Out of Touch

March 23, 2011

During my life, I have witnessed many lively discussions, where one party clearly does not understand the other party’s concerns. Generally, at some point in the discussion, the confused party will reach an “aha” moment of clarity. But not always.

Case in point—last week nine Indiana bankers and I attended the American Bankers Association Government Relations Summit in Washington, DC. FDIC Chairman Sheila Bair spoke at the Wednesday morning business session. She has only a few months remaining in her term and has indicated that she does not want to be reappointed. Perhaps she is becoming blunter as a result of her short time left or, as I suspect, she simply does not get it.

Bair stated that, “The Dodd-Frank Act is almost completely targeted at large financial institutions,” and that, “as this historical era unfolds, public opinion as to the role played by the banking industry seems unlikely to be neutral. It is far more likely that banks will come to be viewed either as a group that supported the restoration of free enterprise and public responsibility in the American economy, or as a group that mainly looked out for its own short-term interests and resisted reforms that could have restored a sense of confidence and fairness in our financial markets.”

Really, Madame Chair? Are you so far out of touch that you can’t recognize that actions taken by Congress and regulators like you will significantly increase costs and reduce income for all banks, but will hit community banks the hardest? Do you not understand that elimination of trust-preferred securities as a tool to raise capital will be a fatal blow to many community banks?

Challenged by members of the audience, Bair’s responses became nonsensical. She asked if bankers wanted to repeal Dodd-Frank. Yes. She reminded them that their FDIC coverage would revert to $100,000 per account, and that the primary formula would revert to domestic deposit-based. While most of us would agree that there are some merits to the Act, that was not the point.

Ms. Bair should be concerned about bank health, safety and soundness—not consumer issues! She simply does not get it.

– S. Joe DeHaven

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