Florida Banks Hoping to Exploit Gulf Oil Spill to Dodge New Regs
Florida banks hope there's gold in that thar spill.
Citing the impact of the Gulf oil disaster on local financial institutions, the state's main banking trade group wants federal watchdogs to give them an additional year to comply with new regulatory requirements. Wrote the head of the Florida Bankers Association in a July 12 letter to Federal Reserve Chairman Ben Bernanke, FDIC chief Sheila Bair and other top industry watchdogs:
Unless we work together in giving our banks more time to work through this oil crisis, after we have been trying to get through one of the nation's worst recessions, we will have massive small business and even more bank failures causing a steep increase in unemployment not only in Florida but in the Gulf states region as well.Nice try. The spill has "has nothing to do with the fact that one in three Florida banks are problem banks," independent banking consultant Ken Thomas told me by email. True, many Florida banks are hurting -- 30 of them have failed since 2007. But it's their frenzied real estate lending (abetted by regulators, of course) that did the real damage, not Hurricane BP.Because of the oil spill crisis, people are getting cold feet in investing in our community banks in Florida, and I'm asking the regulators for a suspension on asking our bankers to go to higher levels of capital.
First, although the oil spill will indeed have a severe impact on the Florida economy, banks are supposed to be financially sound enough to withstand such shocks to the system; if they're not, I question whether they should be in business in the first place. Second, giving troubled institutions a reprieve from new regulations isn't going to save them -- the rot in Florida runs deep. But a regulatory holiday will impede recovery of the state's banking system. Third, if you shield banks in the Sunshine State, what about institutions in, say, Shreveport, La., Mobile, Ala., and other hard-hit areas?
Fortunately, the feds don't seem to be going for it. In a statement on Wednesday, the Fed, FDIC and other banking agencies said nothing about relaxing capital requirements and other regulatory standards for Florida banks. Instead, regulators said only that they will consider the "unusual circumstances" facing lenders in areas affected by the spill.
I'll reserve my sympathy for the thousands of small businesses in the region that, through no fault of their own, are suffering because of the disaster. That said, ailing Gulf area banks do have one place they can go for cash: BP.
Image from Flickr user KK+
Related:
- As Community Bank Crumbled, Bank Regulator Snored
- JPMorgan Chase Expanding in Florida
- Florida Burns Bank of America for Poor Mortgage Relief Record
- The Big Squeeze: Why Community Banks are Endangered