Roby: Alabama banks folding under Dodd-Frank law

Seven years ago, in the wake of the financial crisis, the regulatory overhaul known as Dodd-Frank became the law of the land. Advocates of the legislation claimed it would fix the underlying problems that caused such a major economic collapse, but like many proposals of that era of supermajority Democrat rule, Dodd-Frank has caused more problems than it has solved.

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One especially frustrating consequence of Dodd-Frank is the regulatory burden placed on small banks and credit unions and the way that has stifled economic growth in small town America. When a small business needs a loan to expand its operation, or when a farmer needs to access credit to fund planting for the next season, they don’t go to the giant banks on Wall Street. Many times they go to the small banks and credit unions in their hometowns who they know and trust. But these hometown lenders are increasingly threatened by this Dodd-Frank law commonly referred to as the “Obamacare of the financial industry.”

A total of 357 financial institutions nationwide have been forced to close under Dodd-Frank, including four community banks in Alabama. That amounts to nearly $7.5 billion in our state’s economy that could be lent to help small businesses and farmers. In all, nearly 20 percent of Alabama’s community banks have either closed or been forced to merge under Dodd-Frank.

Why is this happening? It’s happening because hometown banks cannot keep up with the crazy compliance costs resulting from Dodd-Frank mandates. For example, one credit union in the Wiregrass reports that their compliance department has tripled in size since Dodd-Frank was implemented in 2010. They estimate that these new costs have limited their growth by as much as $60 million.

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A giant financial institution on Wall Street can absorb these costs into their budget, but at a small community bank or credit union on Main Street, those costs can threaten their ability to keep the doors open. That’s not right. Hometown lenders in Alabama didn’t cause the financial crisis of 2009, but now they and the communities who depend on them are paying the price.

I’m proud to report that the House of Representatives took an important step toward righting this wrong last week by passing H.R. 10, the Financial CHOICE Act. The CHOICE Act would untangle Dodd-Frank’s regulatory web, end the disparity facing small lenders, and unleash the capital investment that is so crucial to economic growth in this country. The bill would also end taxpayer-funded bailouts of corporations once and for all.

There is no question that we need strong laws to govern our financial markets. No corporation should be allowed to get away with unethical behavior that causes financial harm to others. However, it has become abundantly clear that Dodd-Frank and its complicated mandates are not the answer. The CHOICE Act seeks to make sense of our financial regulations and level the playing field for small and medium-sized lenders.

I was proud to vote for the bill and rally support for its passage. It now awaits further action by the Senate, and I will keep you posted on its progress.

Martha Roby represents Alabama’s Second Congressional District. She lives in Montgomery with her husband, Riley, and their two children.