BankThink

I Challenge TAG with Small Banks' Interests at Heart

I am sad to see Cam Fine of the Independent Community Bankers of America resort personal attacks on me and my firm in response to my comment, "TAG Actually Gives Big Banks the Advantage." I can imagine that my comment stung a bit, but Cam and all of the people at ICBA know that I am one of the most vocal advocates for community banks in the U.S. Indeed, our firm is focusing a great deal of time and effort to help small banks raise capital and compete with the too-big-to-fail banks.

I am happy that Cam is impressed by our address in New York, but his headcount is a bit high. In fact more than half of the space at 9 W 57th Street is empty. Many, many other office buildings in the New York area are similarly under-utilized. I suspect our head count at Tangent is about the same as some of the small communities he cites. We are all small businesses competing with federally subsidized giants.

One point that I did not address in my earlier article is what smaller banks are doing with the funds guaranteed by the Transaction Account Guarantee program. Come on, Cam, everyone knows that your members have, to a large extent, been parking those "free" TAG deposits at the Fed for 25 basis points and profiting from the arbitrage. If your members really used the money to make loans to small businesses, the credit unions wouldn't have the opening — or a case — to lobby Congress to double their business lending caps. The Senate majority leader has pledged to bring the credit union legislation to a vote.

Further, I know how hard it is to break the habit of waving the bloody shirt – in this case, too big to fail – to rally your troops. But it is not an effective lobbying strategy to go to Congress with a request that the legislators fix a problem that they think is already fixed. You really are saying to the lawmakers, "you need to do this for us because you screwed up." This is not an effective means of persuasion. My family ran a lobbying firm in Washington for many years. I think this strategy is a loser.

Cam, I think it is time for the members of ICBA to swear off the federal subsidy trough and reclaim the high ground in the battle to end too-big-to-fail. If we work together, we may even force the breakup of the largest banks, particularly institutions such as Wells Fargo and Bank of America that have done untold damage to small banks over the years, aided by federal subsidies. Reconsider your position and join me in calling for an end to TAG and all other federal subsidies for the banking industry. Given a level playing field, I think that community banks can easily compete with the zombie banks and provide the credit and other services that our fellow citizens badly need. My door is open.

Christopher Whalen is senior managing director of Tangent Capital Partners in New York. He is co-founder and vice chairman of Institutional Risk Analytics, the Los Angeles based provider of bank ratings, risk management tools and consulting services.

For reprint and licensing requests for this article, click here.
Community banking Law and regulation
MORE FROM AMERICAN BANKER