The Idea Is Catching On

The handful of community banks who came to FDIC Exposer aren't the only ones seeing a disturbing trend.  Others are taking notice that the big banks have emerged from the financial crisis bigger than ever, despite legislation to correct that.  Under Dodd-Frank, the FDIC is charged with dismantling those banks, but so far the only ones affected have been community banks.  From an article in the Washington Times:

"In fact, the Dodd-Frank law reinforces the market perception that a small and elite group of large firms are different from the rest” by designating those banks as “systemically important." -Joshua Rosner, managing director of Graham Fisher & Co.

So Congress and regulators have done nothing to fix the problem that led to this mess.  No big surprise, really.  Big money and big power have a way of doing that.  Unfortunately, what Rosner proposes as a compromise spells big trouble for the little guys:

Since Congress repeatedly rejected amendments to break up the banks last year, perhaps it could consider a less far-reaching measure that would make banks much more careful about the risks they take by requiring their executives to pay dearly in the event of failure. [emphasis added]

It's not enough that the FDIC already threatens bankers with personal liability, instead we apparently need legislation mandating it.  When the big banks use their financial, political, and legal clout to sidestep the latest regulation, Washington comes up with another.  And another.  And another.  And each time community banks are the only ones who feel the effects.  What's next, placing liability on bankers' families and friends, because they failed to address the bankers' risky behavior during dinner conversations?

And round and round we go.