In a move that has earned the support of the Montana Bankers Association, Attorney General Tim Fox has joined a lawsuit challenging the federal Dodd-Frank financial regulations.
Fox announced earlier this month that Montana is one of 11 states to join litigation in federal court opposing the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010 in response to the national financial meltdown.
Echoing the concerns of community bank officials, the Republican attorney general said Dodd-Frank has not reined in big banks but has instead unfairly targeted smaller institutions while placing too much power in the hands of federal regulators. He said the regulations make it harder for Montanans to get loans and has put the state’s pension investments at risk.
“Dodd-Frank is an alliance of big government and big business – Pennsylvania Avenue subsidizing Wall Street and suffocating Main Street,” Fox said in his Feb. 14 announcement.
“Montana’s community banks didn’t cause the 2008 financial crisis, but Dodd-Frank punishes them and our citizens who depend on them for credit to purchase a home, start a business, or go to college. It cements the ‘too big to fail’ approach and helps the biggest banks at the expense of consumers.”
Fox said in an interview last week that the goal “isn’t to completely gut Dodd-Frank,” but “to use this litigation as a vehicle to focus on those parts that are illegal and unconstitutional.” He called the regulations an example of “federal overreach” and hopes Congress will take another look at them, specifically citing the orderly liquidation provisions.
The other states involved in the lawsuit are Texas, Georgia, Alabama, Kansas, Nebraska, Ohio, West Virginia, Michigan, South Carolina and Oklahoma.
“This legislation has put a huge burden on (Montana banks) and in turn that affects the consumers,” Fox said on Feb. 21. “And this is my effort to protect the consumers.”
The Montana Bankers Association has endorsed Fox’s decision. Sam Waters, president of First Community Bank in Glasgow, and Mitch Johnson, executive vice president of the family-owned Teton Banks, were both quoted in the attorney general’s announcement voicing their support.
Waters said his bank has had to increase its staff time and costs in order to monitor and implement the Dodd-Frank regulations.
“We’re a small bank operating on a narrow margin,” Waters said. “Like other businesses we have to pass increased costs on to the consumer.”
“Many community banks in Montana are considering halting certain services to consumers,” he continued, “particularly mortgages and other residential real estate lending, due to increased complexity and costs of added regulations. We don’t have an unlimited supply of customers, and we need the flexibility to structure loans to fit our customers’ needs.”
John King, CEO of Three Rivers Bank of Montana in Kalispell, had similar concerns as Waters and Johnson, saying “it has caused so much work for our bank.” Three Rivers Bank, a member of the Montana Independent Bankers Association, has had to hire personnel to keep up with compliance and incur other costs as the result of Dodd-Frank.
“I’d say our costs have doubled,” he said.
King said the Dodd-Frank regulations have missed their mark and are ineffective in clamping down on large banks, which have been criticized for risky practices that helped usher in the financial collapse.
“The regulatory agencies who examine these larger banks are finding out they cannot inject the rules and regulations of Dodd-Frank into these big banks, so they have adjusted to come down to the smaller banks and force us to follow the guidelines,” King said.
Because of Dodd-Frank restrictions, King said it is more difficult for customers who long ago proved their credit worthiness to get a loan now.
“It’s taken the character out of the borrower – it wants everyone to be a clone,” King said. “We weren’t made clones. It’s really taken the handshake away from the small banker. It takes away from our community.”
Fox cites former Democratic Gov. Brian Schweitzer, who said on a television appearance last year that Montana banks have done their jobs properly and haven’t gone upside down, yet “they are the ones that are being penalized.”
The attorney general doesn’t know a timeline on the lawsuit but said “I’m in it for the long run.”
“We’ll continue to fight for Montana’s interests as long as it takes,” he said.
Stay Connected with the Daily Roundup.
Sign up for our newsletter and get the best of the Beacon delivered every day to your inbox.