In the Washington Post, Camden Fine, president and chief executive of the Independent Community Bankers of America, writes, “I was astounded this month when the Federal Reserve announced its intention to keep interest rates at zero percent for at least the next two years. I kept staring at that number, 2013, assuming that it was a mistake.” He continues, “In my view, the Fed’s policy is nothing more than a backdoor bailout for the Wall Street mega-banks and investment houses; it amounts to the back of the hand for the community banks of this country.”
“I have been a community bank owner and was president of a bank that served hundreds of community bankers for more than 20 years. I have always known that the model of community banking is different from that of Wall Street banks. Unlike Wall Street banks, which make their money based on volume and transaction fees, community banks make their money the old-fashioned way. They pay their customers interest on their hard-earned savings, they lend those deposits back into their communities to small businesses that create jobs, and they price those deposits and loans to make enough on the difference to pay their employees and utility bills, and maybe even to purchase a scoreboard for their local high school football team.
“That is, until now.
“Now the Fed is pricing their deposits. Now the Fed is setting the spread. With nearly zero percent rates and slack credit demand, how are community banks supposed to make a viable margin on their funds? Community banks are swimming in liquidity as depositors pour their savings into their local banks in search of safety and security. Most community banks are holding short-term investments because they figured that rates would begin to rise in the next 12 months or so. After all, rates have been near zero for almost three years.
“And what about fixed-income savers and retired senior citizens who were encouraged for years to save for their retirement so as not to be a burden to their families or their government? How long will their savings last when rates are held to artificially low levels? ...
“The Wall Street money houses are basically getting free money that they can hedge and arbitrage worldwide to make baskets of money, while local banks are stuck with deposits costing more than the federal funds rate, sluggish loan demand and a 2.20 percent 10-year Treasury. For the extended future, earnings contractions will accelerate as the investment portfolio prepays and runs off, and capital will be difficult if not impossible to raise, stifling growth on America’s Main Streets.”
Meanwhile, Speaker John Boehner’s office released the following statement this morning:
“A simple scan of the Obama Administration’s current regulatory agenda indicates that the Administration currently has 4,257 new regulatory actions in the works, of which at least 219 will have an economic impact of $100 million or more. That is an increase of nearly 15 percent over last year, when a similar search showed 191 new [$100 million] regulatory actions by the Administration to be in the works….
“[Speaker Boehner] today sent a letter to President Obama noting the scheduled increase in regulatory action by the Administration and asking that the White House provide Congress with a list of all of the regulatory actions it plans that would have an economic impact of $1 billion or more….
“Boehner sent a similar request for information to the president last August....The requested information was never provided.”
The speaker’s office also cites Susan E. Dudley, director of the George Washington University Regulatory Studies Center, who writes that the Environmental Protection Agency’s “pending decision to tighten ozone standards…is likely to slow economic growth in thousands of counties across the nation and impose costs of $20 billion to $90 billion per year, according to the agency’s own estimates.”
It is becoming increasingly difficult to argue that Washington’s intrusive, heavy-handed policies are not stifling economic growth across America, and particularly on Main Street. One might add that this is further evidence that liberty and prosperity (and their opposites) go hand in hand — a point that Republican presidential candidates would do well to emphasize.