The Government Accountability Office (GAO) recently released a report determining that the Office of Management and Budget (OMB), in coordination with the regulatory agencies, may not be consistently determining which rules are considered "major rules" under the Congressional Review Act (CRA), which was enacted to allow Congress to review major rules before they became effective. U.S. Senator Mike Crapo, Ranking Member of the Senate Banking Committee, says this is especially troublesome because many regulations that stem from the Dodd-Frank Act disproportionately affect small and community banks, forcing small institutions to close their doors.
"I have consistently expressed concerns that the regulators do not understand the cumulative effect of the hundreds of proposed rules pursuant to Dodd-Frank, and that there is a lack of coordination among them, both domestically and internationally," Crapo said. "The more-than 10,000 pages of regulations that have already been proposed offer confusing and often contradictory standards and regulatory proposals, making it increasingly difficult for community banks to operate and maintain business presence in many communities. Small banks, especially those in Idaho and other rural communities, are disproportionately affected and overwhelmed with regulatory burdens.
"Regulators must perform meaningful cost-benefit analysis so that we can understand how the rules in Dodd-Frank will interact with one another, affect the economy as a whole and impact our global competitiveness," he added. "The current approach to regulation is affecting our small banks at home, and is bound to harm our standing as the preeminent financial market in the world."
Data released by the Federal Deposit Insurance Corporation (FDIC) last week shows that the number of banks has sunk to the lowest level since the Great Depression. For the first time since 1934, the number of federally insured institutions nationwide has fallen below 7,000. Most of this contraction has involved small community banks, whose closures largely impact small business lending and local employment.
The GAO has recommended that OMB issue guidance to help standardize CRA processes. Current process inconsistencies could lead to differing designations under CRA, and GAO's recommendation helps ensure consistency in designating major rules.