New Mexico bank consultant Joe Badal has always had a way with words, and his hot opinions have been blog-worthy in the past. He gave an interview to an Albuquerque reporter a few months ago that many community bankers throughout the country would appreciate.
Community banks in the U.S. will be merging at a frantic pace in the coming years because they can’t afford to keep up with a growing list of federal banking regulations, New Mexico banking consultant and author Joe Badal said Wednesday.
“The big are getting bigger and the small are going away,” Badal said, blasting “stupefyingly stupid” federal regulations at the Economic Forum of Albuquerque breakfast at Hotel Albuquerque in Old Town.
A banker for more than 30 years, Badal noted that a federal appellate court ruled recently that regulators can arbitrarily set capital levels for banks. In other words, they can tell one bank it must have a certain capital level and set a different level for a different bank of the same size.
“What recourse do regulators have against arbitrary and capricious decision by regulators? None. They have no recourse,” said Badal, owner of the Joseph Badal & Associates consulting firm. “Regulators can descend on a bank like storm troopers.”
Yes, they can. And they've got their own Death Star: the FDIC. With no Darth Vaders of their own to throw into the fight, however, many community banks must resort to The Chewbacca Defense.
Badal really gets riled about a failed New Mexico thrift whose fate we chronicled in these pages previously.
The bank was profitable and most of its loans were current, Badal said, but regulators treated it like banks in California, Arizona and Nevada where enormous housing bubbles had burst.
Those regulators assumed what had happened in those three states was going to happen in New Mexico and failed to understand that New Mexico doesn’t have large booms and busts, Badal said. As a result, regulators forced Charter to write down loans they thought would go bad, he said. That forced Charter to increase its loan-loss reserves, which came straight out of its capital reserves, leaving Charter undercapitalized and unable to raise fresh capital, he added.
“They arbitrarily wiped out Charter’s capitalization,” Badal said.
"Arbitrarily" is a loaded term. By insulting the late OTS and, if only by inference, the regulatory shark that swallowed it, Joe might be encouraging cockroach trolls out of their dark corners and into bright daylight long enough to send him hateful "anonymous" email before they scurry back to regions where the Sun don't shine. If that doesn't do it, his novel might.
Badal, who also writes mystery novels, said he wrote his latest book, “Shell Game,” after being outraged by the January 2010 seizure by federal regulators of Charter Bank in Albuquerque.
“Shell Game” is about a family-owned business that suddenly can’t get credit because federal banking regulators have clamped down on its bank.
While I've got a copy of "Shell Game," I have not had a chance to read it. Once I do, I'll review it. It's the least I can do to bring Joe out of his shell and get him to tell us what he really thinks.