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Bruce Cady Writes as Guest in The County Press

Dodd-Frank well-intentioned but strangled community banks

Editor’s note: The U.S. House of Representatives on Thursday passed the Financial Choice Act which is designed to rollback a number of constraints placed on financial institutions by tough Dodd-Frank Act rules enacted by Congress following the 2008 financial crisis. Critics of the new Act say banks need more oversight, not less, and are particularly concerned about a provision that would reduce the powers of the Consumer Financial Protection Bureau. Supporters of the Financial Choice Act say Dodd-Frank stifled the economy and forced undue burdens on small community banks. Supporters also point out the new act provides banks the choice of avoiding stricter regulatory measures by increasing their emergency financial resources. The legislation next moves to the U.S. Senate.

Today’s guest commentary is from Bruce Cady, CEO and Chairman of Lakestone Bank & Trust. Published June 11, 2017.

There is an old saying that the road to hell is paved with good intentions. I believe the Dodd- Frank Wall Street Reform and Protection Act is pavement on that road. The act created the Consumer Financial Protection Bureau (CFPB), which was meant to protect the interests of the average American consumer against the manifestations and manipulations of large, unscrupulous and greedy financial institutions and other similar entities.

Examples throughout history include the medical treatment of bleeding people to cure illness, prohibition and the introduction of Asian Carp to improve water quality in Southern U.S. catfish farms to name a few.

Unfortunately for us as consumers, the act creating the CFPB made the process of obtaining a mortgage loan for a home, a loan for an automobile or even a “free” checking account so cumbersome and regulated that it strangled the outflow and inflow of loans and payments. The payments system was so hindered by some of the regulation it caused the financial crisis and its effects to linger far beyond any previous recession experienced since World War II.

I believe that very few people have bad intentions. I do not believe the Democratic Congress and Senate had bad intentions when the act became law. However, so often what may seem like good intentions to the people taking the action wind up not being good for the people affected.

The banking industry is one of the most regulated industries in the United States. What the community banking industry needs is not more regulation but more incentive to assist local communities throughout the country to grow and prosper. The President, the House of Representatives and the Senate are all on record saying that community banks are the lifeblood of a healthy nationwide economy. It’s time to remove the unintended shackles created by Dodd-Frank and restore community banking to the role it should be playing.

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