ICBA - Publications - Say It Ain't So, Don!!

Say It Ain't So, Don!!

APRIL 30, 2004


Banker Update: Say It Ain't So, Don!!

In 1919 major league baseball suffered through a scandal from which it nearly did not recover. That was the year of the famous "Black Sox" scandal. Some of the key players on the Chicago White Sox, the most dominant team in baseball, accepted bribes to throw the World Series. One of the most talented players of his era, "shoeless Joe" Jackson was one of the players allegedly involved. After news of the bribe-taking scandal became public, a young fan ran up to the larger than life hero and uttered the now famous line, "Say it ain't so, Joe!" Shoeless Joe could only shake his head and walk away, breaking the young fan's heart.

ICBA knows how that young fan felt. Last week, Chairman Don Powell of the FDIC, a former community banker, in a prepared statement testified that he regarded the10% deposit cap as an impediment to the appropriate evolution of the banking industry. Say it ain't so, Don!

Let's look at some hard facts. The concentration of banking assets is at an historical high. Very experienced and learned senior regulatory officials are questioning whether the very largest mega banks can be adequately supervised (as recent events have so starkly shown). And the risk consequences to our nation's economy are at levels unseen in this nation's history. Now, despite these facts, our FDIC chairman publicly states that he thinks the 10% cap impedes the growth of our banking system. WHAT??? By year-end our nation will have three banks of over $1 TRILLION DOLLARS!!! Impedes? Give me a break!

In a time when serious scholars are debating whether Wal-Mart is a long term positive or negative for our nation's economy, do we really want to build a banking oligopoly? We are too close to such a system as it is.

In an era when corporate CEOs have too often lost their way due to greed and personal aggrandizement, do we have confidence that "free" market forces will act as a natural check on the banks that become "too-big-to-manage," as the chairman suggested? Recent events would say no. ICBA does not think it prudent to test the limits of too-big-to-manage in light of the systemic risk that would flow from the collapse of a multi-trillion dollar bank. ICBA strongly believes that the Riegle-Neal 10% deposit cap and state deposit caps must be maintained if we are going to have a banking system that provides choice and diversity and serves the best interests of all, consumers and businesses alike.

Our history teaches us that oligopolies breed arrogance-and arrogance breeds greed (witness Enron). Greed breeds economic disasters. That is why we have laws to prevent the formation of economic oligopolies. It took the great "trust buster" Teddy Roosevelt to break up the oligopolies of his time because he had witnessed the disasters that they created for the average citizen, small businesses and our nation's economic well being. Mr. Chairman, must we learn the hard lessons of one hundred years ago all over again? Say it ain't so, Don!

~ Cam Fine