It’s easy to drive through Missouri and never think about the number of banks you pass by as you go  from one community to the next. In fact, most Missourians don’t realize that Missouri boasts the fourth highest number of state-chartered banking institutions in the country and has more than 200 banks  doing business in the state. That includes community banks as far north as Kahoka and as far south as  West Plains. 

Ask any banker in any of these banks throughout Missouri what they do every day, and they will tell you  the same thing — they meet their customers’ financial needs by turning local deposits into local lending.  That is how banking works in Missouri, the Midwest and the United States. Banking is the engine that  powers local economies, and deposits are the fuel for those engines. Deposits from local customers  support loans for farmers, small businesses, entrepreneurs and homeowners. When local deposits are  removed from a community bank, the impact is not just felt by the bank; it is felt by those who rely on  that bank for credit. 

That is why the banking industry has asked Congress for two small but important changes to a more than  600-page bill called the CLARITY Act. This legislation is intended to finalize the regulatory framework for  stablecoin entities and exchanges operating in the United States. Stablecoins are an innovative payment  mechanism that places transactions on a blockchain. To be clear, the banking industry fully supports  financial innovation. However, there is a loophole in the current version of the CLARITY Act that would  allow third parties to lure deposits out of local financial institutions and into stablecoin operations. By  law, the dollars that move into those stablecoins cannot be used for lending.  

That is a major problem for Missouri. Every dollar that moves from a deposit account into a stablecoin  reserve account is a dollar removed from local lending, no matter where you hold that account.  Estimates from the Federal Reserve and the U.S. Treasury show that deposit flight to stablecoin  companies could reduce consumer, small business and agricultural lending by one-fifth or more. In  Missouri alone, that would mean a reduction in lending by more than $8 billion. 

The local school, farming operations, the downtown diner, the local church — they will all feel the credit  crunch if deposits start moving from Main Street Missouri to Silicon Valley. The changes to the CLARITY  Act that banks have advocated for amount to less than 30 words in the bill, and yet the crypto industry  has repeatedly claimed banks are trying to derail the CLARITY Act. The truth is far simpler. Banks fully  support the passage of this legislation, but we have consistently asked for language in it that will ensure  local lending is protected. 

Sen. Josh Hawley recently expressed serious concern over the CLARITY Act, becoming the first  Republican senator to publicly step forward on the need to protect local lending. He referenced the  importance of protecting community banks and the customers they serve, especially in rural Missouri.  We appreciate Hawley’s support, but perhaps most importantly, we appreciate his recognition that this is  not “just a banking issue.” It is an issue that brings together groups representing agricultural producers,  small businesses and everyday consumers.  

Banks are the heartbeat of Missouri communities, turning deposits into local loans that generate Main  Street economic activity, a process far removed from big tech companies on the coasts. We are proud of  the number of banks we have in Missouri that serve communities large and small. Congress must keep  our communities strong by fixing the CLARITY Act loopholes and protecting local lending. 

Discover more from The Missouri Times

Subscribe to get the latest posts sent to your email.