Friday, July 24, 2015
Billy Long: Dodd-Frank places families under government's heavy hand
July 21 marked the fifth anniversary of the notorious “Dodd-Frank” Wall Street Reform and Consumer Protection Act, which took aim at Wall Street firms and banks’ actions leading to the financial collapse in 2008 with the intention of preventing it from ever happening again. Unfortunately, this law went well beyond its target and has hit Main Street especially hard.
Five years later, unintended consequences roll on. Regulations have created a bigger hassle for prospective homebuyers to secure a mortgage and close on a home, made it harder for entrepreneurs to access capital to get their start, more difficult for small businesses to secure resources to grow, and have led to a faster demise of small, community banks.
To date, overall Dodd-Frank compliance costs are estimated to be $24 billion and 61 million hours, with many more rules to be written, as the law set more than 400 mandated regulations in motion. These costs have been passed along to consumers in a variety of ways such aschecking account fees, which now average customers about $118 per year. Worse, some in the Seventh District have told me regulations, such as fair lending reporting requirements, have created hesitation to lend out of fear of lawsuits for noncompliance.
The hundreds of new rules have put a squeeze on smaller banks’ ability to lend. The Consumer Financial Protection Bureau has reported a comparatively greater share of small banks’ resources is used to comply with and report on federal regulations. Some institutions, such as the Central Bank of the Ozarks, have had to hire full time staff positions to comply, which further increases the cost of business. As the costs have mounted, the rate ofcommunity bank consolidation over the past five years has doubled, and one community bank or credit union has closed or consolidated per day. This takes away the local, trusted institutions and leaves fewer options for Americans to go for banking and financial services.
According to a Harvard Study, small and community banks make 77 percent of the country’s agricultural loans, more than half of all small business loans and have the most success in real estate lending compared to larger financial institutions. Leaders from banks across the Ozarks have told me the burden of regulatory compliance and applying for mortgages have discouraged home buying and have made the ability to close on a home in less than 30 days a thing of the past.
Dodd-Frank’s biggest tragedy is the ripple effect it has on American families, businesses and the overall economy. In the end, this does not “protect” consumers, but rather places American families and businesses under the federal government’s heavy hand. The high-cost regulations do nothing but regulate the continuity of Wall Street actions and keep them at bay while suppressing the entire system. I have voted on legislation to ease the rules’ weight on the economy, such as the Promoting Job Creation and Reducing Small Business Burdens Act. I am committed to continuing the fight against these over-burdensome regulations and ending the ill-effects on consumers and the economy.