Two tell group of regulatory chill on growth
Congress needs to address a series of changes to an outdated financial regulatory system, an Arkansas congressman and a representative of the U.S. Chamber of Commerce said last week.
U.S. Rep. French Hill, a Republican from
Little Rock, and Tom Quaadman, executive vice president of the chamber’s Center for
Capital Markets Competitiveness, spoke to a group of businessmen last week on efforts to restart the country’s sluggish economy.
The country’s financial regulatory system is rooted in the New Deal of Franklin Roosevelt, Quaadman said.
“And some of [the financial regulatory system] goes back as far as the Civil War,” Quaadman said.
The National Banking Act, which started the federal regulation of banks, was passed in 1863, the same year as the Civil War Battle of Pine Bluff, Quaadman said.
Even before the financial crisis that began in 2008, the regulatory system was not keeping pace with the economy, Quaadman said.
For the eight years after the recession ended in 2009, the focus was on stability, he said.
“We forgot that you can have a stable economy without a growing economy,” Quaadman said.
Since the end of the recession, the economy has grown at an annual rate of 1.5 percent to 2 percent, the lowest growth rate of any recovery since the end of World War II, Hill said. Hill is the former chief executive officer of Delta Trust & Bank, which was sold to Simmons First National Corp. in 2014.
Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock, agreed that the economy has been growing at about 2 percent since the recession ended.
“It certainly is a disappointing performance in the economy, that we haven’t seen a period of above-trend growth to recover from the last recession,” Pakko said.
The nation’s banks hold $2 trillion in reserves, compared with an annual average of $1.7 billion in the 10 years leading up to the recession, Hill said.
“And we’re not seeing those [ reserves] gobbled
up into capital formation or business activity,” Hill said.
The few places where there is economic growth are in the country’s largest cities, what Hill called the “NFL city challenge.”
Of the 20 most successful cities since the end of the recession, all have NFL teams except for Austin, Texas, Hill said.
About 93 percent of the counties in the country have not recovered from the recession, according to the National Association of Counties, Hill said.
“I don’t feel like people in ‘flyover country’ are reaping the benefits of the economic success that we’ve had,” Hill said.
This may be the best opportunity for tax change in 30 years, he said.
“I think there is a lot of
bipartisan support for tax reform,” Hill said. “I think it will be complicated and controversial. But some form of it I think can pass.”
It’s easy to criticize that the country has old regulations “that have been piled up on one another in a way that doesn’t always make sense,” Pakko said.
“But fixing it is a tall order,” Pakko said.
In September, before the presidential election,
the U.S. Chamber of Commerce wrote an 87- page booklet about the country’s economic woes, “Restarting the Growth Engine: A Plan to Reform America’s Capital Markets.”
“I think at the end of the day the anemic economic recovery would have caused any administration, Democratic or Republican, to move forward on an agenda like this,” Quaadman said.
Recommendations the chamber is making include:
■ Creation of a presidential commission on financial regulatory restructuring.
■ Change and place the regulatory processes of the Federal Reserve and other banking regulators on par with other agencies.
■ Provide relief for small, medium and regional banks from enhanced regulations.
■ Restructure the Consumer Financial Protection Bureau into a commission and place
it under congressional oversight.
Quaadman believes some changes can be made legislatively and some through regulatory channels.
“I think a lot of what we want will be [implemented],” Quaadman said. “Of course I realize nobody gets everything they want. But we’ll see important changes made. And I think for right now that’s a tremendous amount of progress.”