There are a number of good ideas for the rules that will help enforce the undisclosed provisions of the 2010 law – the Dodge-Frank Act, intended to curb the risky behavior of financial institutions – a huge failure – now at the Consumer Protection Bureau. As a 41-year-old and unsurprisingly veteran of the academy community in the community banking industry, I was troubled by several steps in DFA Section 1071.

Unfortunately, community banks are the main culprits of this huge debt, and their value has increased significantly due to the ever-increasing federal regulation. A.D. Although they did not engage in the unscrupulous conduct of the financial crisis that led to the financial collapse in 2008, these local banks have undergone significant changes in their business model and customer service.

Unfortunately, many of these smaller banks have chosen to drop the towel. According to official Federal Deposit Insurance Corporation, Dod-Frank had 7,839 banks nationwide at the end of June 2010, shortly before the law became law. As of September 30, that number was 4,923, a shocking 37.2% decline. The industry will continue to grow as the big ones grow and the small ones disappear. Communities at the national level continue to feel the effects of the loss of locally owned community banks.

Why does this affect you, your community and the economy of this country? A team of researchers at the University of Texas Tech’s Bailey Allen, Mike Mauluddin and Drew Winters recently detailed the involvement of community banks in small business lending on “implementation of Dod Frank Law 1071.” The study cites the impact of small business loans and agribusiness loans on community banks, the decline in the size of the loans, and the impact on compliance reporting requirements, particularly on small banks.

Probably the most talked about is the information from the payment protection program. Excerpt from the study above:

“Information from the Small Business Administration (SBA) demonstrates the importance of small banks in supporting small business lending in this critical lifeline, and impartially, the burden of Article 1071 reporting is unbalanced. The SBA’s recent approval of PPP shows that it has received $ 799.83 billion in PPP loans by May 31, 2021. Banks with less than $ 10 billion borrowed $ 335.28 billion, or 41.9 percent of PPP loans.

This is important when FDIC data shows that banks worth $ 10 billion and below represent approximately 12 percent of industrial assets. Regardless of how we look at community bank lending, it is clear that community banks play an important role in small business lending and provide a disproportionately large proportion of these loans in various categories.

Banks conduct extensive investigations into all operations, but especially in the case of consumer and mortgage lending, it is thoroughly analyzed to identify any clues to discriminatory treatment. These are cookie loans; That is, they can be easily analyzed to determine any potential for bias or unfair treatment.

Small business loans are polar opposites, and each one is unique and careful, time consuming and not always numerical analysis to determine the potential for success. Beauty Hall is not a mechanic shop, it is not a lawn service, it is not a dentist’s office. That is why big banks avoid small business loans.

Most of these microfinance loans are network-based and require the knowledge and experience that community and rural banking professionals use on a daily basis to provide the required capital for local businesses. Successful big banks tend to offer cookie-cut loans to consumers through formulas, or focus on multi-million dollar demand for more bottom line revenue for the same amount of work.

Small businesses are the primary innovators in the US and primarily promote economic growth and productivity among communities in the country. Community banks are the engine that drives small businesses. If any of these sectors were to be reduced or eliminated, we would all be affected.

Mike Mauldin is the Director of Advanced Banking at the University of Texas Tech. He wrote this column for the Dallas Morning News.

Get it Full comment section here. Do you have an opinion on this matter? Send a letter to the editor. And only you can print.