As debate heats up about whether to repeal the Dodd-Frank Act, witnesses testifying before the House Financial Services Committee Monday appeared as divided over the issue as the general public, with some criticizing the law and others praising it.[IMAGE]
Lawmakers convened the field hearing on regulatory reform in Wausau, Wisconsin, early Monday morning.
The leaders of banks and credit unions largely panned the financial regulatory overhaul, highlighting the demand for more resources and manpower in compliance issues even as regulators themselves continue to scrutinize new loans.
Marty Reinhart, president of Spencer-based ""Heritage Bank"":https://www.heritagebankwaonline2.com/home/home, read from prepared text that the ""current examination environment is hampering lending at the very time that bank credit is needed to sustain the economic recovery.""
He described current conditions as a ""pendulum... swung too far in the direction of over-regulation,"" citing bank examiners that ask for write-downs on more loans, disregard any other qualifications for a borrower apart from collateral, and hedge toward non-accruals for loans despite current payments.
Patricia Wesenberg, president and CEO of the ""Central City Credit Union"":https://www.centralcitycu.com/, called attention to one instance in which a bank executive with her institution used as much as a third of her working time to oversee and deliver reports to federal regulators.
""The barrage of regulations creates an unnecessary burden without any measure of the effectiveness of these changes,"" she said. ""They are costly, both in time and personnel to implement, and they are confusing to our[COLUMN_BREAK]
In tandem with their Monday testimony, the ""Office of the Comptroller of the Currency"":http://www.occ.treas.gov/ issued a report that found the Volcker Rule ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô a crucial regulation under Dodd-Frank passed to ban proprietary trading ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô would cost banks as much as $1 billion in logged hours, resources, and other expenses.
Still others seemed to portray Dodd-Frank as beneficial to the broader economic recovery at best and less painful for banks at worst.
Alan Erickson, a self-described small business owner and mayor of Mosinee, Wisconsin, said in his testimony that lenders continue to pull back from loan volume for reasons that include a lack of collateral and aversion to new risk.
""As far as risk goes, [b]anks say that regulators are getting in the way of their making good loans,"" he said in prepared testimony. ""For business owners though, those problems are arguable.""
Bethany Sanchez, director of fair lending with the ""Metropolitan Milwaukee Fair Housing Council"":http://www.fairhousingwisconsin.com/, acknowledged ""a big demand for home mortgages and for home repair loans"" but differed from earlier witnesses by saying that ""[r]egulations can, and will help address this need.""
She highlighted success in the Community Reinvestment Act (CRA) and called Dodd-Frank something that would provide ""safeguards to borrowers in the mortgage market, and [ensure] that large institutions looking to acquire another bank will need to evaluate not only the banks' records in CRA assessment areas, but whether the acquisition would be a significant benefit across the country.""
She cited a February 2009 ""Federal Reserve"":http://www.federalreserve.gov/ study that she said discovered that lenders issuing 94 percent of subprime loans in 2006 operated outside of the coverage now provided by CRA rules, adding that ""the damage could have been contained"" had Dodd-Frank been in place during the financial crisis.
The bigger picture, according to Erickson?
""We need to stimulate the system from the bottom up,"" he said. ""It's about jobs. We create jobs by investing in one another.
""Government needs to rethink the concept of trickledown economics,"" he added.