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Montana Banks Welcome Changes to Dodd-Frank Act

With President Trump signing executive order to scale back financial regulations, Montana banks see opportunity

By Molly Priddy

President Donald Trump continues his first 100 days in office, a period of time marked by the signing of many executive orders signaling the direction the Republican plans to take the country.

One of those orders shows the president’s desire to cut back banking regulations, when he set in motion his promise to rein in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Dodd-Frank came into existence in the height of the recession, bringing with it the largest changes to financial regulation since the rules and reform that came after the Great Depression wiped out the country’s finances.

At more than 1,000 pages, the Act is extensive, and created several major areas of change. It established the Consumer Financial Protection Bureau (CFPB), an agency that investigates consumer complaints in banking and lending, as well as the Financial Stability Oversight Council, which keeps track of the health of the country’s financial sector.

The Volcker rule within the Act, proposed by former U.S. Federal Reserve Chairman Paul Volcker, prohibits banks from using certain kinds of speculative investments, the type that Volcker argued led to the Great Recession. Another rule, the Durbin Amendment, named for Illinois Sen. Richard Durbin, limits the fees an institution can charge retailers for debit card processing.

But many small banks and credit unions felt unintended consequences of the Act, including those in Montana. The added regulation was burdensome for financial institutions with small staffs, leading them to either merge with another bank or add positions specifically to deal with the paperwork and compliance rules.

According to data from the Federal Deposit Insurance Corporation (FDIC), there were 7,357 federally insured commercial and savings banks in the United States. By 2016, that number had dropped to 5,980.

Montana U.S. Sen. Jon Tester, a Democrat, sits on the Senate Banking, Housing and Urban Affairs Committee, and said Dodd-Frank has brought much needed regulation to Wall Street, but could lighten up on community institutions.

“Dodd-Frank serves its purpose and currently does serve a purpose. When it comes to Wall Street, I think it is absolutely necessary,” Tester said in an interview. “But it’s a 1,000-page bill – it hasn’t been modified much since it was originally passed. (There’s an) opportunity here to give some relief to community banks and credit unions, those kind of folks who really supply capital for rural Americans.”

Tester said he plans on working with lawmakers on both sides of the aisle to provide “some relief” to small lenders who have felt the weight of heightened regulations.

“It’s not good for rural America,” Tester said. “We’ve got some opportunity. There are some very good bankers out there who understand that when you’re sitting across from your customer, that’s better than any regulation you could put on there anyway.”

U.S. Sen. Steve Daines, R-Montana, expressed a similar desire to rid the Act of some of its rules.

“Regulations associated with Dodd-Frank have cost our economy $36 billion and created 73 million paperwork hours,” Daines said. “We can’t create more high-paying jobs and grow the economy by suffocating it with red tape.”

The Montana Bankers Association is excited about the chance to reduce some of the regulations within the Act, according to CEO Steve Turkiewitz.

“Montana communities, businesses and agricultural producers have been suffering since 2010 in the effort to survive the unintended consequences of the over-reaching regulations of Dodd-Frank,” Turkiewitz said in a prepared statement.

“Our customers are frustrated with onerous paperwork, added costs and significant delays in their ability to get the loans and access to the capital they need. These burdensome regulations do nothing to protect our customers, while they impede their businesses and cause delays in economic growth and job creation in Montana communities.”

Randall Chesler, CEO of Glacier Bancorp, said Dodd-Frank’s creation of the CFPB likely had the unintended consequence of hurting consumers instead of opening up opportunity for them.

“That’s probably hurt consumers more than help them, because they’ve created rules that are so onerous that many banks have stopped making home mortgage and consumer loans,” Chesler said. “ I don’t think they ever dreamed it would do that.”

Repealing that rule could lead to more lending, and more competition from lenders, he said. Chesler also said paring down Dodd-Frank could bring the community part back to community banking.

“What community bankers want to do is serve their customers and serve their communities, and when the regulations get in the way it’s frustrating for them,” Chesler said. “(Changes to the Act) could make it easier, and you may see more of the smaller banks stick around.”

Still, Chesler said Dodd-Frank has helped, since it added needed regulation to the financial sector.

“Some of the regulation has been good. I think some of it has helped make banks more safe and more sound and I think that’s been a good thing,” Chesler said. “(The regulations) need to be studied to make sure what’s been good stays.”