my views as a representative of the Indiana banking community.
I appreciate her outreach and the fact that we share common ground. Elizabeth reiterated her intent that CFPB is to hold nonbank financial service companies to the same high regulatory standards as banks. She also said that she aims to simplify disclosures, particularly mortgage disclosures.
I welcomed her remarks, but cautioned that mortgage disclosure simplification must be extensive in order to be of value. The danger is that, if current law is merely tweaked, the hefty cost of complying with it would negate any benefit to banks or consumers.
We also discussed potential effects of DFA on community banks, such as the possibility of regulatorily induced bank consolidation. Elizabeth seemed surprised that Indiana banks have consolidated so dramatically, from more than 600 banks 25 years ago to fewer than 150 today. When I expressed concern about even more consolidation, Elizabeth said she shares that concern.
Additionally we talked about increased expenses and decreased income for community banks, resulting from the Durbin Amendment and FDIC actions on overdraft protection programs. One way to help close this ugly gap of increased expenses and decreased income is to grow the bank. I then explained how difficult it is to raise capital in the current environment, thus limiting growth opportunities.
I am encouraged that Elizabeth Warren agrees with me on all of these issues, and that she is eager to keep the lines of communication open. She suggested that I visit with Elizabeth Vale, CFPB assistant director for community banks and credit unions. I certainly intend to follow through and continue to voice our industry’s concerns.
– S. Joe DeHaven