Stop Treating Small Banks as If They Caused the Crisis: Bair

By Alan Kline (original source American Banker)

“Round up the usual suspects.” That famous line from “Casablanca” neatly sums up the regulatory attitude toward the banking industry in the aftermath of the financial crisis. In their understandable eagerness to show a toughened regulatory posture to a disillusioned public, regulators cast a wide supervisory net. In the process, they failed to sufficiently differentiate regional and community banks — bread-and-butter lenders that for the most part remained healthy and profitable before, during and after the crisis — from the main actors in the subprime debacle: the originators of toxic mortgages and the big firms that structured all those exotic securities and derivatives products on top of them.

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