Messages from MBT President & CEO H. Douglas Chaffin

     

    MBT President & CEO
    H. Douglas Chaffin on the
    economy and MBT.




"A Voice for More Regulation — And a Cautionary Word Against"                

The nation's banks are one of the most heavily regulated industries in the nation. Bankers comply with more than 6,000 pages of regulations intended to protect the safety and soundness of your deposits and the banking system.  To insure that we comply with these regulations, our bank is examined by two Federal agencies each year (the Federal Reserve and the FDIC), as well as the agency within the state of Michigan responsible for banking (the Office of Financial and Insurance Regulation).              

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 a large financial institution so it doesn't send shock waves throughout the economy. And we want to get away from taxpayers having to prop up an institution because someone thinks it's "too big to fail." It's also important that we close the regulatory gaps that allowed unregulated and lightly regulated businesses – like mortgage brokers -- to create the kind of problems that have devastated our economy.  Even the casual observer should recognize by now that our financial crisis was created by these large under-regulated institutions, not community banks such as Monroe Bank & Trust.               

But there is one reform the administration has put forward that will do more harm than good -- and that's the proposal for a Consumer Financial Protection Agency (CFPA).              

It's hard to argue against anything called "consumer protection." Yet when you peel back the labels, the CFPA would have the government decide what products the banks in our local communities can offer you and your business. And it would add yet another agency in Washington to send yet another set of examiners into our already over-regulated community bank.              

Traditional banks like MBT did not sell the toxic mortgages that led to the housing bust and a recession. And we're not AIG or Bear Stearns or Lehman Brothers, none of which were banks. MBT has been serving the needs of our local communities for more than 150 years.  Community banks like ours are the solution to this financial crisis because we're the ones who are still active in our local cities, towns, townships and counties; providing the financial needs of businesses and individuals.                        

Just as it would be a mistake for government to micro-manage how your physician practices medicine, it would also be a mistake to micro-manage the traditional banks that had nothing to do with creating this recession.              

We're not going to renew our economy by throwing traditional banks under the bus and holding us 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. We're the key to economic growth and job creation. Banks like Monroe Bank & Trust know our communities better than any Washington bureaucrat ever will. The notion that Washington can dictate what financial products we must offer is contrary to everything we know about good business and good government.              

There's another part of the administration's proposal that I object to and that's the idea of separating consumer rules from other banking rules. Yet that's what the administration has proposed. It quite literally puts one agency in charge of bank safety and another in charge of consumer protection. That's a recipe for chaos in the marketplace because consumer protection and the financial integrity of an institution and its products are two sides of the same coin.  

Consider, for instance, the rules that govern how long banks can hold a customer's check before making the deposited funds available. Of course, customers would like their funds available in the shortest amount of time possible. But this desire needs to be balanced with complex operational issues related to check clearing, and with the threat of fraud, which costs banks and ultimately their customers billions of dollars. It therefore makes no sense to separate consumer rules from other banking rules.              

MBT and banks like it throughout the country are intensively regulated federally insured financial institutions dedicated to serving our customers and growing our communities. We call ourselves community banks because we're part of the good things that happen here. Our local schools, human service agencies, and area events are all part of the quality of life for our area.  Much of this would not be possible without the support of Monroe Bank & Trust.  This type of support does not come from these large non-bank financial institutions.              

So as Congress rushes to pass financial reform legislation, I'm asking you to think about the consequences that some of these reforms would have. The good as well as the bad.              

And I hope you'll remember one of the lessons learned in this financial crisis. If something sounds too good to be true, it probably is.

Sincerely,

H. Douglas Chaffin

President & CEO