In the dozen or so years that I've been covering the banking industry, I've heard countless community bankers complain about excessive regulatory burden. One unforgettable moment came at a convention of the Independent Community Bankers Association, when hundreds of bankers climbed up on their chairs and interrupted a speech by then-FDIC Chairman Don Powell with chants of "We're mad as hell and we're not going to take it anymore."

Still, for many years the protests rang hollow because banks were making so much money. It's difficult to convince even a Republican-controlled Congress-and cynical journalists-that regulation is too burdensome when your bank is posting record earnings quarter after quarter and shares are trading at 2.5 times book value.

But those days might be gone for good. With spending and borrowing habits changing in the wake of the worst economic collapse since the Great Depression, many experts believe that banks are in for a prolonged period of flat or very low earnings growth. Factor in all the new regulations associated with the Dodd-Frank Act, and compliance costs that come with them, and it's hard to foresee banks returning to the days of 15-percent average ROEs anytime soon.

A big concern for regulators should be the impact all these new rules will have on consumer lending. Already, even the smallest consumer loan requires almost as much documentation as a $250,000 business loan, and it's only going to get worse under Dodd-Frank.

Some bankers I met with recently said that many consumer loans now involve so much paperwork that they are not worth the loan officer's time. One noted that a borrower approved for a simple $1,000 consumer loan has to wade through 29 pages of legal mumbo jumbo before the bank will cut a check.

What's particularly frustrating to bankers like McCall Wilson, the chief executive of the Bank of Fayette County in Moscow, Tenn., is that regulators want banks to offer more consumer loans but continue to make it harder to do so. Wilson's bank makes roughly 200 small consumer loans a month and "pretty much loses money on every deal" because of all the time it takes to pull credit reports, make copies of borrowers' IDs and go over all the fair lending disclosures. "What should be a five minute transaction takes 30 minutes," he says.

Wilson says that if regulators are really serious about encouraging banks to make these loans then they would make the process simpler. His suggestion: a one-page application for all loans under a certain threshold, to be determined by the regulators. Then more loan officers would be willing to make the loans because they wouldn't be so time-consuming. And borrowers who typically use payday lenders might instead turn to banks, where they are likely to get better rates and can spread repayment out over longer periods of time.

"Consumers want these loans, and banks want to make them, but we just need some help," Wilson says. "It's all about common sense."

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