Georgia leads nation in bank failures, yet bank reform in state legislature unlikely
The Atlanta Journal-Constitution
With Georgia leading the nation in total bank failures last year, you might think the state’s lawmakers would have arrived in town for the new legislative session carrying satchels full of proposed reforms to the state’s banking laws.
The state has about 300 banks, more than most larger states. About 90 percent are small, state-chartered banks overseen by both the Federal Deposit Insurance Corp. and the Georgia Department of Banking and Finance.
Aside from a few tweaks to lending rules, Georgia lawmakers aren’t likely to consider significant revisions to the state’s financial laws or regulatory system any time soon. This despite concerns that Georgia’s bank regulators have been inadequately funded, and that they may have allowed the creation of too many banks and too much lending to boom-and-bust real estate developers.That’s not the case.
Twenty-five Georgia banks failed last year, almost a fifth of the nationwide total. Dozens more are expected to fail this year, dragged down by heavy losses on loans to defunct real estate developments.
Lawmakers, industry players and consumer advocates cite a variety of reasons for the state’s muted response to the Georgia banking industry’s ongoing troubles. Nationwide regulatory changes already in the works in Washington, D.C., could supersede any state laws that might be enacted, some say. It’s too early to talk about changing bank laws when dozens of banks are struggling to avoid failure, say others.
“If it’s not a global issue, it’s a national issue beyond the scope of any state,” said Senate Banking Chairman Bill Hamrick (R-Carrollton). He said it’s “a natural question” to wonder what Georgia’s lawmakers should do in the wake of the financial crisis, but argued that any action for now is largely up to federal and state regulators.
“There’s not much to be done at this point,” he said. “We’re not regulators. We’re policy setters.”
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