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Senator Lankford Calls For Regulatory Relief for Oklahoma Small Banks, Urges Dodd-Frank Reform

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WASHINGTON, DC – Senator James Lankford (R-OK) today urged the Senate to pass a Dodd-Frank reform bill to ease federal regulations on small and rural banks in Oklahoma. In a floor speech, Lankford called for the Senate to pass the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155), a bill that would reform the Dodd-Frank Act and help small businesses access the resources they need to invest and hire more workers.

Since passage of the Dodd-Frank Act in 2010, small community banks and credit unions have struggled to keep up with the regulatory demands because the law placed similar restrictions on them as the large banks. Specifically, the Economic Growth, Regulatory Relief, and Consumer Protection Act would reduce restrictions for small banks and credit unions that provide mortgage loans, eases the threshold for small bank credit access, and adds extra credit protections for veterans and consumers.



(00:00) Mr. President, let me tell you about Farmer State Bank of Allen, Oklahoma. I know exactly where Allen, Oklahoma is, but I bet a bunch of folks in this room do not. Small town, small bank, $43 million in total assets in that bank. That’s a pretty small bank, as banks go. It’s located in a town of about 900 Oklahomans total. The town has a number of small business owners, farmers, ranchers, folks that some people in this room fly over. There are good families that live in that great town. Many of them have great credit scores and have a good family history of repayment back to the bank when they’ve taken loans, because that’s “the bank” in town. There have been long-time customers at this bank and in many instances the bank employees and the people in the bank have grown-up together. They know each other, but they also understand seasonal income. When you’re a farmer or rancher that doesn’t come in with a w-2 every single week or every month, it comes in seasonally. So, they understand the credit restrictions there.

(1:12) A banker named Debbie, at the Farmer State Bank of Allen, wrote me this. Between the ability to repay the global cash flow analysis, particularly for a bank of these size, the rules are taking our time away from doing what needs to be done, caring for our customers. We have 12 employees. We’re treated the same as J. P. Morgan Chase or Goldman Sachs both of which have an entirely different business model of operating. They don’t operate in towns of 900 people. That’s not their business model. That’s not their market. One of our key employees now spends most of her time on compliance issues. Total cost of this employee with the cost of the compliance audit, and everything that goes with it, is $100,000 annually. Folks in big towns may not think that is a big issue to have $100,000 in compliance cost, but the total net income of this bank, total for the year is right at $500,000 a year, $100,000 of it is now spent on compliance.

(2:13) How did this happen? Well, this happened when Congress decided in 2010 to pass something called [the] Dodd-Frank [Act]. Dodd-Frank was a bill signed into law in July of 2010 to deal with the financial crisis that happened in 2007 and 2008, which was real. The largest banks in our country took some incredible risks and it caused a financial domino effect all over the country. It caused great risks for our international markets. In response to that, Congress rose up with a strong Democrat majority and President Obama ran to it and said we need to do something and they looped together as many different financial restrictions as they could. They created a new thing called the Consumer Financial Protection Bureau, with no oversight at all. They created a whole litany of regulations and said this will only be for the banks because they are the violators, [they] put it on out there. And then the regulations started flowing after that. And guess what, Farmer State of Allen, who was not the cause of the financial collapse in America, is now caught up. And they are struggling to survive as a bank because Congress decided they were going to “do something.” The something ended up being something that is devastating rural economies in my state.

(3:39) Since the passage of Dodd-Frank, we’ve seen a 16% decline in the total number of Oklahoma bank charters, just in my state. There is a 35% decline of charter banks with less than a total of $100 million in total assets since Dodd-Frank. The effects of Dodd-Frank were felt pretty quickly, actually, in Oklahoma. Passed in 2010, by the 2013, 2014 reporting time, more than 40% of the banks in Oklahoma no longer did mortgage lending at all. Now let that soak in for a minute.

(8:57) Let me give you an illustration from Elk City from Legacy Bank, Damon… said “As a community banker, my job has become much more difficult and burdensome to our customers. Legacy has always strived to offer the best customer service a bank can offer. I used to be a lender to all. However, with the changes that have come about in the Dodd-Frank bill, along with the fines and penalties, that at times don’t make common sense, I am now a commercial lender only.” Let that soak in for a second. At Legacy Bank in Elk City, he used to make loans to everyone, and now he’s a commercial lender only.

(10:42) Frazier Bank from Altus, which my wife and I have a long-standing saying, “Everywhere you go in the world you’re going to bump into someone from Altus, Oklahoma sometime.” This past week, she wrote, “We had a local small business owner that applied for a home mortgage loan. The customer had a down-payment and closing costs but one of the key issues preventing our bank from making this personal loan was the time constraint of two years of history. This is someone that we would have made a home loan to prior to Dodd-Frank, but now we cannot.

(13:10) For those 2% of the largest banks that have 85% of the banking assets, I understand there’s systemic risk there. For the other 98% of the banks in the country that cover 15% total of all the banking assets in the country, why are they considered so systematically important that 27,000 new regulations would need to come down on their 12 employees? This is a good moment to be able to get small towns in rural America working again and allow people to be able to go down to the street to the banker they know and went to school with rather than have to drive into some big city and talk to the biggest banks in America and have them try to understand more about rural America. We can fix this. I’m looking forward to passing this reform. And allowing our banks not just to make money. They’ll find a way to be able to make money. They’re a business. But actually getting back to serving the customers they want to serve and farms and ranchers and small businesses.