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An Assessment From Banker Guy

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“Banker Guy” is the anonymous CEO of a mid-sized bank in a major city who occasionally lets us know what he thinks of the financial crisis and the response of Congress. Here’s his latest:

The Third Worst Law Passed by the House Ever

Dear Hugh,

After PelosiCare and Cap ‘n Tax the worst piece of legislation ever is H.R. 4173 or as I call it – Barney’s Barf. The bill passed Friday by a vote of 223 to 202 with only Democrats supporting it.

H.R. 4173 creates the Consumer Financial Protection Agency (CFPA). The Director of this agency is appointed by the President and confirmed by Congress for a five year term. The Director has no oversight and broad power and rule-making authority over about one fifth of our economy. The Director can make rules without regard to the safety or soundness of financial institutions. The Director can ban consumer financial products, determine how they are to be delivered, and regulate compensation of people who deliver those products. The Director has subpoena power, can demand documents and oral testimony and issue cease and desist orders.

Further this law enables states to enact even tougher rules that must be obeyed by all banks doing business in that state. So a multi-state institution will be forced to adhere to the most restrictive rules everywhere it does business or become extremely inefficient.

I believe this law will hurt consumers. Meredith Whitney, a noted bank analyst, made this point on CNBC this week. Given the regulation by the CFPA, many providers will reduce their offerings rather incur losses. Reasonably priced credit and deposit products will be less available to many people. It will be more costly to everyone, as overdrafts will not be paid and consumers will be charged by merchants and banks. When overdrafts occur they are reported to credit bureaus and consumers will see their credit scores decline. That will drive up credit costs and reduce credit availability.

I know it is easy to dump on “greedy” bankers and some deserve the scorn, but the thousands of banks in local communities across America are honestly trying to help consumers and small businesses recover from the recession and create jobs. The addition of these populist constraints to the existing pressure from regulators to reduce commercial real estate lending and increase capital, which also reduces lending, will further slow any recovery.

If I sound like I am frustrated, I am. Most bankers I know are also very frustrated. It is difficult to deal with the effects of the recession on so many of our customers, but to have the regulators and the politicians in Washington trouncing on also is no fun!

Hugh, please keep up the good work on defeating ObamaCare and Cap and Trade, but the Consumer Financial Protection Agency, a similar pox on business and our economy, also needs to be defeated in the Senate.

I can be contacted at


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