Deputy Treasury Secretary Neal Wolin’s recent description of Dodd-Frank Act's benefits to community banks is being challenged by a leading financial expert.
Wolin recently took to his Treasury Department weblog and highlighted the reasons that Dodd-Frank rules help smaller financial institutions. He mentioned the leveling of the “playing field between large banks and small ones, helping to eliminate distortions that previously favored the biggest banks that held the most risk," IStockAnalyst.com reports.
Wolin also said that the new capital and liquidity requirements are not being imposed on community banks nor are they being required to pay a large share of the cost of deposit insurance protection.
Thomas K. Brown, the CEO of Second Curve Capital, wrote that Wolin was being “highly selective” in his weblog.
“Among the other blessings Dodd-Frank provides, he forgets to mention, for instance, the new regulatory infrastructure most small banks will have to install to carry out the 4,000 or so pages of new rules the law will spawn,” Brown wrote, according to IStockAnalyst.com.
According to Brown, Dodd-Frank adds so many additional new costs that banks with less than $500 million in assets are simply no longer economically viable and will soon feel pressure to sell out.
“That's not good for credit creation for small business, or good for the economy generally,” Wolin wrote IStockAnalyst.com reports. “And it's a high price for these institutions to have to pay, especially since they didn't cause all the problems in the first place.”