Independent’s Day is a weekly opinion column by published on Wednesdays. The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.
The “Dodo bird” has become an international symbol for all that was but never will be again. It left us sometime in the 17th century and if we are not careful, small banks may leave us early in the 21st century.
Today, the Washington Business Journal reported that Arlington-based Virginia Commerce Bank (VCB) has been sold to Charleston, W.Va.-based United Bankshares. At about $3 billion in assets, VCB is tiny. Compared to the largest banks – like JP Morgan Chase & Co. with over $2 trillion in assets — it is infinitesimal. So why does it matter? It matters because the small banks have done the majority of the business lending in our communities for a very long time. As banks consolidate, some of that power of personal, relationship lending disappears.
Just recently First Virginia Community Bank acquired Arlington’s First Commonwealth Bank of Virginia. Small local banks like John Marshall Bank, headquartered in Falls Church, and Burke & Herbert, based in Alexandria, need to be preserved somehow. We need to preserve them because what’s bad for small banks is bad for small business, and what’s bad for small business is bad for our local economy.
Last year I had an opportunity to talk with one of the GM’s of our many pizzerias in the Clarendon/Courthouse corridor. He shared with me how helpful it’s been to have a relationship with John Marshall Bank, and we know he’s fed thousands of our neighbors with that help (including me)!
Private merchant banks helped build the family farm and gave birth to the industrial revolution of the 19th century. Local bank relationships financed the business-startups-turned-Fortune-500s of the 20th century. We celebrate the “relationship bank” every year with the holiday classic, “It’s a Wonderful Life.” Do we root for Mr. Potter or George Bailey and the neighbors of Bedford Falls? Few of us live in small towns but many of us still have relationships with small banks. They finance our education, new businesses, cars and homes. Credit unions are great examples of relationship banks.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was passed to stop big banks from doing bad things — like failing. Unfortunately, what it’s been better at is stopping small banks from doing good things — like lending.
On September 13th of 2012, the Government Accountability Office completed an 88 page report on the impact of Dodd-Frank implementation on community banks and credit unions. Their 2013 report came out just last week and identified that 52% of the rules for nearly 236 of those laws were still unclear with some governing rules not even proposed. Smaller community banks and credit unions are unequally impacted by the unclear cloud of the new rules because they don’t have the infrastructure — i.e. lots of lawyers and accountants — to muddle through them all.
We can support small banks by banking with small banks and also by dipping into the nuance of news around the Dodd-Frank Act. It is about 2,000 pages long so none of us are likely to read it but we can help fix it. The GAO gives us a great primer on what needs to be clarified and our federal representatives could be encouraged to consider revisions if they thought we were paying attention. We are. We have to because we can’t get let local banks go the way of the Dodo bird.
And we like our pizza here in Arlington.
Jason Howell, a financial advisor and former motivational speaker, ran as an independent candidate for U.S. Congress in 2012.