Red tape or safety net? Local bankers wary about Wall Street Reform.

• Author: Kinder, Peri
• Position: Business Trends

Following the tragedy of 9/11, the government quickly created strict new regulations for airlines and airports, basically making all travelers guilty until proven innocent. Although the vast majority of travelers never consider committing acts of terrorism, the toughened security measures were meant to ensure the few criminals in the group couldn't hurt everyone else. The result of these regulations was increased airline costs, longer time in security lines, travel inconveniences and lots of bureaucratic red tape. Of course, the upside of those regulations is increased air travel safety and the prevention of loss of life.

Today the financial industry is facing a batch of regulations, much like the airline industry experienced. And some banking leaders in Utah worry that the latest round of large-scale regulations--those aimed at Wall Street--will impose all of the red tape without the benefit of increased financial security.

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In July, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act--possibly the most influential set of financial rules since the Great Depression.

However, many Utah bankers believe they're being unjustly punished for the bad behavior of the greedy banks that were "too big to fail." Adding up to more than 2,300 pages, the regulations leave banking officials feeling they've been found guilty until proven otherwise. Results: increased banking costs, longer time for loan approval and lots of bureaucratic red tape.

Impacting Utah Banks

To say Utah Bankers Association President and CEO Howard Headlee is pessimistic about the regulations is an understatement. Headlee goes so far as to say "[Congress] has sown the seeds of the next financial crisis somewhere in this bill."

He maintains that local banks had little or no role in the current crisis and, in fact, warned policy makers about the dangerous loans being sold by mortgage companies and predatory lenders, "The regulations are focused directly on banks and credit unions who had no role in the crisis. Congress has just slapped another set of handcuffs on us," Headlee says. "The 90 percent of us who were doing it right will be subject to the changes because a small group of people weren't acting prudently."

One amendment, added to the regulations by Sen. Susan Collins (R. Maine), could force banks holding more than $250 billion in assets to meet stricter capital requirements. As an example, banks would not be able to...