Sunday’s Democratic presidential debate presents an excellent opportunity to ask the candidates to elaborate on their financial policy positions. While these topics have surfaced on the margins of the Republican presidential race, they have been more prominent, and more contentious, in the Democratic race. Below are four key questions that each candidate ought to answer.
What steps will you take to reduce compliance costs for the smaller lenders that disproportionately fund new, small businesses?
Context: There’s substantial evidence that regulatory costs are increasingly impacting small-business lending. A study from Harvard Business School titled “Why Small Business Lending Is Not Recovering,” found that “the most compelling cyclical factor tightening the loan spigot is the concern that increased regulatory requirements may be hurting small-business lending.”
More evidence that small banks are suffering from excessive regulation comes from a recent poll in American Banker magazine, in which 50 percent of respondents said “compliance costs” were the top reason for the dearth of new banks. If community banking is a thriving industry, why doesn’t anyone want to enter it? There is substantial evidence that the tepid nature of our economic recovery is attributable to the difficulty small companies are having in obtaining financing. In other words, the small banks they use are having a tough time.
In your view, is the recent increase in checking-account costs, most notably in the form of higher ATM fees and fewer free-checking accounts, 1) occurring in part due to the Dodd-Frank Act, and 2) most harmful to lower-income Americans?
Context: Senator Sanders recently called for price-fixing in ATM fees, limiting them to $2 per withdrawal. While many people have a right to be upset about rising ATM fees, Senator Sanders is not one of them. It’s ironic that Sen. Sanders is calling for government price-fixing in response to a problem caused in part by government price-fixing. Like Gov. O’Malley and Sec. Clinton, Sen. Sanders supports 2010’s Dodd-Frank Act, including the Act’s Durbin Amendment that benefited retailers by limiting debit-card fees for many banks. Banks responded to the loss in debit-card revenue in a predictable manner, increasing charges for checking accounts, ATM usage and other services. Banks subject to the Durbin Amendment doubled monthly fees for checking accounts, while the number of banks offering free checking accounts fell by 50 percent.
What do higher ATM fees and rising checking-account fees have in common? Both trends were accelerated by Dodd-Frank, and both hit the poor and middle-class much harder than they do the wealthy. If you’re looking for evidence that Dodd-Frank hurt the little guy the most, banking fees are a good place to start.
Do you pledge to allow the growing financial-technology (“FinTech”) industry to thrive unencumbered by excessive regulation?
Context: FinTech is en vogue. As in many other industries (taxis, hotels, etc.), new companies are disrupting the traditional ways Americans invest, borrow and lend money, send cash, make payments and fund startups. If the government can manage not to excessively interfere, this disruption should benefit consumers and businesses, providing alternatives to traditional financial services. Many in the industry have voiced concern that the government will over-regulate these new firms. It’s also easy to foresee a taxis-vs.-Uber confrontation in which incumbent, over-regulated industries ask governments to handcuff their new competition. The ideal government policy promotes robust competition, neither handicapping traditional players nor carrying water for them.
Given that immigrants start new businesses at much higher rates than other Americans, often using bank loans to do so, has Dodd-Frank helped or hindered this aspect of the American Dream?
Context: Anything that hinders new-business starts disproportionately hurts immigrants. According to the Kaufman Foundation, immigrants were almost twice as likely to start businesses compared to native-born Americans, and accounted for over 28 percent of new entrepreneurs in 2014. Over-regulation hinders access to capital, and thus slows new business formation. America only works when newcomers have a fair shot at success. Continued success requires urgent regulatory reform to arrest the recent decline in entrepreneurship.
Kyle Hauptman is executive director of Main Street Growth Project, a non-partisan financial-policy advocacy group. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
