Source:
Wall Street JournalPoliticians are putting pressure on regulators to ease up on small community banks across the U.S., a move some say could increase the cost of cleaning up the financial crisis.
Last week, House Financial Services Committee Chairman Barney Frank (D., Mass.) sent a letter to the country's top bank regulators, including Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair, urging them to "show some temperance in their regulation of traditional banks." One common complaint from lawmakers is that regulators' tough examinations are making banks reluctant to lend.
"A self-fulfilling prophecy of community bank failures, shrinking credit availability and a slower economic recovery can all result from a regulatory overreaction to the current crisis," said the letter, which also was signed by Rep. Walt Minnick (D., Idaho).
Federal bank regulators have hit hundreds of banks with formal and informal sanctions this year, ordering them to boost capital requirements -- reserves set aside to cover possible losses -- and sometimes to shake up management. Regulators have closed 115 banks since January, and bankers across the country are complaining examiners are criticizing the health of even the strongest banks.
Mr. Frank said in an interview he was trying to address an important public-policy issue in the letter and not exert pressure on regulators. He said he wasn't second-guessing how regulators should address specific banks or specific loans.
Read more:
http://finance.yahoo.com/banking-budgeting/article/108097/bank-crackdown-draws-criticism