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Bair, Bankers Clash Over Dodd-Frank Regs

Posted on 3/17/2011

The biggest long-term threat to the banking industry would be its failure to support the reforms needed to ensure the long-term stability of financial markets and the economy, FDIC Chairman Sheila Bair told bankers during a contentious session yesterday at the ABA Government Relations Summit.

"As this historical era unfolds, public opinion as to the role played by the banking industry seems unlikely to be neutral," Bair said. "It is far more likely that banks will come to be viewed either as a group that supported the restoration of free enterprise and public responsibility in the American economy, or as a group that mainly looked out for its own short-term interests and resisted reforms that could have restored a sense of confidence and fairness in our financial markets."

The conference atmosphere became strained during the question-and-answer period when several community bankers told Bair that Dodd-Frank regulations are hurting their operations, and others objected to the FDIC's recently released guidance on overdraft protection programs. "You made the comment that you believe these new regulations will benefit those of us who are responsible in the way we run our businesses ... . It will not do that. ... The only thing that the new regulations are doing for us are increasing our costs," said Michael Seaver, president of People's United Bank, Burlington, Vt.

Bair insisted that "Dodd-Frank is almost completely targeted at large financial institutions," and the audience groaned loudly. "We are taking all of our attention away from providing banking services to our communities and our customers so that we can train employees over and over again about new regulations," Seaver explained. Read Bair's speech.

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