After
initial reluctance, House Republicans have finally reached an
agreement to move forward on a bipartisan bank deregulation bill that
the Senate passed in March. Its stated aim — to help rural
community banks thrive against growing Wall Street power — appears
to have been enough to power it across the finish line.
But
banking industry analysts say the bill is already having the opposite
effect, and its loosening of regulations on medium-sized banks is
encouraging a rush of consolidation — all of which ends with an
increasing number of community banks being swallowed up and closed
down.
“We
absolutely expect bank consolidation to accelerate,” Wells Fargo’s
Mike Mayo told CNBC the day after the Senate passed the deregulation
bill in March. The reason? Banks no longer face the prospect of
stricter and more costly regulatory scrutiny as they grow. And
regional banks in Virginia, Ohio, Mississippi, and Wisconsin have
already taken note before the bill has even passed into law,
announcing buyouts of smaller rivals.
The
expected consolidation simply furthers an existing trend. Community
banks have been struggling for decades against an epidemic of
consolidation; the number of banks in America has fallen by nearly
two-thirds in the past 30 years. Ironically, the one state that has
seemingly figured out how to arrest this systemic abandonment of
smaller communities is North Dakota, the home state of the bill’s
co-author, Democratic Sen. Heidi Heitkamp.
That’s
because North Dakota has a public bank.
Using
idle state tax revenue as its deposit base, the Bank of North Dakota
partners with community lenders on infrastructure, agriculture, and
small business loans. It has thrived, earning record profits for 14
straight years, which have funneled back into state coffers. And
while Heitkamp has complained that the Dodd-Frank Act has been
disastrous for community banks, in North Dakota they appear to be
doing well. According to a Institute for Local Self-Reliance analysis
of Federal Deposit Insurance Corp. data, North Dakota has more banks
per capita than any other state, and lends to small businesses at a
rate that is four times the national average.
Yet
nothing in the new measure, sometimes called the “Crapo bill,”
after its main Republican co-author, Sen. Mike Crapo of Idaho, builds
upon this proven method to revitalize community banks; it only
bolsters the ability of larger regionals to scoop them up.
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