July 28, 2009

Small banks gain political clout

Small U.S. banks are finding their political power growing in Washington as the debate heats up on regulatory reform, Rep. Barney Frank, D-Mass., says.

As the debate grows on President Barack Obama's proposal to form a federal agency to oversee consumer financial products, such as mortgage loans and credit cards, Frank, the chairman of the House Financial Services Committee, said large financial firms are radioactive.

The only way big banks can win, in their stand against a new regulator, is if they get the community banks to be their troops, Frank said Monday.

Community banks may be reluctant, in general, to align themselves with the large firms that are blamed for much of the financial crisis, The Washington Post reported Tuesday. But many have come out against a Consumer Financial Products Agency, which they see as punishment for the behavior of big banks.

We're really getting punished for the sins of a lot of our big bank brethren, said Chris Williston, president of the Independent Bankers Association of Texas.