Where Did My Bank Go?
The June 18, 2012 Wall Street Journal has an article about the large number of small community banks putting themselves up for sale. The primary issue, according to the article, is the high cost of regulation. Jamie Dimon, CEO of JP Morgan Chase Bank, noted in his senate testimony last week that his bank probably spent about $1 billion complying with new regulations and upon questioning, intoned that small banks would have a more difficult time with the cost. Last week I booked a flight to Raleigh to visit clients, something I have done every year for the last two decades. The airfare was about $1,000. In the recent past, that airfare averaged about $400. The difference (besides $600)? American Airlines has pulled out of the non-stop route for Detroit to Raleigh Durham. From the article: “Still, the flurry of activity is likely to eliminate some small-town banks that have been in communities for decades. That could mean fewer choices for customers and, some bankers say, fewer loans because the buyers might not have deep roots in those communities.” Is all regulation bad? Of course not. But, we cannot lose sight of the flip side of regulation – the hidden cost of regulation – higher prices. Beware, consumers.
Questions and thoughts are welcome.
Robert M. Bilkie Jr., CFA