Two tell group of reg­u­la­tory chill on growth

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - DAVID SMITH

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.”

Hill

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