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Main Street banks vs. Wall Street banks

Robert G. Wilmers, chairman and CEO of M&T Bank, penned a letter to the editor that appeared in today’s paper. He felt that a recent editorial unfairly lumped responsible Main Street banks, like M&T, in with the same irresponsible Wall Street banks that brought the country to its knees during the 2008 subprime mortgage crisis.

Wilmers

“To be sure, the handful of gigantic Wall Street banks deserve criticism for putting taxpayers and our overall financial system at great risk,” he writes. “But Main Street banks are very different. They adhere to a much safer strategy. Rather than gambling capital on uncertain investments, they utilize deposits to extend credit to local families and businesses.”

It’s not the first time he’s made his case.

He spoke in detail about the issue in M&T’s 2011 annual report, something that was lauded as a must-read:

We have reached a point at which not only do public demonstrations specifically target the financial industry but when a leading national newspaper would opine that regulation which might lower bank profits would be “a boon to the broader economy.” What’s worse is that such a view is far from entirely illogical, even if it fails to distinguish between Wall Street banks who, in my view, were central to the financial crisis and continue to distort our economy, and Main Street banks who were often victims of the crisis and are eager, under the right conditions, to extend credit to businesses that need it.

He goes on to say that “fear-driven rulemaking” meant to rein in irresponsible banks will harm community banks and the local economies they serve.

He’s not the only one who feels that way.

“Ironically, the larger ‘Wall Street’ banks will likely be more able, at least initially, to maximize opportunities for growth in strategic areas even in this new, more restrictive environment, while smaller, ‘Main Street’ focused banks may suffer under the weight of new rules and regulations, at least at the outset,” writes Amy Markham DeCesare in the New England Real Estate Journal.

  FirstNiagaraThe Wall Street Journal did a story a few months back about a small Texas bank that decided to close its doors rather than deal with tightened regulation:

 "The regulatory environment makes it very difficult to do what we do," said Thomas Depping, Main Street Bank’s chairman.

A group of U.S. Senators also outlined how tightened restrictions on Main Street banks would adversely affect Main Street businesses. They came together last year to seek an amendment to the Dodd-Frank Act that would loosen credit for Main Street businesses: 

“End-users from manufacturing to energy to farming rely on financial risk management tools like over-the-counter derivatives to conduct regular business,” said Sen. Mike Crapo, (R-Idaho) in a statement.  “This amendment provides certainty for Main Street businesses by providing American companies with a clear exemption from excessive margin requirements that without change will lead to a higher cost of doing business.”

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Banks | Regulation
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