Where Have All the Small Banks Gone?

Aug 25, 2016 by AFP

Eight years ago, employment numbers were in freefall. The housing bubble burst, and Americans witnessed the federal takeover of mortgage giants Fannie Mae and Freddie Mac, the collapse of the financial services firm Lehman Brothers, and the bailout of insurer AIG.

The coming recession would only get worse, Congress thought it could fix this mess with legislation, and so in 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act was born. Now, six years into its existence, this federal banking and finance law has proven harmful to consumer banking and the Americans who depend on it.

The law has applied a one-size-fits-all set of rules and regulations for all banks – irrespective of a bank’s size or risk appetite. While big banks have largely adapted, thanks to the lawyers and accountants they can afford to retain, small banks are disappearing.

Many small community banks are being forced to shut down or consolidate with their larger competitors, depriving many communities of a valuable service. Small community banks provide services for individuals and small businesses that many large banks don’t, such as small business loans, residential mortgages and agricultural-related loans.

Read the full oped by AFP Federal Affairs Coordinator James Setterlund in The Hill.