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Tuesday, May 7, 2013

The Impact of Dodd-Frank on Community Banks

The American Enterprise Institute (AEI) has released a paper co-authored by Tanya D. Marsh and Joseph W. Norman entitled “The Impact of Dodd-Frank on Community Banks.”

The paper concludes:
  • Although the Dodd-Frank Act was meant to avoid too-big-to-fail situations, in reality, the effect is the opposite. The act will force greater asset consolidation by increasing the competitive advantage large banks have over smaller banks.
  • The Dodd-Frank Act encourages financial product standardization, this will make it harder for community bank customers to obtain loans as product standardization undermines the relationship banking model and decreases the diversity of consumer banking options.
  • As a result, credit and banking services will be eliminated or become more expensive for small businesses, those living in rural communities, and millions of “informationally opaque” American consumers and businesses.
Read the report.

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