Thomas J. Donohue, president and chief executive officer of the U.S. Chamber of Commerce, last week disclosed the chamber’s “10 Truths about the Financial System.” As shown below, they are short and to-the-point:
- A well-regulated system lifts everyone up.
- Consumers must be protected ‒ but they must also be served.
- Capital markets are the key to commerce.
- Diversity in the system is a strength ‒ not a weakness.
- Overregulation stifles innovation.
- By regulating only for stability, we will sacrifice growth.
- Our economy is global ‒ the U.S. financial system must be, too.
- Efforts to reform the system have made it more complex and less coordinated.
- Business is not against regulation, we just want smart regulation.
- It’s not too late to fix the system.
The U.S. Chamber speaks on behalf of all sizes and locations of business, and the organizations it represents include the most important customers of the financial services industry. It is one thing for bankers to bemoan the overly restrictive environment that has been cast upon it, but quite another when banking’s customers are being so negatively affected that they are willing to speak out.
There are many principles embedded in these 10 truths. I will attempt to cover a few. First, regulation does play an important role in the financial services business. Consumers should be protected, and financial service companies should be subject to safety-and-soundness standards and examinations to ensure that compliance. I do not know of a single banker who would disagree with this principle.
Second, the financial services industry is integral to supplying capital, so that all other businesses can fund their products or services, employ people and contribute to the quality of life. Capital and financial services are among the few products and services that every consumer and business needs in order to function. Government should aim to encourage, not discourage, access to capital and financial services. Yet our government has been discouraging availability for the past several years, as evidenced by the fact that only one new bank in the entire nation has been started within the past five years. Within that same timeframe, countless others have been closed or have been merged with others. That does not sound like encouragement to me.
Third ‒ and I have written volumes about this over the years ‒ our diversified financial system of community banks, regional banks, national banks and international banks is a strength that is not duplicated anywhere else in the world. Surely it is not a coincidence that the United States has the most advanced and powerful economy ever to exist on earth, and enjoys the most diversified financial services industry. Why does our government seem intent on infringing on what may well be the most important economic differentiator that we have? Under the current anti-banking scenario, innovation and economic growth have practically come to a standstill. This cannot be to the public’s benefit.
It is past time for the regulatory pendulum to swing back to smart regulation that protects consumers and encourages organizations that provide capital that foster economic growth, rather than the current system that requires banks to prepare meaningless reports, shrouded in fear of civil money penalties for the most minor of violations.
Donohue’s last point indicates that it is not too late to fix the system. I agree, but the clock is ticking.
– S. Joe DeHaven