Small banks hampered by more regs

A south Louisiana bank official is speaking strongly against the creation of a new federal banking regulatory agency.

During a talk given in Houma last week, Ross Little, Jr., senior vice president of New Iberia-based Teche Federal Bank, said the new agency would regulate community banks too closely. Teche has branches in Thibodaux, Morgan City, Houma, Franklin and Bayou Vista.

A bill sponsored by U.S. Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, would create the Consumer Financial Protection Agency to regulate consumer financial products and services.

A summary by the Congressional Research Service states that the bill would “promote transparency, simplicity, fairness, accountability and access” for financial products to consumers and deter unfair and fraudulent transactions. The bill was introduced on July 8 and is currently in the House Financial Services Committee.

Little was strongly critical of the proposed legislation, calling the agency “a liberal attempt to control banking.”

“It tells banks what to do,” he said. “What you offer will be under strict scrutiny. You do the slightest thing wrong, you’re subject to lawsuits.”

The legislation would create a marketing panel to determine the products banks can offer and would force banks to provide only “vanilla” financial products to avoid lawsuits, he contended.

“It’s not consumer protection,” said Little, who is also an attorney. “It’s trial lawyer payback. It will encourage frivolous lawsuits.”

The banking crisis beginning last year, he said, was caused by the largest banks in the country, not by the more than 8,000 community banks like Teche. Community banks make up $7 trillion of the nation’s economy-half in loans and half in deposits-and employ thousands of people in small towns, according to Little.

The bill has other features that will hurt the banking industry, he said. Complaints against banks would have to be documented, growing the federal bureaucracy.

“It will have a database for complaints,” Little said. “More justification for government intrusion into private business.”

The federal government will also erode banks’ engaging in niche marketing by posting their business practices on the Internet, he said.

Frank’s bill has not received the attention that health care and cap and trade legislation have attracted. The banking industry contributed less to President Obama’s election campaign than almost every other industry, Little said.

“It’s not a hot-button issue … No one knows about this outside of banking,” he said.

U.S. Rep. Charlie Melancon (D-Napoleonville) opposes the bill as written, but could change his stance if slight alterations to the legislation are made, according to Little.

“Rep. Melancon is the key,” he said. “If Melancon opposes it, others will follow. Melancon will not see the light unless he feels the heat.”

“Tell him you don’t want bureaucracy,” he said.