Dime News
Dime Bank sounds an alarm over proposed banking reform
News Release - October 7, 2009
Norwich, CT - As we all struggle to recover from the financial
crisis thrust upon us by a host of perpetrators-mortgage brokers, large
retail and investment banks and Wall Street- further enabled by regulators,
Congress and the Executive branch of government, I would like to sound
an alarm and ask for your help.
To begin with, we need to separate community banks from the pack. They
did not play any part in the creation of this mess. They nevertheless
are quickly becoming the most affected victims and, by extension, I fear
so too will the communities they serve.
The general public needs to know that the losses experienced by the FDIC
will all be directly paid for by the banking industry not by the American
taxpayer. Acknowledging that, we must also recognize that those increased
premiums will be paid by community banks that had nothing to do with the
failures that have occurred. As an example, Dime's FDIC premium went from
approximately $250,000 in 2008 to just under $1 million this year. That's
a 300% jump in one year! And there will be further increases in 2011.
Although taxpayers won't "directly" pay for the increased premiums,
they might indirectly in the form of possibly lower interests rates on
deposit accounts or increased fees.
As difficult as those increases are for a community bank to fund, I fear
they pale in comparison to the potential harm that might come about from
the various proposals being circulated in Washington from the Obama administration,
Senator Dodd and Representative Frank.
These folks are hell bent on "correcting" the ills of our banking
system with typical Washingtonian solutions that are not all well thought
out or formed with minimal understanding of the consequences to, again,
the community banking system. I also strongly believe that politicians
are trying to read the reaction of the American voter to this crisis;
painting all banks with the same broad brush; and are responding in a
way that might appease voters and, thereby, garner votes with little regard
for the impact on community banks and, ultimately, their communities.
Let me illustrate. One idea is to create a new "super" regulator
called the Consumer Financial Protection Agency. Under this proposal,
there would be one regulator that would ensure all banks comply with all
consumer related statutes and regulations. The idea is to create an "independent"
body, separate from existing regulators.
Sounds reasonable but totally unnecessary. The problem is, there would
be minimal connection between the concerns the existing regulators rightfully
have in assessing the safety and soundness of an institution and compliance
with consumer regulations. An organization such as that being proposed
would have too much power and could very well exercise it with a lack
of understanding of the interconnectivity of compliance laws and regulations
versus safety and soundness concerns. And of course, it would create a
whole new bureaucracy that would be very costly, all of which would be
paid for by the banking industry, hence another burdensome and unnecessary
cost to community banks.
Another suggestion is to create a new regulator, the National Bank Supervisor,
to replace The Office of Thrift Supervision and the Comptroller of the
Currency. Concurrent with the formation of this new regulator is a proposal
to eliminate the federal thrift charter. That would mean existing federal
mutual institutions would either have to convert to stock ownership or
seek to become a state chartered institution.
Why the concern? There are 296 federally chartered, mutual thrift institutions
in the country. Most of them used to be called Savings and Loans with
a few former savings banks included in the mix. The Obama administration
has concluded that thrifts, with their focus on residential lending, are
a product of a bygone era and that "thrifts were more vulnerable
to the housing downturn that the United States has been experiencing since
2007." They have effectively concluded that their number is so small
that they should legislate them out of existence as they are currently
structured.
In addition to the thrifts, there are 215 mutual savings banks nationwide,
predominately in the northeast, 17 of which are in Connecticut, Dime being
one of them. I submit that, if this proposal is passed, it doesn't take
a lot of imagination to conclude some bureaucrat in Washington, in the
not too distant future, will question the need for mutual savings banks
as well. From that, there could be further legislative action to force
mutual savings banks to either convert to a stock institution or a national
bank, hence legislating us out of existence too. From a public policy
standpoint, small - to mid- size thrifts and mutual savings banks would
no longer be a concern of big government.
The frightening part of all of this irrational thinking is what I said
earlier. Community institutions didn't create this problem. Large national
or regional banks and Wall Street did. Sure one of the main culprits was
Washington Mutual that had a thrift charter but there is no connection
to what it did and a mutual community bank other than coincidentally its
charter.
What needs to happen? The Senate and House Banking Committees need to
slow down the process. Take time to evaluate all of the ramifications
of the current proposals, both short - and long- term. Listen to constituents-
community banks and their customers.
If you agree with these conclusions, and you see the value mutual banks
like Dime provide to our community, please let your state elected officials
know by writing to them directly or by emailing them. You can download
sample letters below. Please date and provide your address information
in the letter prior to printing.
I ask that you not hesitate because the process is moving full speed ahead.
Let's not let Washington act and then say: I wish I had known. I would
have made my voice heard.
Connecticut residents:
Download letter to Senator
Christopher Dodd (rich text format)
Download letter
to Senator Joseph Lieberman (rich text format)
Download letter
to Representative Joseph Courtney (rich text format)
Download letter to
Representative John Larson (rich text format)
Rhode Island residents:
Download letter to
Senator Christopher Dodd (rich text format)
Download letter to Senator
Jack Reed (rich text format)
Download letter
to Senator Sheldon Whitehouse (rich text format)
Download letter to
Representative Patrick Kennedy (rich text format)
Download letter
to Representative Jim Langevin (rich text format)
About Dime Bank
Dime Bank is a mutual institution that was established in 1869 and has
been committed to the needs of its neighbors and friends for 140 years
with 10 branches in Connecticut and one branch in Westerly, Rhode Island.
To learn more about Dime Bank, please visit us on line at www.Dime-Bank.com.
As a grass roots effort, the Dime Bank Blue Crew was developed to capture
Dime's 140-year tradition of supporting and giving back to the community.
A voice of public support, the Blue Crew participates in supporting education,
non-profit, human needs efforts, and general volunteerism. For more information
about requesting Dime Bank Blue Crew support at your event or organization,
email us at bluecrew@dime-bank.com.
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