Fair Lending, Steeper Costs: Regulators’ approach to enforcing fair lending rules “may actually be producing more societal harm than benefit,” writes attorney Peter G. Weinstock. He illustrates this point with the story of Nixon State Bank in Texas, which agreed to a $100,000 settlement with the Department of Justice in 2011 over allegations that the company was discriminating against Hispanic borrowers by charging them higher prices on unsecured consumer loans. But the effect of the settlement has been not to lower the cost of loans to Hispanic borrowers but to significantly increase the price of small-dollar loans for all Nixon State Bank clients, according to Weinstock. “Intentional discrimination should not be tolerated, but we should question the benefits of disparate impact theory for fair-lending enforcement,” Weinstock writes. American Banker commenters were unanimously on board with Weinstock’s argument. “Weinstock rightly points out how massive government overreach is actually harming both the consumer and our nation's economy overall,” one reader opines.

The Breakup Song: It's back on the airwaves, in medium-to-heavy rotation. A new report from the Basel Committee appears supportive of too big to fail, writes Camden Fine, the president and chief executive of the Independent Community Bankers of America. “If even our international capital rule-writers are acquiescing to the continued systemic risks of these highly complex institutions, it appears that ‘too big to fail’ is here to stay,” Fine writes. His solution? Break up the big banks to erase the problem of implicit government guarantees. Fine’s recommendation set off a debate in the comments section. “It is hard to figure out … how taking, say, our 6 largest banks … and turning them into two or three dozen still very large banks will solve anything, other than the ‘problem’ of U.S. banks remaining competitive at home and abroad,” writes Wayne Abernathy of the American Bankers Association. Cornelius Hurley, a banking law professor at Boston University, responds: “Let the ABA join with the ICBA in supporting [legislation] which will have the Fed do a thorough public analysis of the subsidy issue ... let the chips fall where they may. Taxpayers have a right to know the answer to this fundamental question.” Indeed, as American Banker's Capitol Hill correspondent Victoria Finkle reported last week, the legislative battle over the megabanks' implied guarantee may soon heat up again. In a separate post, Hurley's BU colleague, law professor Tamar Frankel, says that breaking up the big bank holding companies into smaller subsidiaries “would allow for more effective management, risk controls, innovations and profitable services, facilitating market regulation.”

Also on the blog: Computer science professor Darren R. Hayes recommends that small banks collaborate on cybersecurity, perhaps with the help of regional centers that would allow them to share technological resources and train staff members. Consumers’ continued confusion over overdraft charges demonstrates the need for new regulation of the practice, according to the Pew Charitable Trusts’ Susan Weinstock. The Farm Credit System, meant to provide small farmers with access to capital, has gone beyond its mission and “is now directly competing with the private sector for nonagricultural business,” writes Rep. Marlin Stutzman, a member of the House Financial Services Committee.

Banks can boost their mortgage businesses by asking in-branch loan officers to hunt for leads from outside referral sources, such as real estate agents and financial planners (as salespeople at independent mortgage companies do), writes Garth Graham. Matthew Eschmann recommends that financial institutions wrangle the power of push notifications to alert customers to potential deals. And Thad Woodard of the North Carolina Bankers Association argues that reducing the number of Federal Home Loan banks would indirectly help improve access to credit.