REVOLT OF THE BANKS

Healthy banks are revolting?  Yes, & with good reason!  Regional branch banks & community banks are rebelling against added FDIC costs, curbs on pay and business practices imposed on recipients of TARP capital after public outrage over bonuses and perks at the biggest lenders. 

I fault the News Media for not differentiating healthy banks from big unhealthy banks, causing a TARP stigma that has decimated stock prices of healthy banks & brought pressure to cut dividends, pay and perks. Healthy banks are applying to return TARP funds & urging Congress to change FDIC assessments so formulas are weighted by bank size to shift the cost burden to the largest banks that caused this train wreck.

Why should healthy banks have to help clean up the mess made by Wall Street banks?  8300 regional branch banks and community banks did NOT "securitize" collateral nor indulge in other unscrupulous behavior like hire fly-by-night mortgage loan originators.  These healthy banks adhered to high standards, maintaining healthy balance sheets & capital reserves. 

Adding insult to injury, the 8,300 banks also face increased FDIC fees plus an "emergency charge" to raise $27 billion this year to replenish FDIC's funding accounts. The FDIC took over 25 banks in 2008 & another 16 banks this year, most with less than $1 billion in assets.  Independent Community Bankers of America, representing 5,000 locally-owned community banks, expects that even half the proposed "emergency" charge means a 10-20% drop in 2009 earnings.

I wholeheartedly agree with Paul Volcker, former Chair of the Federal Reserve (1979-1987), who has recommended separating commercial banks from investment banks & insurance companies.

Congress should reinstate holding company provisions in the Glass-Steagall Act of 1933 that were repealed by the Gramm-Leach-Bliley Act of 1999.  Obviously such provisions are needed to maintain scrupulous oversight of our banking system.