Today the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing on several studies recently completed by the Federal Deposit Insurance Corporation (FDIC), the FDIC Inspector General (FDIC IG), and the Government Accountability Office (GAO). The FDIC IG and GAO studies were done in compliance with legislation Congressman Westmoreland drafted and was signed into law in December 2011 (Pub. L. No. 112-88). Witnesses today included representatives from the FDIC and GAO and the FDIC IG.
"I want to thank the witnesses for testifying," stated Westmoreland. "Unfortunately these studies and their testimony today just seemed to raise more questions instead of answering those out there. Even Director Evans from the GAO said that more study was needed on the impact appraisals are having on community banks and the economy. I think these studies and today's hearing are good first steps, but we still have a lot to do in order to truly get to the root of the cause of so many community bank closures. Community banks are the economic engine of so many of our towns and cities, especially in Georgia, and when they close their doors we often see local economic investment dry up. I will continue to investigate this issue and look forward to working with my colleagues on the committee on solutions to this very serious problem."
The hearing, entitled "State of Community Banking: Is the Current Regulatory Environment Adversely Affecting Community Financial Institutions?," was held to discuss the findings from the studies. Members on both sides of the aisle expressed their serious concern with the large number of failures of community banks, and Congresswoman Carolyn Maloney (NY-14) specifically pointed out this is not just a problem in smaller towns -- urban areas are seeing their community banks closing as well, to their detriment.
"From 1984 to 2011, more than 10,000 community banks have closed their doors," stated Westmoreland. "That's a decline of 59 percent. Or to put it another way, only 40 percent of community banks survived. And what is happening to these banks? They are getting merged or consolidated with larger banks. In 1984, the four largest banks -- JP Morgan, Wells Fargo, Bank of America, and Citigroup -- held $228 billion in assets, or about 6.2 percent of total bank assets. By 2011, those same banks held $6.1 trillion in assets, or about 44.2 percent of total bank assets. That is a dramatic centralization of wealth within these four banks. After the problems caused by institutions that were "too big to fail' in 2008, we have seen first-hand what can happen if one or more of these four banks have any issues: it will put our entire economy at risk."