Small banks botched public relations, outsider charges

July 23, 2010
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Bank reform is now law, and regulators soon will begin drawing up new rules for banks to live by.

Mark Hill, a local entrepreneur with close ties to banking, thinks small- and medium-size banks are going to regret not having lobbied harder to knock some of the sharp edges off the legislation.

Hill has an unusual perspective on the industry. He made a lot of money selling software to mid-sized banks through the firm he started, Baker Hill, and then made another killing when he sold Baker Hill to Experian in 2005.

The new regulations will be overwrought, thus expensive for banks, fears Hill, now an angel investor in tech startups. And he believes the banks have nobody to blame but themselves.

In the months leading up to the debate over reform, small- and medium-sized banks did a rotten job of telling their story, he says. The public needed to be reminded that banks play a crucial role in the economy by accepting savings, loaning out the money and making a return for the depositor. Depositors also needed to be told that businesses and jobs depend on profitable banks.

The banks should have screamed in the public square that, while admitting they also got caught up in mortgage speculation and other excesses pioneered by the huge Wall Street institutions, instead, they were not Wall Street; they mostly helped Main Street prosper.

Hill can’t recall receiving so much as a piece of direct mail from his own bank explaining banks’ role in the economy and larger society.

“It feels like they ought to be starting with their own customers,” he says. “I think a lot of people think the bank is the big, bad guy who won’t lend them money. They’ve just not done a good job of differentiating themselves in the mind’s eye of the public.”

do you agree? Did the smaller banks botch public relations?
 

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  • What reform?
    You think banking reform was heavy-handed? Seriously? Did it curtail the casino-style betting of derivatives that got us in this mess? No. Did it force banks to separate the depositors money from their own when they make those wild gambles (Volker rule)? No. If anything this new legislation is weak sauce. Does Mark Hill remember why bank reform became an issue in the first place? I do agree with him on one thing: the banks have nobody to blame but themselves. Too bad he thinks it's related to PR.
  • What
    You know who cried most about regulations in the early Bush administration? The very people who got the deregulations and caused the financial crisis. I choose to bank at small local banks and not the megabanks (although it is getting harder to do) for this very reason. Do you think for a moment that the megabanks really care about me, my community, the welfare of my society when they reside elsewhere? You bet they don't. They only look after themselves at the price of all us other guys. Case in point, the financial crisis we are now in.
  • What
    You know who cried most about regulations in the early Bush administration? The very people who got the deregulations and caused the financial crisis. I choose to bank at small local banks and not the megabanks (although it is getting harder to do) for this very reason. Do you think for a moment that the megabanks really care about me, my community, the welfare of my society when they reside elsewhere? You bet they don't. They only look after themselves at the price of all us other guys. Case in point, the financial crisis we are now in.
  • Not so fast
    Jim, fair enough, but you're naive if don't think that small banks care about their bottom line first and foremost. And look at the list of 96 banks the FDIC has shut down this year. Mostly small, community banks. The dirty secret out there that no one wants to seem to talk about is that a lot of small banks made bad commercial real estate bets, and we're starting to see the results of that. So, don't be so quick to sing the small bank praises.

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