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Congressman David Kustoff

Representing the 8th District of Tennessee

Kustoff: Dodd-Frank Discourages the Creation of New Financial Institutions

April 26, 2017
Press Release

Washington, D.C. - In a Financial Services Committee hearing today to examine The Financial CHOICE Act, U.S. Representative David Kustoff (TN-08) discussed the lack of new financial institutions created since the implementation of the Dodd-Frank Act.

“Since the enactment of Dodd-Frank almost six or seven years ago, it is incredible that we have had very few new banking starts in this country,” said Kustoff.

The Congressman asked Mr. John Allison, a hearing witness and former president and chief executive officer of the CATO Institute, to explain what “real-world hurdles and challenges Dodd-Frank presents” to someone seeking to start a new bank.

Mr. Allison replied: “The biggest challenge is that the regulators don’t want you to start a bank, so they are going to come up with every obstacle they can dream of... Secondly, when you do your cost analysis and your profit analysis, you say, ‘I can’t make any money because I’m going to have to hire an army of compliance people before I can make my first loan. I’m going to be embedded with a cost structure radically higher than a traditional community bank startup has.’”

Later, Kustoff asked Mr. Allison how passage of the CHOICE Act, as it is currently written, would affect new bank starts in this country.

“I think you’ll see a significant increase in the number of startups, and I think that would be good for the economy,” replied Mr. Allison.

In a hearing on March 21, the Congressman discussed the impact that the Dodd-Frank Act has had on the creation of new or “de novo” financial institutions. After Dodd-Frank was signed into law in 2010, zero new banks have been created in the state of Tennessee.

Kustoff represents the 8th District of Tennessee and is a member of the House Financial Services Committee, serving on three subcommittees: Financial Institutions and Consumer Credit, Oversight and Investigations and Terrorism and Illicit Finance.