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The HQ Conundrum
WINEGARDNER: The unintended consequences of some of the regulation. The very people they are trying to protect and save, they have hurt desperately. And not just small banks, but consumers. When you get into the mortgage arena and credit and what have you, the regulatory environment is what is stifling everything.
BEARD: There are as many as 1,000 banks that are predicted to disappear over the next four or five years. That’s a huge number. We are ending up driving more and more to the big banks and consolidating all these little community banks out. It’s either done intentionally or out of ignorance, but the result could be the same.
We have already gone from 14,000 banks to a little over 6,000 banks in the last 25 years or so. Another 1,000 could dramatically change the face of banking. So is that your feeling? Get big or die?
HOLLOWAY: We had the privilege of meeting in Washington with six bankers around a conference table with the Consumer Financial Protection Bureau (CFPB), which is a brand new regulatory agency. The banks represented tiny little banks from the Montana countryside to multi-billion dollar banks. Across the board they were looking at the question of qualified mortgages and the mortgage reform. A number of bankers said, “We will be out of the mortgage business.” So CFPB said, “We want to protect the consumer,” but they are reducing the availability of mortgage loans to consumers.
With capital requirements, the slim interest margin, all of those things, a handful of banks around that table said, “We can’t do it. We can’t stay in business, support the regulatory requirements, serve our customers.” It’s going to be a too-big-to-fail environment because those are the only people who are going to be able to survive.
SUTTON: The overarching theme of what’s been happening with regulation is, first of all, it is becoming seriously disconnected from the marketplace. It is being driven by political considerations and by people who don’t understand the business itself. And it is becoming schizophrenic.
It’s also becoming unworkable. It is just layer after layer of complexity. When I first started working in this area, the text of the regulation itself was maybe 20 pages long and the official commentary interpreting it was another 20 pages or so. You could learn that, you could work off memory without too much difficulty. Today, after the Card Act, a separate piece of federal legislation apart from Dodd Frank, it has grown into a 2,000-page monster.
There are some people in a few of the financial centers that may have some grip on what this stuff involves. But increasingly they are the only ones who do. The people who actually run these businesses are struggling and smothering under all those layers. And the people in Washington don’t understand that. That trend has got to stop.
HOWELL: If you look back at TARP, the government has collected $233 billion on TARP, which has been more than paid back. In fact, they are $33 billion to the good. They didn’t lose any money through the TARP program, and yet everybody says the government lost money through that. So they continue vilifying the banks, and it hurts the customer.
When a bank has to add people, you have to pay for that through increased costs. So it’s the customer that’s going to get hurt when you do that.
PIGNANELLI: Banks have been vilified, but at the same time banks need to push ahead because every small business, every large business—they need a bank in order to operate. I’ll be honest with you, I don’t think the Republicans did a good job and I don’t think the banking community is doing a good job of pointing out that Dodd Frank doesn’t offer all these protections, plus it is centralizing more of the banking operation—the exact reverse of what most people think.
Now that there’s a new Congress and Mr. Frank, an author of this bill, will no longer be in Congress, there’s a real opportunity to mess with this and get the changes through. An argument can be made by the banking community that Dodd Frank and the Volcker rule will have no positive impact for any American. It is simply a regulator’s dream.
Let’s focus on the Utah economy. Are we over the foreclosure crisis? Are we starting to see construction?
BEARD: In terms of housing permits, statewide you see a 12 percent increase over 2011. That’s significant. Up in Davis County, it’s almost 30 percent. In Utah County it is just a little under 12 percent. This indicates that there’s still pent-up demand that is starting to use up some of the inventory.
On the local level, if you follow the population, you will see that Utah is growing organically—and if we can keep our economy running, we will have some importing of people as well. That will all lead to a strengthening housing environment here. The Bank of Utah has significantly increased in the mortgage area. So there are some positives that are happening here locally.