Rich Galen

A Wall Street Journal story by Robin Sidel looks at a troubling trend in the banking industry. No, not the JPMorgans of the industry losing $2 billion on bad bets, but on small community banks who don't have the word "billion" anywhere on their balance sheets.

According to her piece:

"A growing number of tiny community banks are deciding it's time to put out the 'for sale' sign … many executives of these small lenders are frustrated by costly, new regulations."

Let's head into the Way Back Machine:

In October, 1975 New York City was on the verge of bankruptcy. Sort of like California in the Summer of 2012.

New York's Democratic Mayor and Governor (Abe Beame and Hugh Carey) came to Washington, DC begging for Federal help.

President Gerald Ford said he would veto any bill which would have the effect of taxpayers in, say, Michigan, bailing out New Yorkers whose profligate ways had led them in that fiscal blind alley.

The New York Daily News published a famous front page with a photo of Ford and the blaring headline: Ford to City: Drop Dead

There are no front page photos and no tabloid headlines about the "costly new regulations" that the Democrat-controlled Congress put in place prior to the 2010 mid-term elections that restored Republicans to power in the U.S. House.

The major regulatory burdens were demanded, or at least permitted, by the bill commonly known as Dodd-Frank in honor of former Democratic Senator Chris Dodd (CT) and soon-to-be-former Democratic Congressman Barney Frank (MA).

It is not just small banks that are being pushed off Main Street. A piece in the Des Moines Register last week quoted an Iowa businessman as telling reporters on a conference call:

"We really want to continue to be able to create some good jobs but it's tough when we are staring at higher taxes and more regulations, so these are the things that concern us."

That conference call was organized and hosted by the Republican National Committee, but the businessmen were not actors - they were businessmen.

"Effectively," one told reporters, "what we have is the Obama administration is focused on regulatory practices and constantly trying to drive a wedge between people who are employed and trying to work and government who is trying to regulate and control everything."

According to the WSJ piece, small community banks were not generally caught up in the mortgage securitization collapse, but the recession washed over small towns all across the country and what should have been solid personal and business loans went sour.


Rich Galen

Rich Galen has been a press secretary to Dan Quayle and Newt Gingrich. Rich Galen currently works as a journalist and writes at Mullings.com.