When the economy collapsed in 2008, federal regulators responded by imposing tougher monitoring systems on big banks. However, the new rules had a trickle down effect on small banks, and on Thursday, U.S. Rep. Scott Tipton met with local officials to hear their concerns.
“The concern we were hearing here through our district, while directed at big banks, is that the smaller institutions are now feeling the impacts of the rules and regulations as a result of the legislation,” Tipton said.
The conversation at the Durango Library revolved around the Dodd-Frank Wall Street Reform and Consumer Protection Act, a set of federal oversight initiatives President Barack Obama signed into law in 2010 as an attempt to prevent practices that led to the 2008 financial meltdown.
Tipton said the legislation has been effective for monitoring the big banks, which can afford the cost the new regulations demand. But community banks cannot.
“The concern now is it’s casting out a broad net that’s scooping up smaller community banks,” Tipton said.
Tipton’s meeting brought together a consortium of local bankers who talked about the impacts and struggle with Dodd-Frank.
Scott Smith, CEO of the Colorado Association of Home Builders, said closings on houses have become more difficult as a result of the legislation, and the penalties for minor violations are “very extreme.”
“We were kind of fearful as a group of the impact,” Smith said. “It’s definitely has created some uncertainty.”
Kathy Stout, of Colorado Capital Bank, said there are some areas within the regulations that simply don’t make sense.
“We were put in a position of eating significant amounts in fines that are not a result of infractions, but real life issues,” Stout said. “The constraints on community banks need to be lifted.”
Tipton said Congress is working on several drafts of legislation that would provide some relief to local banks: “Right to Cure,” which lifts fines on innocent mistakes, and the TAILOR Act, which would adjust fines according to an operation’s size and risk profile.
“I’m not going to question the heart, but I am going to question the outcome,” Tipton said of Dodd-Frank. “This shouldn’t be a partisan issue. I know too many local people trying to do the right thing for the right reasons, but the current regulatory scenario almost seems adversarial.”
jromeo@durangoherald.com
