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Thu Oct 4, 2012, 06:40 PM

Fortune: Fact check: Obama isn't killing small banks


In a response to a question about regulation, Romney said Dodd-Frank, the set of banking reforms that Obama pushed for and Congress passed in the wake of financial crisis, was an example of a law that's hurting the economy. Romney said that by specifying certain banks as Too Big to Fail, the government has given "the biggest kiss to New York banks I've ever seen." As a result, Romney said that's making it tough for smaller banks to compete.

Romney said 122 small and community banks have failed since the passage of Dodd-Frank. In fact, the mine field for small banks might be even worse than Romney describes. In the two years, since the passage of Dodd-Frank in mid-July 2010, 196 banks have failed, most of which would qualify as small or community banks.

But it's not clear that has anything to do with Dodd-Frank. In the two years leading up to Dodd-Frank, 256 banks failed, albeit at least part of that time includes a banking crisis, but many of the failures of the past two years have been related to the credit crunch as well. Most banks fail because they made bad loans, not because they are being run over by larger rivals.

What's more, Dodd-Frank doesn't appear to be putting small banks at any more of a disadvantage than they were before. Big banks have increased lending slightly faster since Dodd-Frank than small banks, 4% vs. 1%, according to stats from Bankregdata.com. But loan growth for both groups has been slow.

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Reply Fortune: Fact check: Obama isn't killing small banks (Original post)
cal04 Oct 2012 OP
Common Sense Party Oct 2012 #1

Response to cal04 (Original post)

Thu Oct 4, 2012, 07:37 PM

1. The bankers I've spoken to have complained about the cost of being compliant

with new regulations. The big banks can afford it with their army of lawyers. The First National Bank of Podunk cannot.

I don't know if that is really a valid complaint about Dodd-Frank, since all banks had regulations before.

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