For more information a banking topic or to schedule an interview with someone on staff, contact Jayme Foster at foster@lba.org or 225/387-3282.

Letter to the Editor Submission 08/13/2009 »

Dear Editor,

The nation’s banks are one of the most heavily regulated, supervised and examined 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.  We all need to understand that Congress could overreact to the current difficulties in the economy and the financial distress we have all seen.  Congress should focus on the regulatory gaps in the financial system that contributed greatly to the toxic subprime mortgage lending and its tragic aftermath.  President Obama’s administration has stated that 94% of these toxic mortgages were generated outside the traditional FDIC-insured banking system.  That 94% is where Congress needs to act responsibly to assure the public this type of lending will never happen again. 

Louisiana banks and thrifts did not participate in the toxic subprime mortgage debacle.  Bankers here have stuck to sound banking practices that have served them and the state well.  Louisiana banks and thrifts on the whole are strong, safe, lending prudently and are a safe haven for insured deposits.  The FDIC has covered every penny of insured deposits and will continue to do so.  Nothing is safer than money in a FDIC-insured bank and thrift.

The Louisiana Bankers Association, made up of Louisiana banks and thrifts, believes Congress has an opportunity in the coming months to take actions that address regulatory gaps in the financial system that will protect consumers, taxpayers and the overall financial system.  We believe some of the actions Congress should take include:  support the extension of consumer protection laws currently applicable to FDIC-insured banks and thrifts to those non-FDIC insured financial firms currently exempt;  support federal supervision and regulation of currently unsupervised or under-supervised and unregulated or under-regulated financial firms;  support capital requirements based on risk for all FDIC-insured institutions and non-bank financial firms;  support entrepreneurs and existing institutions to have a choice of bank and thrifts charters, and not create a new all powerful single bank charter with a single all powerful bank regulator in Washington;  support the establishment of a regulator whose duty is to supervise and regulate very large financial firms that are deemed to be a systemic risk to the economy;  further to support the designation of a federal agency  that will have the authority, in the event one of these very large financial firms becomes insolvent or otherwise unable to continue in operation as we saw with AIG, Fannie Mae and Freddie Mac among others in 2008, to seize or place into conservatorship to resolve and liquidate the firm.  We should not have any business that possess a risk to the general economy to be perceived by the market as too big to fail.  Our economic system should reward the successful and punish the failures through the market and not through government decree.  By establishing a systemic risk regulator and a system risk resolution authority we will have the framework to avoid any future taxpayer bailout of businesses in America. 

In the last year there have been some stunning failures in the traditional banking system.  On the West Coast and Florida a number of very large institutions have failed, were taken over by the federal regulators who then sold the assets and paid the liabilities through the time tested process that has worked since the 1930’s.  No taxpayer money has been used in these traditional bank failures.  Louisiana’s banks and thrifts, who are not part of the problem, are nonetheless paying increased fees to pay for these failures, as are banks across the country.  There is plenty of blame to go around for what has happened.  But now is the time to look forward with constructive solutions that serve the interests of consumers, taxpayers and the business men and women who serve their community through their bank and thrift.

Sincerely,

Robert T. Taylor, Chief Executive Officer of Louisiana Bankers Association
Tel: (225) 387-3282
taylor@lba.org