Dodd-Frank Needs to Work for Rural America

Published on Tue, 09/29/2015 - 1:48pm

By Philip Ellis, NCBA President

In recent years the agriculture industry has been fortunate to experience record growth in agricultural commodity sales due to strong demand from domestic and foreign consumers. Increased sales have allowed many farms and ranches to pay off loans and look for new areas to expand and diversify their operations.

Growth in demand has also spurred the need to acquire the necessary land, machinery, technology, and livestock to remain competitive and realize the opportunities growth brings to family operations and the rural communities where they live. These necessary investments and potential successes though will not be possible without access to credit at reasonable rates. And that is why our rural banks and lenders are critically important.

However, there is concern in rural America that credit will only remain available as long as local financial institutions stay in business. These local institutions, many of which have been around for generations, are familiar with the risks associated with production agriculture and the people in the industry.

Unfortunately, in an effort to combat previous bad actors, Congress passed Dodd-Frank legislation with the idea that creating more laws was an adequate substitute for enforcing existing laws. There is growing apprehension that numerous new regulations being published as a result of Dodd-Frank legislation are squeezing smaller rural banks out of the market and threatening farmers and ranchers’ ability to operate their businesses.

Our smaller local banks are simply unable to afford to keep up with increased reporting and paperwork requirements from Washington that are unrelated to their purpose of lending to rural America.

Moreover, many of the factors associated with agricultural banking are difficult to quantify on paper but are based on the bank’s relationship with the community and their knowledge of the agriculture industry.

The “one-size fits all” approach under Dodd-Frank does not take into consideration the unique relationship of ag-based lending and places our industry at great risk. If small banks fall out of compliance, credit availability in rural communities will decrease as banks are consolidated into larger financial institutions.

These larger institutions may not have the desire to make credit available to customers in higher risk industries such as agriculture and may even move out of sparsely populated rural towns.

My family multi-generational ranch operation and our small ranching community are served by a small locally owned bank struggling with the demands of Dodd-Frank, and we certainly risk being personally affected by these very real concerns.

That is why NCBA is encouraging Congress to re-examine Dodd-Frank and its implementation and consider whether it is truly benefiting rural consumers who rely on these local banks for credit to operate their businesses.

The focus should be on enforcing existing laws instead of creating new rules and regulations that threaten the future of small community banks. Our community banks can compete, but they cannot afford to be burdened with red tape and regulation in an effort to prevent issues they never created.

That’s not fair to these Main Street businesses, and it’s not fair to the communities that rely on them.