Bank Examiners Holding Back Recovery
Congressman Duncan delivered the following remarks on the floor of the House on 2-16-12:
Mr. Speaker, Tony Blair was the Prime Minister of Great Britain and was considered to be a political liberal, and perhaps his actions didn't always match his words, but I would like to read a statement he made at one point. Mr. Blair said:
"The role of government is to stabilize and then get out of the way as quickly as possible. Ultimately, the recovery will be led not by the government but by industry, business, and the creativity, ingenuity, and enterprise of people. If the measures you take in responding to the crisis diminish their incentives, curb their entrepreneurship, and make them feel unsure about the climate in which they are working, the recovery becomes uncertain."
That was Tony Blair.
Then Thomas Donohue, the president of our national Chamber of Commerce, said at a jobs submit about a year and a half ago here in Washington:
"The regulatory activity presently going on is so far above and beyond anything we have ever seen in the history of this country, that we are in danger of becoming a government of, by, and for the regulators instead of a government of, by, and for the people."
I thought of these two things when I read a letter recently from one of my constituents who runs a small bank in east Tennessee. He wrote to me. He said:
"One of the single greatest needs of small business is access to capital, and much of that small business lending capital is typically provided by America's more than 6,700 community banks. Yet, community banks are by and large being forced to withhold and constrain lending at the time America needs it most. This is largely due to unprecedented onerous regulatory constraints being placed on community banks by Federal bank examiners."
He goes on and says this:
"Never in modern history have banks, especially community banks, been under great pressure by banking regulators. Much of that pressure is unprecedented, virtually ignoring or redefining historic standards and definitions of bank examining. Routinely, banks are being required by bank examiners to classify and put into a nonaccrual status loans that are current on their payments. In many cases, this be can far more than half of all of the classified loan assets. This is enormously inconsistent with historic bank examination practices."
And I go on, quoting from this letter:
"In most cases, this results in a bank's capital being constrained and consequently may well lead to a forced merger of these banks by the Fed into the larger banks. Despite acknowledgement by the Fed that the two big banks represent a systemic threat to the U.S. and global banking systems, the big banks seemingly are allowed to keep getting bigger.
"That is a serious problem. It was the too-big-to-fail banks that got us into the mess that we got into in the first place, and now many of the smallest banks in this country are being forced out of existence or forced to merge. So the big keep getting bigger and the small and the medium-sized ones are having a real struggle to survive."
Finally, this banker who wrote to me said:
"If America is going to have economic recovery and jobs depend on it, banks must not only be allowed to lend, but encouraged to lend. Instead, they are largely being constrained from lending with much of that constraint attributable to overly aggressive bank examination. By and large, most U.S. banks are having to shrink in size in response to the Fed's pressure, which translates into reduced lending."
We have been going through a period of time in which President Bush and his Secretary of the Treasury at the tail end of their administration started saying this and then President Obama and his Secretary of the Treasury then saying it. They have been saying loan, loan, loan, and then the local bank examiners having been saying no, no, no, and it has been holding us back. This country could be booming beyond belief right now, but we're holding it back in so many ways, and we will never come out and have a full and complete recovery unless that atmosphere changes.
I heard a talk this morning by Governor Mitch Daniels of Indiana, and he said that our employment rate is less than 64 percent now. He says that is the lowest it's been since the era of stay-at-home moms. He said over a third of adult children are now living at home with their parents, which is way above what it has been in the past. In fact, we have an unemployment rate that is far too high, but our underemployment rate is perhaps even much higher. All across this country you have college graduates who are working as waiters and waitresses in restaurants or in other low-paying jobs because they have gotten college degrees and can't find good jobs because we've sent so many good jobs to other countries in recent years and because our regulatory environment is holding this country back and keeping it from booming as it should be right now.