Pub. 5 2015-2016 Issue 2

6 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S A Word From CBA... 'Celebrate' Dodd-Frank's Anniversary by Fixing It Tuesday, July 21 marks the fifth anniversary of the Dodd- Frank Act—a sweeping overhaul of financial regulation. Five years in, we’re at a good point to evaluate how the law is working so far. No law passed by Congress is perfect – especially one 2,300 pages in length – and the evidence is clear that the Dodd-Frank Act requires tweaking to make it work better. For example, there are many customers today who don’t meet qualified mortgage (QM) requirements imposed by the government to obtain a home loan. That includes customers with low income, small business owners, residents of rural areas, the recently retired or recently employed and many others. Again and again, the bank has confidence in its customer but government restrictions stand in the way. The lender is forced say NO when they want to say YES; the customer gets a YES based on their own creditworthiness, and a NO due to government requirements. Worse, many community banks are drastically cutting back or getting out of the home loan business altogether, not because they want to, but because they have to – often in the rural and underserved areas that need credit most. These banks regretfully do this not because they want to, but because they can’t afford the personnel to co comply with complex government mandates. Put simply, potential borrowers aren’t being denied home loans because they cannot afford them, but because the banks that would typically make those loans aren’t in the business of mortgage lending anymore. It’s too cumbersome, risky and expensive. The number of banks – and services available to customers – continues to shrink. Prior to Dodd-Frank enactment, there were 143 state-domiciled banks operating in Colorado, according to the FDIC. Today there are 95. One can surmise that shrinkage is largely due to banks being forced to merge or sell to be larger in order to keep their doors open as the stacks of regulations grows ever higher. And none of these examples take into account the hidden costs of complying with 20,000 of pages (6½ feet of paper) of Dodd-Frank’s new regulations that affect community banks – and Dodd-Frank’s rules are only 65% done. Each new regulation requires banks to hire new staff and outside contractors to help them navigate a world with so many new regulatory landmin- es—and those costs function as a hidden federal tax on bank customers. And the Dodd-Frank price fixing at under-market rates for what banks can charge retail stores to process debit card transac- tions have forcedmany banks to end free checking for customers because retailers didn’t want to pay their fair share. No one rational is arguing for a WildWest scenario devoid of any bank regulation. When it works well, bank regulation helps ensure the safety and soundness of the overall banking system.