Small-bank CEO: I spend 50-60% of my time dealing with regulatory issues

by Walter Olson on November 21, 2012

Maryland Reporter on what an Eastern Shore banker told a forum arranged by the state’s tax authorities:

The CEO of Easton Bank and Trust, Mike Menzies, said the new standardized approach in how the banks count assets along with state regulation policies have a distinct impact on the loans they can lend to small businesses….

Menzies said that regulations associated with the federal Credit Card Card Act, the Fair and Accurate Credit Transactions Act and Dodd-Frank Act have have placed large burdens on banks, forcing them to devote more human resources toward regulatory compliance than is necessary.

“I would say that seven years ago, I would spend 20 to 25% of my time as CEO of a small company dealing with regulatory issues,” said Menzies. “I spend no less than 50 or 60 percent of my time today dealing with regulatory issues. It’s unbelievable.”

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Maggie's Farm
11.25.12 at 8:46 am

{ 8 comments }

1 Ron Miller 11.21.12 at 11:31 am

Honestly, I can’t speak to the whether whether Dodd-Frank is over-the-top. I majored in finance, follow the market and some banking stocks regularly (I also have an industry ETF because I think banking stocks are undervalued). Still, I think analyzing Dodd-Frank is above my pay grade.

What I do know is hearing that what a small Maryland bank CEO says about how difficult the regulations are does not add or subtract from the equation. These guys whine about every single new regulation and serially exaggerate how difficult they are. Besides, is there someone else at Easton Bank that could do some the regulatory work that he does?

If you want to push that Dodd-Frank is an overreach, I have to think there is low hanging fruit to make the point than the whining of some small bank CEO.

2 Jack Olson 11.21.12 at 12:42 pm

Dodd-Frank prohibits me, a FINRA-licensed stockbroker, from giving more than $150 to any state or local candidate in any one election. Nor may I do anything like install a yard sign, make phone calls, or walk a precinct, without notice and consent of my employer even though I am technically a franchisee. This restriction applies not only to me, but also my wife, my children, and my employees, and applies retroactively to anybody I might hire. You won’t find this in the Dodd-Frank bill. FINRA imposed it under the authority Dodd-Frank delegated to FINRA. It’s an invasion of my political freedom and civil liberty, especially since it doesn’t apply to people in other occupations. Dodd-Frank limits my ability to donate or campaign for or against any local judge running for election or re-election, while lawyers who argue cases in his court are free to donate or campaign for him as much as they please.

3 David Eggers 11.21.12 at 3:20 pm

Ron,

With a degree in finance, you can’t see anything wrong with having to spend half your time doing paperwork as opposed to running your business? At what point does it cease to be whining? 70%? 90%? Or 115% when regulators come in, shut you down, fine you, and lock you up for not keeping up with paperwork.

4 Ron Miller 11.21.12 at 4:20 pm

David, I think you missed the point of my post. I think you kinda nailed it though when you mentioned 115%. I think they will claim this at some point. I will tell you two things I think:

1) Dodd-Frank is not going anyway

2) Buy bank stocks. They are dramatically undervalued. (If I’m right about this, and I’m betting on it literally and figuratively, it may be the the regulations are not stopping banks from making money hand over fist.)

5 Ron Miller 11.21.12 at 4:21 pm

Jack, I really don’t know much about this and it sounds unfair although I have not heard the other side of the argument.

6 Jack Olson 11.22.12 at 12:30 pm

Ron, this provision is called “pay to play.” The theory behind it is that campaign contributions by financial companies might influence the decisions of state and local officials in which financial companies should handle public money, e.g., pension funds. This is likely true although it’s just as true for other businesses local governments employ. In California, for instance, the lead underwriter of nearly every new bond issue was a large contributor on the pro side of the bond election. That’s like letting GMAC vote on whether or not you need to buy a new car on credit. But, if it’s a conflict of interest to let stockbrokers give to state and local political campaigns, then isn’t it also a conflict of interest to let government employee unions do the same?

7 Robert 11.23.12 at 8:54 pm

I have a little 5-person technical consulting company. I have to spend about 5 hours a week (~ 10% of my time) on tax and regulation compliance issues and it’s a big waste of time. I don’t think many people understand how much a burden regulation is on business large and small, and not just in the financial sector.

8 Dirk 11.25.12 at 10:08 am

Yes, but those regulations create jobs. Highly unproductive and totally pointless jobs but how are we supposed to keep hiring more of those hard working government employees if we don’t find some way to take money out of the private sector that otherwise would have been wasted on growing business and hiring non-union private sector employees?

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