Consumer bureau could help banks – US regulator

* Walsh says consumer agency can take on shadow lenders

* Says new law a challenge for community banks

By Dave Clarke

BOSTON, Oct 18 (BestGrowthStock) – A top U.S. bank regulator sought
on Monday to ease industry concerns about the new financial
reform law but acknowledged it will provide an extra burden for
community banks, which continue to struggle through the
sluggish economy.

Acting Comptroller of the Currency John Walsh told bankers
that the new Consumer Financial Protection Bureau could wind up
being a positive for their businesses because it will oversee
previously unregulated, or “shadow,” areas of the financial
sector that have been blamed for worsening the 2007-2009
financial crisis.

For years banks have complained about having to go
head-to-head against financial firms that served many of the
same credit functions but did not have to follow the same
rules.

The set-up of the new bureau is being led by Harvard Law
School Professor Elizabeth Warren, who is serving as special
adviser to President Barack Obama and Treasury Secretary
Timothy Geithner. Warren has clashed with the industry in the
past and her role is being viewed skeptically by bankers.

Walsh downplayed those concerns.

“It will no doubt require some vigilance to ensure that the
new consumer bureau doesn’t fall into this same pattern and
focus the lion’s share of its attention on the regulated banks
and thrifts that are easy to find,” Walsh told an audience at
the American Bankers Association’s annual meeting.

“I am reassured on this point because in our first meeting,
Professor Warren made clear that the new agency will ensure
that its supervision and standards are applied equally to
lenders of all kinds.”

Many banks, especially small and medium-sized institutions,
say their reputations have been unfairly damaged by the
activities of mortgage lenders and payday lenders who were not
regulated before the July enactment of the Dodd-Frank financial
regulatory overhaul law.

Bankers arrived in Boston on Sunday for the ABA meeting
during a turbulent time for the industry, particularly as
concerns about whether mortgage foreclosures have been
mishandled remain in the headlines.

The top topic for the gathering has been the Dodd-Frank
law, the most sweeping overhaul of financial regulations since
the Great Depression.

Many bankers have complained about the law, portraying it
as an overreach by politicians responding to populist anger and
that its impact on the industry was not carefully considered.
This resentment has been most obvious among community bankers,
who argue that they had little to nothing do with the exotic
and complicated financial products that were major contributors
to the financial crisis.

In his speech, Walsh pointed out that the law exempts
smaller banks, those with $10 billion or less in assets, from
many of its provisions, but acknowledged it would still likely
prove a burden for smaller institutions.

“The fact is, any new regulation affects small banks
disproportionately, no matter how carefully it is crafted,” he
said. “While large institutions have whole departments
dedicated to dealing with regulatory requirements, community
banks are lucky to have a single unit — and sometimes a single
individual — to ensure compliance.”

He said the OCC will be mindful of this dynamic as it
carries out the law.

Walsh moved into his job in August, replacing John Dugan,
whose five-year term as comptroller ended. The Obama
administration has not said when it plans to nominate someone
to replace Dugan on a full-time basis.

Walsh, who said he was making his first speech in his new
job, also addressed one of the main drivers behind the law —
ending the notion of “too big to fail” institutions whose
failure could threaten the broader economy. The law gives
regulators new powers to seize and liquidate large, failing
firms.

“I can’t honestly say whether we’ve put too-big-to-fail
behind us,” Walsh said. “We won’t really know until the next
crisis. I hope that will be a long time in coming but, with
apologies to Santayana, those who study financial history know
we are doomed to repeat it.”
(Reporting by Dave Clarke, Editing by Gerald E. McCormick)

Consumer bureau could help banks – US regulator