Alva Review-Courier -

Ask many Oklahomans where they bank and they’ll probably name a local community bank. It’s the place where they pay their bills and finance cars, homes and even small businesses. They may know the tellers by name, and most tend to talk about “my bank” with trust and pride.

Sadly, the community bank is an endangered institution today, thanks in large measure to the 2010 Dodd-Frank financial reform law that was supposed to help, not harm, our financial system. The number of community banks has been steadily declining in recent years. One primary reason is the increasingly costly regulatory burden imposed by Dodd-Frank.

It wasn’t supposed to be this way. Dodd-Frank was passed in response to the 2008 financial meltdown, which was largely caused by the practices of a few large financial institutions that dealt in so-called derivatives, financial instruments supposedly backed by mortgage debt.

Unfortunately, many of those mortgages went into default. One reason was the unsafe loose credit practices encouraged by the federal mortgage-lending giants, Fannie Mae and Freddie Mac. When those mortgages went belly up so did the securities they no longer supported and some of the “too big to fail” financial institutions that had invested in them. The result was the deep recession that began in 2008 and which prompted passage of Dodd-Frank two years later.

That bill created new federal regulatory agencies and powers designed to oversee and rein in the institutions responsible for the crash. But it also imposed many of those same heavy new regulations on community banks, which were not responsible for the financial meltdown in the first place.

Dodd-Frank is an ever-evolving, many-headed Hydra of a law. To date, it has spawned 23,000 pages of new regulations, with more to come. It costs money to comply with those regulations. For example, Dodd-Frank now requires a mortgage lender to go through a multi-stage verification process to confirm such simple facts as a borrower’s employment and salary.

Of course, that costs money, money community banks are often ill equipped to spend. A Mercatus Center survey by George Mason University found that 85 percent of polled banks had experienced increases of at least five percent in compliance costs due to Dodd-Frank. Even worse, many community banks began trimming more expensive services like free checking and pulling back on loans.

That is especially crucial. A 2015 Harvard study found that community banks make 77 percent of all agricultural loans and half of loans to small businesses, not to mention the millions of car loans and home mortgages they provide to responsible borrowers. It seems the “too big to fail” institutions that were largely responsible for the 2008 crash won’t stoop to providing those services to ordinary folks. And thanks in part to Dodd-Frank, there are fewer community banks that will every year.

Today there are at least 1,500 fewer financial institutions with assets of less than $1 billion than before Dodd-Frank. One estimate suggests that at least one community bank closes or merges every day. Those mergers are especially worrying. Even if your community bank remains open as part of a much larger financial network, it loses many of its community connections of the kind that prompted you to bank there in the first place.

Dodd-Frank set out to curb the excesses of a few “too big to fail” institutions. Thanks to its increasingly burdensome regulations, which disproportionately penalize community banks, it is now forcing many of those smaller institutions into the arms of the large banks the law was meant to address.

Congress has been largely stymied by the threat of a presidential veto in efforts to repeal or modify Dodd-Frank. Hopefully, that mindset will change as the harm caused by Dodd-Frank’s too-wide net becomes more and more apparent. Sadly, that may not be soon enough to save your community bank.

Frank Keating served as the 25th governor of Oklahoma from 1995 to 2003 and was most recently the president and CEO of the American Bankers Association.