Should Dodd-Frank be repealed and replaced? Debate rages in Washington and beyond regarding the need to repeal or significantly amend the DoddFrank Wall Street Reform and Consumer Protection Act, implemented in 2010 as a result of the 2008 financial meltdown. The intent was to address a lack of oversight and control of financial markets.

The market collapse was due primarily to mega banks and mortgage companies that made bad, even fraudulent loans, to individuals and businesses that didnt qualify, then sold these questionable loans to unsuspecting investors: a perfect storm for economic disaster! Yet this well-intentioned act has had dire consequences reaching far beyond the culprits of the financial disaster.

Our nations financial system is complex. You have Wall Street, investment banks, mortgage banks, the housing institutes of Fannie and Freddie, mega-banks (i.e., too big to fail) and then there are community banks.

Community banks are the backbone of small to mid-range businesses in our country. Did you know that the same sweeping regulations of the Dodd-Frank Act extend from Wall Street to the too-big-to-fail monster banks all the way down to small banks in rural communities across our land? Theres virtually no distinction in size, complexity, risk, etc. And, intentional or not, these regulations have created a chokehold and burden for neighborhood community banks, one greatly impeding their ability to do what theyve done well for decades: serve the financial needs of their communities. The overhead and expenses associated with meeting these federal requirements are more than many small banks can bear.

An American Action Forum study pegged costs of the act since inception at $36 billion. This has forced many community banks to re-evaluate their ability to remain a going community concern. Some smaller banks are forced to close while others choose to merge to achieve economies of scale to address federal compliance costs. This is specifically because the fixed costs of hiring yet another employee to address compliance issues impose a larger burden on small banks. Larger banks dont suffer from this issue as they have a much larger asset base across which to spread the cost of each incremental compliance-related hire.

The community banking group of financial institutions were not a part of the financial meltdown. In fact, they have stepped up and assisted families and businesses more than ever since many of the big banks have all but exited smaller markets since implementation of Dodd-Frank. The big banks today refuse to consider or even hear the varied stories of individual circumstances, choosing instead to follow algorithms and inflexible formulas for underwriting. This trend has caused many small- to mid-sized businesses to go longer before receiving much-needed financing due to having to cast a wider and wider net to find a bank amenable to provide financing. Couple this with many banks reluctance to lend to small businesses with short histories or weak collateral and you have a recipe for an unhealthy small-business environment.

Yes, there is a need for regulatory reform. The extreme overreach of the Dodd-Frank Act has penalized and punished hundreds of quality financial institutions across the country and in turn has negatively impacted millions of consumers and small businesses.

Small business and the folks they employ are the engine that powers this countrys economic success. Community banks are the reservoir of resources those small businesses need to grow and hire. When it works well, bank regulation helps ensure the safety and soundness of the overall banking system. When it does not work well, it constricts the natural cycle of lending, job growth and economic expansion.

When considering regulation for the financial industry, Congress should not lump community banks in with their larger, publicly held, bottom-line counterparts. The time has long passed for the Dodd-Frank Act to be repealed or replaced.

David Littlewood is president of First National Bank of McGregor. It is the oldest bank in McLennan County and seventh-oldest national bank in Texas still operating under its original charter.

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David Littlewood, guest columnist: Time to repeal Dodd-Frank Act and free up our community banks - Waco Tribune-Herald