Small banks across the nation are celebrating today, after President Donald J. Trump rolled back some of the key regulations of the Dodd-Frank Wall Street Reform and Consumer Protection Act with the slash of his jagged signature.
While Dodd-Frank was created to address the crisis created by the "too big to fail" banks, its critics maintained it kept small banks from doing business, business that was vital to the close-knit communities in which they belong.
"Dodd-Frank was a misguided, one-size fits all approach to regulation," says Jason Zacher, Greenville Chamber of Commerce senior vice president of business advocacy and executive director of the Upstate Chamber Coalition. "This hamstrung the community banks that are an essential lifeline for small businesses -- particularly in smaller towns and rural areas."
"When sorted by credit risk, the Federal Reserve has consistently reported that businesses with less than $1 million in revenue have trouble receiving traditional funding or lines of credit," Zacher notes. "When we convened a dozen local banks last year to meet with Senator Graham's staff, our local banks blamed the Dodd-Frank regulations for those restrictions."
Zacher adds, "Loosening some of the restrictions and regulations on the smaller community banks -- banks that don't pose a systemic risk to the nation's banking system -- small businesses will get access to the capital they need to grow."
Community bankers waged a robust campaign in support of the rollback bill -- delivering an estimated 15,000 messages to Congress members and meeting with lawmakers 325 times, according to the Independent Community Bankers Association. Their efforts won over both Republicans and Democrats alike, in a rare moment of bipartisanship on Capitol Hill.
“The passage of Senate Bill 2155 represents common-sense changes that will correct some of the unintended consequences of the Dodd-Frank legislation and help South Carolina banks, particularly community banks, get back to the basics of lending to credit-worthy businesses and consumers," says R. Thornwell Dunlap, III, president/CEO of the Greenwood-based Countybank.
"These changes will help to grow our economy and expand access to credit for consumers and businesses."
Dunlap also notes that the rollback isn't just a victory for small banks, it's a victory for its customers.
"What it means to the consumer is less arduous analysis of a borrower’s ability to repay, reduced cost of credit, and reduced appraisal requirements, particularly in rural markets," Dunlap says.
Eddie Fewell, executive vice president and chief credit officer for the Bank of Travelers Rest, also sees the passage of S 2155 as a victory.
“We appreciate the diligence of the legislature in revising Dodd Frank for consumers and banks alike," Fewell says. "Overall, it includes common-sense improvements to the nation's financial rules that will allow community banks to better serve their customers and communities."
A group of Democrats in Congress opposed the anti-Dodd-Frank bill, claiming it would harm consumers.
According to a Democratic Joint Economic Committee fact sheet, S 2155 would "relax regulations on manufactured-home retailers, which disproportionately serve rural areas, by eliminating legal protections that ensure that mortgages are safe and affordable," exempt "roughly 85 percent of mortgage lenders from reporting requirements under the Home Mortgage Disclosure Act (HMDA)" and potentially lead to discriminatory lending practices, and allow banks "to skirt certain mortgage appraisal laws, putting consumers at risk of receiving unaffordable loans that were a major cause of the 2008 recession."
Fewell, for one, says that while bankers are still examining the details of the rollback, protecting consumers remains a top priority.
Ted Pitts, president and CEO of the S.C. Chamber of Commerce, is pleased that both sides of the aisle were able to come together.
“South Carolina’s business community thanks the Congress for their actions in addressing the over-burdensome regulations imposed by Dodd-Frank on the state’s community banks and their customers," he says.
"It is encouraging to see members from both parties come together to tackle this very important issue to the business community."