The nation’s banks are among the country’s most heavily regulated industries. Zions Bank, along with all other banks, complies with more than 6,000 pages of regulations intended to protect the safety and soundness of your deposits and the banking system.
So you wouldn’t expect a banker to come out in favor of more regulation. Yet that’s just what I’m doing — up to a point.
I support the Obama administration’s proposals to develop ways of handling the failure of large financial institutions so it doesn’t send shock waves throughout the economy. I also support the need to get away from taxpayers having to prop up an institution because someone thinks it is “too big to fail.” It’s also important that we close the regulatory gaps that allowed unregulated and lightly regulated financial companies — like mortgage brokers — to create the kind of problems that have devastated our economy.
However, there is one reform the administration has put forward that will do more harm than good — the proposal for a Consumer Financial Protection Agency.
While it is hard to argue against anything entitled “consumer protection,” when you peel back the labels, the CFPA would have the government decide what products Zions Bank (and all banks throughout Utah, Idaho and the nation) can offer you and/or your business. And it would add yet another agency in Washington to send yet another set of examiners into our already over-regulated banks.
Traditional commercial banks like Zions Bank did not sell the toxic mortgages that led to the current housing bust and the resulting recession. In fact, the administration’s own proposal states that 94 percent of the high cost mortgages occurred outside of the regulated banking sector. For more than 135 years, Zions Bank has been meeting the financial needs of our communities. We are a part of the solution to this financial crisis because we are among those banks who are still lending. During the second quarter of this year, Zions Bank originated nearly 6,000 new loans totaling $623.0 million.
Just as it would be a mistake for government to micromanage how your physician practices medicine, it would also be a mistake to micromanage the banks that had nothing to do with creating this recession.
Another part of the proposal that is troubling is the elimination of federal preemption of state consumer protection laws. The existing system allows banks to offer products and services on a nationwide basis that provide important benefits to consumers in our highly mobile society. For example, how will nationwide ATM networks or online banking systems function if individual states enact new restrictions? Transactions through these networks will become far more onerous for consumers under the administration’s proposal.
We’re not going to renew our economy by throwing traditional banks under the bus and holding them there. More red tape isn’t going to bind up the nation’s wounds. It’s going to strangle the one part of the economy that is still lending to help grow small businesses, promote home ownership and support consumer spending.
Banks such as Zions Bank, here and around the country, are intensively regulated and federally insured financial institutions dedicated to serving our clients and growing our communities. We consider ourselves, first and foremost, a community bank because we are actively engaged in important community issues and are deeply committed to help provide creative solutions to community needs.
So as Congress rushes to pass financial reform legislation, I hope you will think about the consequences that some of these reforms would have — the good and the bad.
If there is one thing we all should learn from the current financial crisis, it’s that if something sounds too good to be true, it probably is.
A. Scott Anderson is President and Chief Executive Officer of Zions First National Bank
Featured in the September/October 2009 issue of Zions Bank’s Community magazine.
What specifically can an individual like myself do?
Hi Scott,
Good letter. This trouble has been caused by the big players and a few very unscrupulous companies. The people responsible need to be incarcerated and the big “banks” need to be disassembled. I see no advantage to US citizens in having “too big to fail” institutions. We are confusing “regulation” with trying to control huge businesses that are in fact controlling the market and our government. These are two very different issues.
Patrick H.
Carbondale, CO
While I’d like to commend you for the nobility of your company, I’m hard pressed to give you too much reign over your banker’s patois. It would be easy for you to tout that you’re among those who are still lending, but may I point out that you’re now only one of the “few” “still” lending and that is indicative of the sickness that has befallen our financial industry. Greed at the top of the food chain has trickled down to those “traditional banks” which have sunk, dragging the FDIC down with them as more chartered banks join the ranks of the dead and dying (my old bank, First Bank of the Tetons, being one of them). So to say that the industry is already over-regulated seem to me a denial in your part in light of the meltdown we have seen. If anything, those who are smarter, more manipulative, more aware of the regulations have found a way to break them. And that is perhaps where the cautionary tale lies. The preponderance of wealth and power has incited a large number of people on both sides of the table in a crazy rush to climb the top at the expense of what is prudent, to ditch self-accountability for what we misjudge as entitlement. I think that more regulation is necessary, if nothing else, to save some of us from ourselves.
You make very good arguments, but one thing is not clear to me…
You state and I quote
“Another part of the proposal that is troubling is the elimination of federal preemption of state consumer protection laws”
What is the logic behind proposing this change?
If this is so bad why is the Govt. trying to do this?
What is the other side of this statement?
Mr Anderson,
I applaud your stance on this.
However, when you claim that, “Traditional commercial banks like Zions Bank did not sell the toxic mortgages that led to the current housing bust and the resulting recession.” this doesn’t seem plausible.
Considering all of the junk loans that WAMU alone issued, not to mention B of A, Wells Fargo, Citibank, and others, how can this be said? Even today, many corporate loans are tied to complicated derivatives. Until banks can show they can be trusted by the public, I agree there needs to be more regulation.
What really needs to happen is Glass-Steagall, the law separating depository banks from investment banks, needs to be put back into place. This would eliminate a lot of the craziness that developed over the past decade.
Funny, you site that Mortgage Brokers caused mass devastation, yet not one mortgage broker underwrote or funded a single loan. The truth is that large banks gave away money knowing full-on that they were looking the other way. I promise that tighter regulation to police the likes of Option Arms and Stated income is the only way to keep CEO’s of large financial institutions from artificially driving up stock values with earnings that are only representative of short term performance.
