House Subcommittee to Focus on Small Bank Failures

Wednesday, 10 Aug 2011 10:43 AM

By Greg McDonald

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A House subcommittee has scheduled a hearing in Georgia next week to examine what Republicans say are “overly stringent” bank examination standards that “are impeding an economic recovery.”
The Financials Services Subcommittee on Financial Institutions and Consumer Credit plans to convene in Newnan, Ga., to question community bankers and regulators as lending for small businesses and mortgages tightens nationwide.
The hearing, said full Committee Chairman Spencer Bachus, R-Ala, will focus on the “mixed messages” emanating from Washington; while lawmakers are urging banks to lend more, he said federal bank examiners are applying more restrictive standards that make it difficult for community financial institutions to lend more money.
“With a struggling economy and high unemployment, small businesses and small town banks need some relief from the growing regulatory burdens that block the creation of new jobs,” Bachus said in statement announcing the hearing on Aug. 16. “We cannot allow regulatory micromanagement of community banks to stifle prudent lending.  Bank examiners must recognize the risks of over-regulation, and particularly avoid subjecting smaller financial institutions to undue regulatory burdens.”
The subcommittee hearing follows on the heels of a bipartisan bill passed by the House last month that requires the inspector general of the Federal Deposit Insurance Corporation (FDIC) to conduct a review of its examination practices that many lawmakers believe may be contributing to a rise in small bank failures nationwide. The bill has yet to pass the Senate.
Rep. Lynn Westmoreland, R-Ga., who introduced the House bill along with 13 Republican and Democratic co-sponsors, noted that bank failures nationwide have risen steadily since 2009 when 140 of them closed their doors.

In 2010 the figure was 157 and so far this year, 63 have failed, 16 of them in Georgia alone, he said.

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