The House Financial Services Committee’s Subcommittee on Financial Institutions held a hearing in Newnan, Georgia today to discuss the high rate of bank failures in Georgia and across the country and how the policies and practices of the Federal Deposit Insurance Corporation (FDIC) and other federal regulators may have affected those failures. Congressman Westmoreland hosted the hearing and was joined by Committee Chairman Spencer Bachus (AL-06), Subcommittee Chairwoman Shelley Moore Capito (WV-02), and Congressman David Scott (GA-13). Testimony was offered by two panels. The first was comprised of federal regulators from the FDIC, the Office of the Comptroller of the Currency (OCC), and the Federal Reserve. The second panel was comprised of bank owners and financial leaders from across the state of Georgia. More than 100 people attended the hearing.
“I would like to thank Congressman Bachus, Congresswoman Capito, and Congressman Scott for joining me today in Newnan to discuss this important matter,” stated Westmoreland. “I would also like to thank the witnesses who offered testimony as well as those who travelled to attend the hearing. This is an extremely important issue that is affecting communities across the country. After listening to both panels of witnesses, it seems to me that there are mixed messages between what regulators in Washington are saying and what regulators on the ground are actually doing. While the heads of these agencies are telling us their regulators on the ground are supposed to be using common sense, bankers in Georgia told us today that is simply not happening. And what I have to say to these Washington regulators is that you need to get out more. That might be what you think is going on in Washington, but that’s not what’s happening in our local communities. Instead, what we are seeing is that banks that are ‘too big to fail’ are given assistance to survive, while community banks are pushed to the side and have become ‘too small to save.’”
During the first panel, Congressman Westmoreland expressed his concern that many of these federal regulators have never worked in a bank or made a loan – making it hard for them to fully comprehend the best solutions to help some of these troubled banks. He also expressed his frustration with what appears to be inconsistent reviews by federal regulators.
“How does a bank get an A+ on their review by the Office of the Comptroller of the Currency one year and then get an F 12 months later?” Westmoreland asked the OCC representative Gil Barker. “You have told us that you address problems at the earliest possible stage to prevent banks from becoming troubled or failing. But it’s hard for me to believe that a bank can go downhill so quickly – going from completely safe to utterly unsalvageable 12 short months later.. I think, instead, that regulators on the ground are either ignoring the warning signs or, because of their lack of industry experience, aren’t aware of these signs. Either way, it seems to me that federal regulators are not actually addressing problems at the earliest possible stage.”
During the second panel, bank owners expressed their frustration with overzealous regulators on the ground as well as the regulations they were enforcing. Both, they say, have led to less availability of credit and have negatively affected many local banks – forcing some to close their doors when they could have been saved. Congressman Westmoreland shared his frustration with the fact that the OCC, the FDIC, and other federal regulators could not see their solutions to assist troubled institutions – usually to have an out-of-town bank purchase the troubled bank – have not helped.
“Some of these purchasing banks don’t know the community,” stated Westmoreland. “What they know is that the quicker they flush out troubled assets – even those that are performing – they better off they are. So now we have communities that don’t have community banks. Generational wealth has been sucked out of communities and capital has dried up. Had some of these federal regulators thought to themselves, ‘I’ve been in Washington for 30 years and have never actually worked in a bank. I should be talking to these local leaders and bankers to determine what would be the best way to help them out.’ Instead, they ignored problems and enforced policies, like loss-share agreements and immediate write-down of loans, that only caused more trouble for community banks. Without these community banks – who know and understand and are invested in their community because it is their own – economic recovery has stalled and we see investment in smaller areas all but disappear.”
Since joining the House Financial Services Committee this January, Congressman Westmoreland has since become an active voice in the committee, standing up for community banks and working to end the failed policy of too big to fail, too small to save. For more information on legislation introduced by Congressman Westmoreland to study the policies and practices of the FDIC and their impact on bank failures visit http://westmoreland.house.gov/News/DocumentSingle.aspx?DocumentID=252837. Videos of the hearing will be available on Congressman Westmoreland’s YouTube channel shortly at www.youtube.com/replynnwestmoreland.