Matt S.
CEO Consumers Financial Company
- a sucessful and ethical Mortgage Broker for 16 years
Mr. Anderson,
Thank you for your insight into the possibility of more regulations. I have learned that more isn’t necessarily better it’s just more.
My dad, Bill S. was often put off by how many new health dept regulations were added each year and I think that it kept him from doing things that would have increased business. Now that I am better informed I will know what to express to my congressman and senator on these issues.
Heidi F.
Traditional commercial banks like Zions Bank did not sell the toxic mortgages that led to the current housing bust and the resulting recession.
Really? Could please tell me what actions you did take that warranted receiving $1.4 billion in TARP funds.
What can I, as an individual do to help. I agree with you that more control to the government will not solve anything. Please let me know if there is anybody that I can write to.
Is this why Zions has a 2 star rating? Below Peers. Maybe more regulation, not more
I’m pretty much with you on this one, Mr. Scott. Your words are wise. That is why I bank with Zions. Like you said, Zions is a local community bank particularly committed to the local interests. I have learned not to trust those large megabanks from out of state. If I have an issue with a local bank, I can take it to the Utah Bankers Association and have it resolved here, locally. But, if I have an issue with a megabank, with headquarters out of state, I have to file a complaint with the Federal Compcontroller of the Currency, which can take months. I know, I did this against Wells Fargo. Out-of-State megabanks like Wells Fargo, J. P. Morgan/Chase, and Citibank are the ones that created some of the problems that crashed the market, and small local banks, like Zions, are the ones that are committed to trying to revive the almost dead market. I am trying to get my Smokin’ Bill’s LUCKY 13 Magic Seasoning on the market, but it is hard to get financing during this current crisis. But, I will persist. And, it will be a local institution that I go to when I close the deal.
MY COONSKIN HAT GOES OF TO YOU AND ZIONS!
Smokin’ Bill W.
The disasterous lending policies of the last decade must be eliminated whether they are mortgage brokers, or in some cases banks. It does seem a little disingeniuos to say its ok to regulate the other guy but not me.
While I do not wish more regulation on anyone, I do not want a banking system where taking risks is not watched by someone other than a person who stands to make huge profits, and then if they fail, they get bailed out. Count me as a propenant of reasonable regulation, it was not clear that that is what you are asking for.
Thanks for the article. It is timely and needed. I hope we get a chance to vote against a lot of the stuff Obama is doing. If it continues unchecked, it will ruin our country—if he hasn’t already.
my experance is when the gov fixes 1 problem it causes 2 more
sounds like more big gov to control us :(
Mr. Anderson,
I think most Americans think further regulation of the banking sector is necessary. I am also aware that Zions bank’s practices have been far better than others with regard to the sub-prime mortgage crisis. Thank you for that.
However, as a voter, I must look beyond the interests of one bank when choosing to support or not support our President. The banking sector has been under-regulated, that much is obvious. Maybe its time they were over regulated.
That said, I appreciate your opinion, but I’ve sort of lost trust in any banker.
Regards,
Preston
Maybe it’s a good idea to have more regulations as to what banks are allowed to sell! I think we were all better of when banks were truly “local” and not allowed to cross state borders. Mortgages were sold by mortgage brokers, insurance was sold by insurance brokers, stocks were sold by stock brokers, etc. We now have maga banks that sell everything (and that is very hard to oversee). Banks used to be places where you parked your money. Let’s go back to that practice!
Thanks for enlightening us on the Bank’s perspective of regulation. No doubt some federal regulation is past due. To go further with nitty gritty that impacts local commerce is typical bureaucratic overkill.
In your example of ATM, would this proposed consumer protection agency protect consumers from bank ATM usury rates recently noted in the press? Apparently these small number of “irresponsible ” banks have almost bankrupted the FDIC. To what extent do we need to protect the public from further financial product innovation? Like most legislation today we can not let perfect get in the way of better.
Just as I expected, this is not a vote FOR regulation but AGAINST. I don’t have enough expertise to decide if you are correct or not, but I resent the misrepresentation.
Scott,
I agree to a large part with your post but our views diverge on the need for enhanced consumer protections. Several practices endorsed and enacted by banks dealing with everyday consumers can be considered abusive and designed to solely aid in the pursuit of profit. I have enumerated three examples below:
1. Posting of debit transactions from highest to lowest amounts rather than by chronological order.
I have had the experience of helping several people learn to get a handle on their finances and was simply appalled to see their daily debit card receipts and then their bank statements with accompanying overdraft fees. In every case without exception, transactions were posted from highest to lowest dollar amounts – even when the largest transactions were the last ones of the day. As a result, what should have been one overdraft turned into 3,4 or even more along with the accompanying fees. For families under stress these additional fees can place burdens on charitable or governmental organizations to help make up the difference.
2. Universal default provisions in credit card contracts.
It is reprehensible that a contract interest rate and payment amount could be adversely affected by performance issues on another, separate contract. If an individual is performing on a contract with you, performance on another contract that this person holds with someone else should have no effect on your contract with this person.
3. Fees for credit/debit holds.
Prevent issuers from charging over-limit fees when a retailer’s hold is the only reason the consumer exceeded the limit. A hold does not equate to actual payment. Fees should only be charged if actual funds are transferred to the retailer/provider resulting in an overdraft condition.
In conclusion I wish to state that I abhor regulation with its accompanying loss of freedoms. However, with the demonstrable lack of ethical behavior shown by many institutions and the unabashed pursuit of profits at any costs, I find myself resigned to supporting regulatory changes more and more. It’s sad indeed.