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The separation of banking and commerce is vital
By Don A. Childears
The Rocky’s Jan. 18 editorial about banking (“Banking bill shafts consumers”) misses the logic of the federal policy of separating banking and commerce.
That policy has enjoyed strong and broad support from both political parties, multiple administrations, Fed chairmen, bank regulators, consumer advocates, industry groups and others for decades. Not having that almost unanimous policy has huge ramifications. For consumers, almost all of them are bad. The policy keeps lenders from competing and from having a conflict of interest with their own loan customers. There’s a loophole in that federal policy that regrettably would allow that conflict — hurting consumers and small businesses.
Two bills in the Colorado legislature would close the loophole. Consumers and businesses need and deserve objective credit decisions. Otherwise, a bank lending to Independent Flower Shop (thus knowing the florist’s business plan and financial status) could also compete with it by owning and operating Bankers Flower Shop. That’s unfair — it hurts the independent flower shop and consumers. The two bills will fix the loophole to block commercial ownership of banks and vice versa, thus preventing the bank-borrower conflict, protecting Colorado consumers and depositors, and promoting safety and soundness of Colorado financial institutions.
Commercial owners don’t have the same regulatory oversight, restrictions and prohibitions as all other owners of financial institutions. That’s a big deal. The Government Accountability Office has stated bank regulators don’t have the same authority to regulate the commercial owners of industrial banks as they do for all other owners of financial institutions. The two Colorado bills simply put all financial institutions on a level playing field — same rules, same requirements, same restrictions, same government exams and supervision.
Thankfully, consumers and businesses can take for granted the stability of our financial system. We’re simply protecting that position taken by practically every public official in the federal government and in all states, and practically anyone else involved in bank regulation. We disagree with the Rocky’s advocacy of allowing big-box stores and other commercial entities to freely get into banking with insufficient regulatory oversight. We don’t think it is wise to have lower regulatory standards, conflicts of interest, unfair competition with the bank’s customers, and other damaging consequences — all of which flow from this one loophole. The Rocky’s advocacy of Wal-Mart getting into this business with lower standards and other bad consequences hurts consumers and small businesses and is not well-reasoned.
Don A. Childears is the president and CEO of the Colorado Bankers Association