It's a Wonderful Lie: Main Street Banks Are Angels

Good ol' Bailey Savings & Loan. You know, your kindly community banker, lender to the little guy and all-around good neighbor. It's enough to make a fella want to take his money out of that den of iniquity on Wall Street and put it into the tiny vault of virtue down the lane.

Why, just look at how hard Camden Fine, head of the Independent Community Bankers of America, is fighting for the proposed Consumer Financial Protection Agency. In a recent blog post, he wrote:

Well, these days it seems that there's a damn lie going around about ICBA supporting the Consumer Financial Protection Agency. And to paraphrase Mark Twain, that lie has traveled halfway round the world while the truth is putting on its shoes.

Whether in Washington, D.C., or in Missouri, or anywhere else for that matter, such damn lies are fighting words. The truth is this -- ICBA has never supported the creation of a CFPA over the community banking industry or any FDIC-insured banks for that matter. And anyone who says different is telling a damn lie [boldface and underline his].

Just to make sure we get the point, the ICBA responded yesterday to Sen. Chris Dodd's new financial reform bill by rejecting the idea of making the CFPA independent, as opposed to a spindly limb of one of the existing bank regulators. In a statement, the group expressed "concerns that the new bureau would not report to the Federal Reserve Board."

And thank goodness for that. Because if anyone's got consumers' backs, it's the FRB. It says so right in their mission statement. OK, technically that doesn't say anything about, say, the dangers of "liar loans" and interest-only ARMs.

Still, the Fed did yeoman's work in the years preceding the housing bust. Remember the 1994 Home Ownership and Equity Protection Act, which the FRB was charged with enforcing? Hell of a law -- barred all sorts of shady subprime lending schemes. Perfect, really, because until early 2007 the Federal Reserve also supervised banks like Countrywide Home Loans, which once had a bang-up subprime business.

So if the U.S. government is all gung-ho for the CFPA, you can see why small banks would want to shackle it to a staunch consumer advocate like the Fed.

Sure, there are a few skeptics out there who wonder what these erstwhile George Baileys are thinking.

"If small banks are as strongly against predatory lending as the ICBA contends, why shouldn't they support the creation of an independent consumer financial protection agency?" asks Ken Thomas, a banking consultant and longtime observer of the financial scene.

But hey, as Twain said, if I knew the answer to that I'd be a very rich dude. One theory, and I know it may be a stretch, is that small banks have no more interest in wrestling with consumer watchdogs than big banks do. Bad for business, you see.

Besides, what really matters is that small banks aren't ever mistaken for some blood-sucking vampire squid. Take the ICBA's position on allowing the courts to force lenders to ease mortgage payments for homeowners facing foreclosure, as outlined in the group's Priorities for 2009: "ICBA opposes legislation that would allow bankruptcy judges to re-write mortgage contracts for primary residences in Chapter 13 bankruptcy cases."

Now the odd coincidence here is that your average pin-striped vampire squid could've inked that very same sentence. But that's life on Main Street for you. Oops, Wall Street, I mean!

Speaking of, Fine is one guy who understands that when it comes to standing up for just plain folks, geography matters. He said in his post:

When I came to Washington from Missouri, I found out the hard way that nothing is what it seems. Damn lies are everywhere.

Photo: Flickr, Americans4FinancialReform