Ask Jimmy Didden, president of $340 million-asset National Capital Bank, who he blames for the financial crisis, and he won't mention big banks or subprime lenders. Instead, he literally points to Congress.
At his office on Pennsylvania Avenue, three blocks away from the U.S. Capitol building, Didden says that the problem, as far as he's concerned, is "very simply that the federal government got involved in dictating credit standards and encouraging lower credit standards."
But ask for his assessments of the regulatory consequences stemming from the crisis, and Didden, a banker for more than four decades, gets noticeably more diplomatic. "It's hard to say something bad about the regulators. But the bank examiners are getting more and more aggressive and wield much more influence on how we manage our day to day."
So goes the task of managing a complex juxtaposition for a simple institution, a community bank whose community consists of lawmakers and regulators. Didden has strong opinions about the federal government but also wants to stay civil with a bureaucracy that employs, directly or indirectly, a majority of National Capital's customers.
National Capital was founded in 1889 by a group of beer brewers in the Capitol Hill neighborhood of Washington, who wanted a place closer to home to do their banking. The bank has always been family owned, and a Didden has been at the helm since 1943. (Jimmy's younger brother Richard Didden is CEO, the third Didden to hold the post.)
The bank came out virtually unscathed from the financial crisis of 2008, and 2010 was a record year for earnings. Real estate lending is the core business of National Capital. The bank does not sell any of its loans, and as of the end of the second quarter of 2011, it didn't have a single past-due loan, based on the most recent data available from the Federal Deposit Insurance Corp.
Didden credits National Capital's success to its nimble size and experienced employee base. "Because we are a small institution, we get to know our customers," he says, noting that the average employee tenure is 20 years.
It's a standard line for community bankers trying to explain why their model is solid. But Didden doesn't have the standard line when it comes to arguing that big banks are worse. Didden believes there is a place for big banks to serve large businesses (National Capital's lending limit is a modest $6 million) and to offer more complex financial products. And he sounds an almost sympathetic note when describing the aggressive lenders who fueled the crisis. "If you are a mortgage broker and you make a living based on how many loans you qualify people for, why wouldn't you make as many loans as you could if the federal government was on the other end willing to take the credit risk and buy them?" he asks.
Didden doesn't believe that more intense regulation of the big banks will make the banking system or the economy any stronger. While his bank is benefiting from the public backlash against big institutions—National Capital welcomed several new customers who left Bank of America after the announcement of a $5 monthly debit card fee that was later scrapped—Didden overall sees little to love about the Dodd-Frank Act, which forced National Capital to add a third compliance officer to a total staff of 55.
Discussing what it would take to get the banking system and the economy back on track, Didden once again gestures to his neighbors at the Capitol, but this time it's an open palm instead of a pointed finger. "The federal government has to get its nose out of private industry—out of the business cycle, out of the interest rate cycle—and let the free market dictate," he says. "Supply and demand will take over from there and resolve everything."
