The Markets and You

The Markets and You:  Good News! From 1926 through 2015 the S&P 500 Index posted an average annual total return of 10.02%.

“Dodd-Frank” Bill and Consequences for the Consumer:  The Act was signed into law in July of 2010 and has been criticized regularly since then.  Theoretically designed to create greater transparency, accountability, and protection for the taxpayer, it is seen by many as doing no such thing. Listening to a speech outlining negative consequences of the law to the consumers I heard the following*:

1.) Before the law was enacted, 75% of banks offered free checking. By 2015, the number had dropped to 37%.

2.) There is a 21% increase in checking account fees and the mandatory account balance to qualify for “free checking” has increased.

3.) There are 15% fewer credit card accounts and account fees have increased by 200 basis points (2%) on average.

4.)  The Federal Reserve estimates when the new law is fully phased in that 1/3rd of Spanish and Black families applying for new mortgage loans will be hurt by the debt to income ratio increase, and one out of five who were able to borrow in 2010 will be denied.

5.) The cost to run a community bank has increased and those costs impact small businesses whose costs have risen by 10%.  There is a direct impact upon the community.

6.) In Missouri, 26 of 44 “small” banks with capital of $50 million or less lost money in the previous year due to increased regulatory costs.  They may be forced to go out of business or merge with bigger banks.

Because we run a small business and are regulated by the government, we can confirm that our costs have increased…significantly!   We wish we could say that it is for the good of the customer, but benefits are hard to identify.  On the personal side, the loan on the office building came due as it does every five years.  Previously, it was easy to renew.  The bank knows exactly how much money I have and I have never missed a payment, but this year it took five months to renew the note and undocumented hours of my time providing information. Finally the note was renewed at a slightly lower rate.  I wonder what the costs to the bank and me actually were.  Of course, these amazing costs come out of the already measly return the depositor is earning on his deposits.  We provide this information as an example of the exponential increase in regulations which we believe is hurting our economy.



Louise Googins


*Quotes from a speech by Congressman Blaine Luetkemeyer at the Financial Regulations Seminar in June.