So if the richest big banks, lawyers, lobbyists and Congress were the big winners yesterday, who are the losers? Small banks, entrepreneurs and you.
Smaller community banks do not have the same resources that the Goldman Sachs of the world do to hire armies of lawyers and lobbyists to shape and comply with new regulations. The cost of compliance will eat up a much larger share of small bank revenue. Jim MacPhee, CEO of Kalamazoo County State Bank in Michigan and chairman of the Independent Community Bankers of America (ICBA), told USA Today: “We weren’t part of the subprime (mortgage) meltdown. Why throw more regulations at us?”
Entrepreneurs take a double hit in the Dodd-Frank bill. First, by forcing banks to raise more capital it will now be more difficult for them to make new loans for small businesses. But more important is the regulatory threat for new products. Acrosstheworld mobile device and telecommunications firms are beginning to compete against credit card companies and banks to reshape how consumers buy products and manage their finances. Will the Dodd-Frank Consumer Financial Protection Bureau even allow these services to come to market? Will cell phone firms have to be regulated exactly like financial firms? Nobody knows the answer to these questions. Here is what we do know: it will be the banks and telco firms with the best lawyers and lobbyists – not the best entrepreneurs – that come out on top in this battle.