By Dan Shaul
As the state director for the Missouri Grocers Association, I work closely with our 1,300+ members – retailers, vendors, manufacturers, and wholesalers, both mid-sized and small – to address to concerns hampering their businesses and ensure their livelihood. In Missouri, grocery stores play an important role in the economy; independent grocery stores, for example, support 25,700 jobs and more than $702 million in wages, in addition to contributing nearly $300 million in state and local tax revenue.
In communities where large grocers don’t have a presence, independent grocery stores fill the gap. People in rural areas need access to grocery stores just as much as the next person and no Main Street is complete without a grocer. Yet, these independent grocery stores can’t exist without support from banks that offer them access to capital. Most often, grocers look to regional banks for commercial lending; these banks have the scale to meet a business’ funding needs, as well as the local ties that place their emphasis on Main Street loans.
Since 2010, when the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, regional banks, including those with a presence in Missouri like US Bank, Regions, and BMO, have faced restrictions on their lending. This is because the resulting burdensome regulations mandated by Dodd-Frank forced banks to allocate more of their internal resources towards compliance rather than traditional financial services, like lending.
Dodd-Frank was meant to prevent another recession like the one following the 2007-2008 financial crisis, however it does so by regulating financial institutions based on an arbitrary threshold of $50 billion – designating banks over this threshold as Systemically Important Financial Institutions or “SIFIs.” In the nearly eight years following Dodd-Frank’s implementation, it’s become clear that the $50 billion isn’t the best way to measure which banks are actually risky, especially given its harmful impact on lending. In fact, at the end of October, the Office of Financial Research (OFR) examined the current SIFI designation process and concluded “a multifactor approach… — one focused on systemic importance — would be an improvement on the asset-size thresholds now used.”
Recognizing the negative effects of ill-fitting regulations stemming from Dodd-Frank, Missouri Senator McCaskill, as well as Representative Luetkemeyer, introduced The Systemic Risk Designation Improvement Act (S. 1893/H.R. 3312), a bipartisan bill that would mandate a multi-factor approach to risk evaluation to replace the single factor, $50 billion threshold. As the OFR report notes, using more than one factor allows for each individual bank to be assessed more accurately and not solely based on the size of their assets. This amendment to Dodd-Frank regulations is far overdue. The regional banks that have been harmed by the current regulatory environment are not the banks that caused the recession and therefore shouldn’t be regulated in the same manner as the large, complex banks that were, like JPMorgan Chase.
Tuning regulation to appropriate levels is not only the right thing to do, but will more importantly free regional banks from regulations that don’t fit and allow them to offer lending to small business owners and entrepreneurs. With capital more accessible, small and medium-sized businesses, including grocers, will grow and, in turn, offer greater contributions to our state and national economy. It’s time Congress takes action and moves S. 1893/H.R. 3312 forward into law.
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Dan Shaul is a State Representative and the State Director of the Missouri Grocers Association