Community Bankers of Iowa Monthly Banker Update October 2013 | Page 6
From the Top
Written By: Bill Loving, Chairman of ICBA
Facts Stacked Against TBTF
In my travels, I’ve confirmed that regardless of where you live,
the lifeblood of each and every community is its community
banker and his or her desire to make their community a better
place to live and work. This means that, as community bankers,
we want to stand up for what is right, and we determine what
is right based on a host of criteria—core values, beliefs, facts,
common sense, morals and a higher purpose. Our conscience
is with our community, plain and simple.
• Many studies show that too-big-to-fail financial firms do
enjoy a funding advantage over the smaller institutions that
do not have a government guarantee against failure. Both
a study by two economists at the International Monetary
Fund and a Bloomberg View analysis estimated their funding subsidy at approximately $83 billion a year. To bring
the point closer home, the competitive advantage has
been estimated at 20 to 80 basis points by another study.
That’s
clearly an
advantage.
Poll results from a nationwide survey conducted by ICBA.
• FDIC
data show
that while
megabanks
have the
lowest
credit quality in the
banking
industry,
they also
have the
lowest cost
of funding.
End TBTF: America Speaks
Community
bankers by their
very nature are
evaluators, taking
in all perspectives of a situation to come to a
final conclusion.
That’s how we
make loans. We
look at the facts
surrounding the
request and determine if a loan
makes sense for
us and the borrower. We don’t
simply rely on
a formula. This
same strategy is
employed when
we are analyzing
important policy
issues, such as
too-big-to-fail.
That’s why I am
dismayed when
others say that
my fury against
too-big-to-fail
simply comes
out of emotion—
nothing could be further from the truth. Community bankers’
plates are full, and mine is no exception, so I don’t have time to
simply get emotional over a topic. I need clear and hard facts
to help me determine if it’s a case worth fighting for. And guess
what—it is!
So here are some facts for anyone out there who might want
to know more about how ending too-big-to-fail will support free
markets and help our economy. I encourage you to share these
facts with members of Congress, your regulators and the media
so you can continue to enlighten stakeholders and average citizens about how too-big-to-fail affects them and their community.
• Too-big-to-fail distorts free markets, incentivizes risky behavior, leaves taxpayers on the hook for bailouts and creates unfair competitive advantages for the largest banks.
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CBI Banker Update
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October 2013
• Large
or interconnected
institutions are
too-big-toprosecute
for fear of
destabilizing the
economy,
and their
executives are
too-big-to-jail. The very firms that have inflicted the most
abuse on consumers and the most damage to our financial
system and economy are effectively immune from being
held responsible for their actions.
• But there is perhaps no greater reminder of the too-bigto-fail impact than the constant, oppressive regulatory
burdens that community banks face on a daily basis.
For more facts and clarity, I encourage everyone to read the
ICBA study on ending too-big-to-fail. You can find it at www.
icba.org/tbtf.
With all of these facts stacked against too-big-to-fail, it’s hard for
anyone not to see the clear direction we must take for the sake
of our economy and the communities we proudly serve.