Andy Barr and Community Banking

Newly elected Representative Any Barr was appointed to sit on the House Financial Services Committee. Barr said that “Serving on the Financial Services Committee will enable me to immediately go to work on solving Kentucky’s jobs crisis. … We must return to the day when a local banker and a small businessperson could meet face-to-face and arrange a loan based on trust and accountability.” [Read more here:]

There are serious concerns about some of the provisions of the Dodd-Frank Reform Bill, particularly provisions that tighten lending requirements. Some have suggested that the lending requirements are too tight, and this is an issue that must be addressed, and hopefully Representative Barr will work on the issue.

But the problems with community banks goes far beyond Dodd-Frank. There has been a dramatic decline in the number of community banks over the recent decade, and the cause is not Washington regulation. The cause is the free market and the fact that large banks are just more efficient than small banks. According to a report from Celent, which is a research firm that advises financial instates, there has been an “unprecedented concentration” in banking, and much of it has come at the expense of community banks. A link to the Report is here: The Decline of the Community Bank.

 If Representative Barr wants to truly address the problems facing community banks, he needs to look at all of the issues facing community banks. That includes over regulation, but it also includes the effects of consolidation. The problem is that consolidation is a product of the operation of the free market, and that means that there are, on occasion, negative effects from the free market. I wonder how Rep. Barr will address that.

Author: Mike

I am a patent attorney in Lexington, Kentucky. My law firm web site is I ran for State Representative in 2010 and lost in the primary. Many of these posts are based on writing that I did for that election. Rather than delete it all, I decided to dump it onto the internet.

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