We have said that The New York Times often provides the best rural coverage of any national news organization, because it has the staff and the editorial interest required to do the coverage. But sometimes the paper misses by a mile. That seems to be what happened with today's business-page story pegged to Senate Republican Leader Mitch McConnell's comment that the financial-regulation bill about to pass Congress "punishes Main Street for the sins of Wall Street."
Reporter David Herszenhorn came to Main Street in McConnell's hometown of Louisville, and concluded that in Kentucky's largest city, "Main Street seems to be an extension of Wall Street" because national and international financial institutions have offices there and a new, publicly owned arena on the street is "financed through a bond deal underwritten by Goldman Sachs." But what about the housing-loan debacle that prompted the reform bill? Herszenhorn writes, "Main Street seems less an innocent victim of Wall Street in the financial crisis of 2008 than a savvy counterparty, whose own dealings contributed to the days of easy credit and overinflated real estate prices that led to the collapse."
"How did he come to that conclusion?" small-town Kentucky columnist Don McNay asks on The Huffington Post. "Sounds like he wrote it on the plane before he got here."
The 1,245-word story devotes all of two paragraphs to the real contrast McConnell was talking about, between Wall Street banks that precipitated the debacle and community banks in smaller towns that played little if any role but seem likely to bear a disproportionate burden from the bill. “Congress is painting them both with the same brush,” Ballard Cassady, president of the Kentucky Bankers Association, told Herszenhorn. “Being a community bank is more a state of mind than size. Even the largest of banks in the state of Kentucky are community-minded.”
Cassady said he told the Times some other things that didn't make the paper: "Banks in Kentucky didn't fall for" the idea of making home loans with 10 percent or nothing down; most of the bad loans were made by largely unregulated entities, such as mortgage companies; and the "most costly" feature of the reform bill will be the new Consumer Financial Protection Bureau, which will require more recordkeeping, a greater burden for small banks. He also said all loan instruments will be subject to approval by the agency, making it more difficult for community banks to tailor loan arrangements with borrowers in specialized industries.
Writing for The Atlantic, former banker Daniel Indiviglio says, "There are a number of provisions that would hurt community banks due to their costs increasing disproportionally to those at larger institutions." He quotes Steve Wilson, Chairman and CEO of LCNB National Bank in Lebanon, Ohio: "It's amazing how they've called this the Wall Street rein in act, and yet the overall bill is more targeted towards additional regulatory burdens -- additional regulations on the Main Street banks. We have identified, within the bill proposed in the Senate now, we have identified 27 new regulatory burdens that come to us."
Federal regulation has often made allowances for smaller entities, including banking, but Cassady said Congress appears to be accepting the argument of Harvard Law School professor Elizabeth Warren, who said that creating such provisions for smaller entities would encourage large banks to circumvent the regulation by creating subsidiaries.
We encourage rural journalists to talk to their local bankers about financial reform, and to seek out the perspectives of others who may see its benefits. For example, in the Charlotte Business Journal, Adam O'Daniel says Thad Woodard, president of the North Carolina Bankers Association, "compares pending financial-services reforms to a pendulum swinging toward an extreme point before returning to its equilibrium. But while he believes reforms will ultimately be good for the industry, Woodard and North Carolina’s community bankers are fearful of the unknowns they say could harm small lenders in the meantime." (Read more)
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