Walsh Holds Hearing On Dodd-Frank Impact on Small Business Lending
Bankers Slam Dodd-Frank As Harmful For Small Businesses
Jun 16, 2011 -
WASHINGTON, DC— Economic Growth, Capital Access and Tax Subcommittee Chairman Joe Walsh (R-IL) today held a hearing to examine the regulatory structure of financial institutions, including the new provisions of the Dodd-Frank Act and regulations being proposed to implement the Act that have the greatest impact on small financial institutions and on small business lending.
Along with Dodd-Frank, many financial institutions are facing increasing pressure from federal regulators. This increased pressure has the potential to hamper small business lending, since some regulators are taking a disproportionally stringent view of small business lending and loan performance.
“One of the biggest issues faced by small businesses is the inability to access sufficient credit and capital to hire employees and invest in their company,” said Walsh. “The Dodd-Frank Act is a massive regulatory reorganization that contains requirements for over 240 new rulemaking actions and will cost $1 billion to implement. The new regulatory environment created by Dodd-Frank has caused uncertainty on behalf of both bankers and business owners, which leads to less lending to small business and less desire to take on additional capital.
“Today’s hearing was important in determining the overall economic impact of this law and what it will do to small business job creation in this country. These bankers have confirmed what many legislators fear -- that Dodd-Frank has created more over-regulation and made it harder for banks to improve their lending services. The best way to get capital flowing is to create a better business environment with lower taxes and less regulation, and Congress must remove barriers that prevent participation in and utilization of the various financing programs.”
Click HERE for the full text of Chairman Walsh’s opening statement and witness testimonies.
Notable Witness Quotes:
Mr. Greg Ohlendorf, President and CEO, First Community Bank and Trust, Beecher, IL said, “The stakes were raised sharply after the financial crisis, but I believe many examiners have overreacted and now the pendulum has swung too far in the direction of over-regulation.”
Ohlendorf continued, “Many community banks complain that the required capital level goalpost is unpredictable and regulators simply keep moving it further, making it nearly impossible to satisfy capital demands in a difficult economy and capital market place. As a result, bankers are forced to pull in their horns and pass up sound loan opportunities in order to preserve capital. This is not helpful for their communities and for overall economic growth.”
Mr. Mark Sekula, Executive Vice President, Chief Lending Officer, Randolph-Brooks Federal Credit Union, San Antonio, TX, said, “With a slew of new regulation emerging from the Dodd-Frank Act, such relief from unnecessary or outdated regulation is needed now more than ever by credit unions. Further, while we acknowledge that taken on its own, Section 1071 is a well-intentioned provision, when added with other laws and regulations, this new compliance burden is just another drop in the new and growing overall cost of compliance bucket emerging for credit unions from Dodd-Frank.”
Mr. Thomas Boyle, Vice Chairman, State Bank of Countryside, LaGrange, IL said, “We strongly believe that our communities cannot reach their full potential without the local presence of a bank – a bank that understands the financial and credit needs of its citizens, business, and government. However, I am deeply concerned that this model will collapse under the massive weight of new rules and regulations.”
Boyle continued, “Banks are working every day to make credit and financial services available. Those efforts, however, are made more difficult by regulatory costs and second-guessing by bank examiners. Combined with the hundreds of new regulations expected from the Dodd-Frank Act, these pressures are slowly but surely strangling traditional community banks, handicapping our ability to meet the credit needs of our communities. The consequences are real. Costs are rising, access to capital is limited, and revenue sources have been severely cut. It means that fewer loans get made. It means a weaker economy. It means slower job growth.”