Economics of Contempt

This new meme among journalists is truly baffling:

One widely used strategy by the financial industry has been to deploy representatives of smaller high-street banks to make the case to lawmakers. Organisations such as the Independent Community Bankers of America tend to get a sympathetic hearing because they can point to members in towns and cities in almost every Congressional district, rather than purely in lower Manhattan.

Saying that Wall Street "deployed" community banks to do their bidding on Capitol Hill is beyond absurd. Community banks detest Wall Street. They'd sooner set their own branches on fire than lobby on the Street's behalf. Seriously, this is the equivalent of saying that Walmart deployed the AFL-CIO to do its bidding on the Hill.

A lot of people, especially journalists, seem to have a very romantic view of community bankers — as if they're all modern-day George Baileys or something. So when community banks come out strongly against something journalists like a great deal, like the Consumer Financial Protection Agency, it's like it doesn't compute. How could community banks be against something as obviously noble as the CFPA? (For the record, I'm for the CFPA.) So the answer they come to (entirely in their head, of course) is that Wall Street must be behind it somehow. Wall Street — which, as every good journalist knows, is pure concentrated evil — must be using community banks as a front. Of course!

Is Wall Street opposed to the CFPA? Meh. They're not enthusiastic by any means, but it's way down on their list of priorities. The CFPA will mean a lot more regulatory compliance, but banks like BofA and Chase can handle regulatory compliance issues relatively easily. The Street will happily trade their support for the CFPA for one of their bigger issues, I guarantee you.

In reality, community banks are violently opposed to the CFPA, because they'll probably have to hire a couple additional people, at least, to handle the increased regulatory compliance work. (Stimulus!) For community banks, that's a very big cost. And the truth of the matter is that community banks have far more sway on Capitol Hill than the Street. Think about it — community banks are in every Congressman's district, and they tend to have a lot of influence at the district level. They're the ones who killed the mortgage cramdown legislation, even after big banks like Citi had acquiesced. Just remember, all politics is local.