Wall Street Journal: Capito Talks To Wall Street Journal About How Proposed Legislation Could Impact Community Banks

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Wall Street Journal: Capito Talks To Wall Street Journal About How Proposed Legislation Could Impact Community Banks

The fate of a central plank in President Barack Obama's financial-regulation overhaul -- an agency to regulate consumer financial products -- is increasingly in the hands of the nation's small-town bankers....

...Community bankers say they support regulation for nonbank financial institutions that have avoided government supervision. But they don't want to be subjected to a new layer of regulation, especially since they were largely uninvolved in the lax lending standards that led to the financial crisis....

In the office of Rep. Shelley Moore Capito, a West Virginia Republican, Eddie Canterbury, president of Logan Bank & Trust, made his pitch. He told Ms. Capito the new agency was trying to solve a problem his bank didn't have, seeing as he keeps every loan he makes and has had just two foreclosures during the downturn.

"We don't feel that we should get painted with the same brush as everybody else because we didn't create the problem," he said. "If you penalize the big banks, you're going to penalize us, too."

Community banks worry about the costs of a new agency and new regulations that might limit their flexibility to work with customers. They also fear a new agency focused on consumer products could conflict with their primary regulator.

Ms. Capito has been pressing the points with Treasury officials. "I know a lot of the people who work at these banks," she said. "It always helps when they have someone from their own backyard. In some ways I'm their bigger voice."

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