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Welch Wants To Lift Regulations On Community Banks

Jane Lindholm
VPR File
The First Bank of Orwell, pictured here in 2009, is a community bank that stands to benefit from Welch's proposed legislation.

Rep. Peter Welch has introduced legislation that he says will make it easier for Vermont’s community banks to offer mortgages and loans.

The legislation would exempt many smaller banks from the financial regulations that were put into place following the national financial crisis in 2008.

Welch says it’s very important for Congress to realize that there’s a big difference between the operations of large Wall Street banks and the work done by community based banks across the country.

He says he strongly supports additional federal oversight of the larger banks after they engaged in high risk activities that resulted in the great recession beginning in the summer of 2008.

"What happened on Wall Street was not caused by what was going on, on Main Street." - Rep. Peter Welch

But he argues that smaller community banks, and these are defined as institutions that have less than $10 billion in capitalization, need some relief from the regulations.

“What happened on Wall Street was not caused by what was going on, on Main Street. Yet the regulations have had an immense impact on many of our community banks,” said Welch. “They got caught up with the burden of complying with many of these regulations that made sense for the Wall Street banks but don’t make sense for our community banks and the cost is really quite substantial.”

Ken Perrine is the President of the National Bank of Middlebury. He says the federal regulations impose a strict formula to determine if a person or a business qualifies for a loan.

Credit Bob Kinzel / VPR
Speaking in the lobby at Vermont Community Bank in Montpelier, Rep. Peter Welch said community banks need relief from strict regulations.

And he says this inflexible system makes it much more difficult for his bank to loan money to local customers.

“It bogs down our closings. It really creates havoc for our customers and so we are very focused on trying to relieve some of that  burden and that red tape that is really unnecessary,” said Perrine. “We’d like to stand on our track record which has been excellent in serving our customers not only in a safe and sound way but in a consumer friendly way.”

Mark Young is the President of the First Bank of Orwell. His bank has 18 employees and he thinks they can do a better job evaluating loan applications than the federal government.

“The current proposed regulation dictate those models and algorithms on all banks,” said Young. “And if left to stand will greatly affect the availability, the cost, the conditions and the sheer complexity of obtaining a loan from anyone’s home town Main Street rural bank.

Welch is optimistic about the bill’s future because  it is co-sponsored by Oklahoma Republican James Lankford.

Welch says their bipartisan approach demonstrates that the concerns of rural America are much more important that party affiliation and he hopes that the legislation will be considered by Congress after the November election.

Bob Kinzel has been covering the Vermont Statehouse since 1981 — longer than any continuously serving member of the Legislature. With his wealth of institutional knowledge, he answers your questions on our series, "Ask Bob."
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