New regulations killing small banks, making “too big to fail” banks even bigger

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Despite what we have been told our entire lives, big business often loves regulation.

Regulation is a great way to shut out the smaller competition. If one is JP Morgan, or Wells Fargo, or Citibank, one has the money to deal with new rules (often written with the help of big bank lobbyists) coming down out of Washington DC. The small banks, the community banks, are however crushed.

Once crushed, the assets at the community banks migrate to the TBTF banks.

(From The LA Times)

Gary Findley, an Anaheim-based consultant to small banks, attributed the difference mainly to the cost of compliance with regulations. He said the gap is especially great between banks with less than $500 million in assets — the smaller community banks — and those with assets of more than $1 billion. Major banks, he said, can better absorb the costs on their bigger balance sheets.

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