6 Hoosier Banker May 2015 On Feb. 9, Marshall Lux and Robert Greene of the MossavarRahmani Center for Business and Government, John F. Kennedy School of Government, Harvard University, released a working paper titled, “The State and Fate of Community Banking.” It is a fairly short and to-thepoint study of community banking in three distinct timeframes: (1) prior to the financial crisis; (2) during the financial crisis, but before the enactment of the Dodd-Frank Act (DFA); and (3) postDFA. The paper verifies much of what I and many others have written over the past eight years. It delves much deeper than I ever have, due to extensive research to glean ample facts and data, and to break down the data into three time frames. The United States, as I have often stated, is the most powerful economic engine ever on earth. Much of its strength is due to our unique financial services system that provides access to international banks, national banks, regional banks and community banks. I attribute our economic success to this diversified system of financial product delivery and choice, because the United States is the only country on earth to offer such a diversified system. I also have fretted, frequently, that this delicately balanced system is in jeopardy. Years ago I adopted a belief that the community banking system in the United States could and would adapt to anything thrown at it, except for one possible fate … it could be destroyed overnight by a stroke of the pen in Washington, DC. Congress and the presidential administration, I fear, could layer on so many suffocating requirements that community banking, and perhaps all banking, could no longer be conducted profitably. A reading of the Lux/ Greene research paper makes a sound case that DFA may have been the stroke of the pen that make it impossible for community banks to make a profit. It is not too late, however, to make the changes necessary to ease the burden on community banks, so that our unique and delicate balance of financial services can continue to be delivered profitably for all levels of providers. The paper concludes that many provisions in Dodd-Frank should not be applicable to community banks, and it provides excellent data to support this conclusion. The changes needed will require a boldness and leadership from Congress that we have seldom witnessed in the past few years. Leaders are required to look far into the future and guide us onto the appropriate path, so that those values we all share will continue to prevail. What is at stake is the very existence of our system of government and economic success. FEATURE President’s Ponderings S. Joe DeHaven, President & Chief Executive Officer, Indiana Bankers Association Community banks provide over 75 percent of agricultural lending, over half of small business lending and about 25 percent of residential real estate lending. Yet the number of community banks continues to dwindle at an alarming pace ‒ a pace that has quickened since the passage of Dodd-Frank. Community banks serve customers in urban, suburban and rural areas, but it is in the rural and agricultural areas that they are the dominant providers. Access to credit for the businesses in these areas would decline substantially without the presence of community banks. It is past time to review the rules promulgated as a result of DFA. There has only been one new bank charter approved in the United States in the past five years .While I believe it is important for new banks to be adequately capitalized, the restrictive rules ‒ 32 percent of which are from DFA ‒ have gone far beyond what is necessary for a safe and sound system to supply capital that creates jobs and finances dreams. I recommend that you read this excellent paper by Lux and Greene and come to your own conclusions. Let me know what you think, and how the Indiana Bankers Association can help you in your quest to continue to serve your communities. * Available at: www.hks.harvard.edu/centers/mrcbg/publications/awp/awp37 “As constituents, sometimes when you’re out of sight, you’re out of mind. It’s important to come to Washington to keep your issues on the radar screen.” ‒ U.S. Congressman Marlin Stutzman, July 2014 Hoosier Banker Join your peers Sept. 27-29 to make your voice heard in Washington, D.C.Visit your elected officials in the House and Senate, and benefit from informative briefings by the American Bankers Association, Independent Community Bankers of America and regulatory agencies. Trip details forthcoming. For questions, contact Josh Myers at 317-917-8047, email: jmyers@indianabankers.org. g Save the Dates g 2015 IBA Annual Washington Trip September 27-29
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