In tomorrow’s State Of The Union Address, take a listen for some bipartisan good news: President Trump and a bipartisan group of lawmakers are looking out for the regional and community banks that are the lifeblood for small businesses. It’s rare these days to find a bill with such strong cross-aisle appeal, but the Economic Growth, Regulatory Relief, and Consumer Protection Act, introduced by Senate Banking Committee Chair Mike Crapo, R-Idaho, has an equal number of Republican and Democratic sponsors (it’s a 12-12 split, including Sen. Angus King, I-Vt., who caucuses with Democrats).
The bill passed out of committee earlier last month. Among other changes, the bill would increase the threshold for harsher banking rules from $50 billion to $250 billion in assets and change the leverage ratios imposed on custodial banks. In plain English, that means smaller banks will be able to compete better with the big ones, and that’s good for aspiring startup founders.
Research from my former Harvard Kennedy School professor Robert Glauber showed that the Dodd-Frank financial regulatory bill likely hurt small banks. This generally happens because they don’t have an army of lawyers and accountants to comply with harsher regulatory standards. This then creates a domino effect of hurting aspiring small business owners who wouldn’t qualify for loans from bigger banks. This explains part of why we’ve seen a sharp decline in community banks serving the African-American community.
Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council (SBE), wrote a post endorsing the bill, along with other measures to help encourage healthy lending.
“SBE Council expects solid progress for advancing bills and regulatory initiatives that improve capital formation and access for startups, entrepreneurs and small businesses,”Kerrigan wrote. “Thankfully, the issue has become a very bipartisan one, which has withstood even the most partisan political periods.”