Info Tech Boomed Because It Was Least Regulated Sector
(p. A9) "The regulatory environment has become so onerous in America that it is now easier to start a business in England than in the U.S.," Mr. Hill says--and he would know.
. . .
In 1973 and only 27 years old, Mr. Hill founded Commerce Bank with one branch in Marlton, N.J. The fledgling company focused on customer service and called itself "America's most convenient bank." By the time Mr. Hill left Commerce Bancorp 34 years later, only months before the company announced it would be bought by TD Bank for $8.5 billion, he had grown the business to some 460 branches, with 14,000 employees and combined deposits of about $40 billion.
Now he's replicating that model in the United Kingdom with Metro Bank, which he founded in 2010. And Mr. Hill says there's an ocean of difference between doing business in the overregulated U.S. and in the U.K. "When I went to Britain I thought the regulatory environment would be much worse," he says. "It's infinitely better there."
The problem in the U.S. starts with towering federal regulations, such as the voluminous reporting and compliance rules in Dodd-Frank, the financial reform act that recently celebrated its fifth birthday. "Regulators are making it impossible for the medium and small banks to comply with the rules," he says. "The burdens get so intense that it is destroying the small and medium-size banks in America."
The result is that Dodd-Frank, a law intended to take on the systemic risk of "too-big-to-fail" banks, is multiplying the problem. "The big banks that are too big to fail are bigger now than ever, but the regulations have trickled down to the smaller banks that didn't cause the financial crisis" Mr. Hill says. As a result, community banks are disappearing. "When I started my first bank in the 1970s there were 24,000 banks in America," he says. "There are now 7,000 banks. It may soon be 500 or even fewer."
But it's more than Dodd-Frank that leaves him frustrated. "The feds have taken anti-money-laundering rules to the extreme," Mr. Hill says. "We have to monitor every deposit account every 24 hours. Somebody's monitoring your account every day." That's invasive and expensive.
He laments that the Community Reinvestment Act, a catalyst of the 2008 subprime mortgage crisis, still hasn't been repealed. "We are literally required to make loans that we know are going to fail," he says.
Then there's the tangle of local regulations that every American small business must cut through. "You don't need a building permit in Britain. Here [the U.S.] you have to get permits and you have to get inspections," he says. All that can eat up months and months. "I can build 100 branch banks in Britain before I can get one built in the U.S., thanks to regulators."
Policy makers and economists in Washington fret about what's slowing the rate of business startups and entrepreneurial ventures. But Mr. Hill says it's no wonder, with all this red tape, and it's no accident that the industry that is really booming, technology, is the one least regulated by government--though the assault against Uber suggests that Silicon Valley might not be immune for long.
. . .
And how much should we be worried about overregulation--or competition from abroad? "Here's my story in a nutshell and I hope Washington is paying close attention," Mr. Hill says. "A very successful American business model has been transferred to Britain, where it's even more successful because it doesn't have to deal with the same burdens of government."
He continues: "The politicians keep talking about fairness and helping the little guy. But it's the little startup businesses that get hurt the most from the heavy hand of excessive government regulation. How is that fair?"
For the full interview, see:
STEPHEN MOORE. "THE WEEKEND INTERVIEW; The Demise of the Small American Bank; The man who put the customer first in retail banking says Dodd-Frank is crushing community banks and Britain is now a better bet." The Wall Street Journal (Sat., Aug. 1, 2015): A9.
(Note: ellipses added.)
(Note: the online version of the interview has the date July 31, 2015.)