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FDIC Federal Register Citations

First City Bank

I oppose permitting banks to import their own state's laws into other states in which they do business for the following three reasons.

First, permitting importation of state laws benefits multi-state community banks to the detriment of local community banks.  Although allowing banks to import laws theoretically should help to equalize the power between multi-state banks and national banks, this equalization would not result on the ground.  The banking market is in fact bifurcated into two segments – small and mid-sized community banks and large banks.  The multi-state banks that would benefit by the importation law are a part of the former segment, and thus compete with like-sized and smaller community banks more directly than with large banks.  Within the community banking segment, this law would put community banks at a distinct competitive disadvantage.  Although local community banks would still be required to follow their state’s law, their interstate competitors could opt to be governed by less restrictive and less costly laws.  This law would erode the protection community banks need in order to compete on equal footing with other small to mid-size banks that happen to have branches in multiple states.

Second, states need to be able to set their own laws to meet the situations specific to their state.  For example, if abuses of sub-prime lending are excessive in a particular state, that state needs to be able to control this area with appropriate restrictive policies.  Another state that has no problem with sub-prime lending abuse should be entitled to have more permissive regulations governing their states activities, and to instead focus it’s regulatory energy on it’s own local problems.  As a point of comparison, imagine the activity is speed limits instead of banking.  If a western state has a 80 MPH speed limit, should drivers registered in that Western state visiting Washington, D.C. be entitled to drive at 80 MPH surrounded on the freeway by other cars traveling 65 MPH?  Ultimately, if a state’s laws could be imported and affect activity outside of the state’s borders, the burden will fall on responsible state lawmakers who will be forced to legislate with the foresight of not only solving their own state’s issues but also anticipating the policy repercussions throughout the country.

Third, in today’s world, companies are trying to be more successful by becoming larger and larger instead of focusing their efforts on doing a better job.  The banks advocating this legislative change want to compete in ever-growing markets by crafting specialized laws advantageous to themselves.  Our communities benefit both from having a diversity of small and individual businesses in compliment to the massive ones.  The system needs to protect local players that prioritize knowing their markets and customers, and that serve the specific communities where they are located.  Banks have traditionally been among the largest charitable donors in their communities.  As banks grow larger and merge, however, in search for more and more profits, the communities that built these banks are neglected.  Non-local banks lack a personal connection to their communities but I believe it is the responsibility of banks to serve their communities by giving them more than fair lending policies.  Most local banks realize this, and are involved in numerous ways to support their communities and the people in them.

Doug Simson
President, First City Bank


Last Updated 05/12/2005

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