President Donald Trump’s recent executive order on regulating the U.S. financial system underscores the need to “make regulation efficient, effective and appropriately tailored,” and requires the Treasury Department to periodically report how existing regulations align with the administration’s principles. California’s community banks applaud the president’s actions.
Ensuring regulations are effective and tailored is common sense, and conducting periodic reviews is good government (“President Trump is boosting Wall Street not Main Street”; Editorials, Feb. 8). In response to 2008’s great recession, lawmakers across all government levels enacted several hundred new regulations affecting banks of all sizes – the Dodd-Frank Act alone spans 2,300 pages. Why shouldn’t there be ongoing analysis of whether these rules are meaningful or have resulted in adverse consequences?
In our view, the pendulum has swung too far and the compounding effect of these regulations is hurting banks’ ability to serve customers, and support their communities and the economy. Many recently enacted regulations disparately impact community banks, not Wall Street, resulting in greater nationwide bank consolidation. A vibrant financial services system requires banks of all sizes.
California bankers have long advocated for meaningful reform of Dodd-Frank, so that community banks aren’t continually crushed by a one-size-fits-all regulatory system. We strongly support the Financial CHOICE Act introduced by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, which contains important reform elements including directing federal bank regulators to consider a financial institution’s risk profile before taking regulatory action.
If taking action is inappropriate for certain institutions given the costs and complexity involved, the regulator must “tailor” their action to limit its compliance burden. This measure offers targeted relief for banks overwhelmed with often unnecessary regulations.
It’s our hope this legislation and the president’s review will receive bipartisan support. We encourage lawmakers to be open-minded and not respond reflexively with predictable public statements containing incendiary comments about protecting Wall Street. When their sole focus is on Wall Street, a disservice is done to the several thousand community banks serving and contributing to the economic vitality of our communities. If the review concludes that certain existing regulations meet the test of efficient, effective and appropriately tailored regulations, there will be nothing to worry about.