Small banks botched public relations, outsider charges

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?