Many on the right, myself included, talk at length about how excessive regulation kills business opportunity. The current Administration in Washington has been an active promoter of aggressive regulators — actions that don’t make the front page of the paper — but add to the “economic uncertainty” that businesses are facing. If a business is facing too much uncertainty, then it is going to wait until the certainty improves before making investments. Many on the left say that this is a falsehood by voracious capitalists who just want to take advantage of people to make money.
So, let me give you an example. This example is being played out in thousands of business decisions across the country, every day…
Over the last year, the FDIC has begun suing failed banks. OK, so far. But, in these suits, they have also asserted that the Bank’s directors are personally liable for voting to approve individual loans that went bad if the loans had deficiencies at the time of approval. At the same time, according to the American Association of Bank Directors, the average board member of a community bank with between $500 million and $1 billion in footings can expect to make $24,518 per year.
Now, it is true that we’d like all loans to be good ones. But, being in business requires taking certain risks. Given a new threshold of personal liability, how many well-qualified people will want to serve as a director of a community bank? How many Bank directors will now approve loans without extracting a 100% guarantee of the loans success?
Many “pundits” are saying that there is no demand for loans. With the extra costs of a federal lawsuit hanging over my head for taking a risk in my business, I don’t need the loan. This is but one example of the myriad “banking requirements” that have been applied by regulators since Dodd-Frank — a bill that was supposed to address too-big-to-fail, but didn’t.