To The Editor:

The inaccurate, misleading title notwithstanding, the Banker and Tradesman article by Matt Brown (“FDIC Criticism Exchanged For Fed Coddling,” Banker & Tradesman, Sept. 12, 2011) made some good points.

In the past few years more Massachusetts state-chartered banks have chosen regulation by the Federal Reserve Bank of Boston rather than by the FDIC. The banks so choosing are, by and large, well-capitalized, well-managed banks. Their decisions to change regulators had various sources, without doubt; but a desire to be coddled was not among them, nor was access to the Fed’s discount window.

Consider the two regulators:

The mission of the FDIC is to protect the Deposit Insurance Fund from loss. One may argue how successful they are – since the Fund seems to need replenishment by banks every decade or so – but it is nevertheless their mission. The regulatory perspectives that drive them derive from their mission.

As protectors of the fund, they seek to identify and counter threats to the fund. As to a hammer, everything looks like a nail, so to the FDIC every bank is a threat to the fund – except, we must acknowledge, those that are too big to fail. Still, every community bank is a threat to the fund, now and forever.

This perspective – and, in the past, misdirected bonus incentives – drives the FDIC to the adversarial, search-and-destroy tactics so often employed in their examinations.

The Federal Reserve has multiple missions: Monetary stability, employment stability to the extent it may be influenced by monetary strategy, and prudential regulation of banks and bank holding companies.

Their perspective is the entire economic fabric of the country and how the economic parts engage to produce the whole. They understand the role of community banks in the local and regional economies, the link between small business lending and job creation. Community banks are viewed by the Federal Reserve not as threats to be countered, but as essential elements in the economic fabric of the nation, its regions and its communities. They are interested in the business models of community banks, in their strategies, in their successful management of compliance and other regulatory issues. They study these things and take time to understand them. They are interested in the success of community banks.

And to a community bank, that interest makes all the difference in the world.

William Stapleton,
President & CEO Northampton Cooperative Bank
Northampton, MA