Douglas C. Manditch is chairman and chief executive of Islandia-headquartered Empire National Bank.
President Barack Obama is traveling our highways and byways, promoting passage of smaller bills from his defeated American Jobs Act. But quick and temporary fixes are not what America needs to stimulate economic growth and spur job creation.
My perspective comes from more than 46 years of local Main Street banking experience, and my concerns are shared by many of our bank's small business customers. These proprietors -- whose businesses drive our national economy -- think the president's proposals will do more harm than good.
Our bank customers tell me that extending the reduction in payroll taxes will do nothing for job creation. And while tax breaks to buy new equipment and incentives to hire veterans are all well and good, the cloud of overall economic uncertainty discourages immediate action.
And it's not only our federal government's economic policy, but also the banking regulations in the Dodd-Frank Wall Street Reform and Consumer Protection Act that are of deep concern. Once again, community banks will suffer for the problems created by big banks and investment houses. Dodd-Frank, while attempting to "fix" the financial services industry, has come up short in correcting the problems that created today's economic uncertainty. Thousands of pages of new compliance requirements stemming from this legislation and from the Consumer Protection Act will continue to burden many financial institutions dedicated to serving local communities and supporting Main Street businesses.
Some community banks will find it financially impossible to operate independently and competitively while complying with the host of expected regulations, and that will lead to consolidation among smaller banks. And that will mean hardships for many small businesses that depend on their neighborhood bank. Many of our small business customers tell us that they left large banking institutions because of their inability to obtain credit and the high service fees charged by these banks. Few deals were sealed with a handshake -- one of the hallmarks of community banking.
Community banks are generally classified as those with less than $10 billion in assets. But most are much smaller in size. They provide a significant share of banking services and continue to be important providers of relationship-based banking services, especially to small businesses, professional practices and local not-for-profits who place a premium on personal service.
The important role of community banks as lenders to the small business sector of the economy is supported by impressive statistics. Small businesses account for just over half of private sector output and employment, and provide two-thirds to three-quarters of net job growth. Half of net job growth in the country is provided by the smallest businesses -- those with fewer than 20 employees.
As the economy sputters and gasps in an attempt to spark a true recovery, community banks should be viewed as the locomotive that jump-starts our nation's economic engine. Government should view our financial institutions as partners in trying to stimulate the economy.
Instead, the current climate of regulatory burdens hinders, not strengthens, the more than 6,900 community banks that support Main Street businesses. Unlike Wall Street titans, these everyday business people are simply striving to achieve the American dream. The entrepreneurial spirit of these individuals must be supported and nurtured if we are to reap the rewards of a robust economy.
Regulatory burdens and temporary quick fixes for a struggling economy are not what constituents want from their elected officials. Now is the time for politicians to rise above the fray and put the country's interests before their constant quest for re-election. We need exemptions to Dodd-Frank that will empower, not impede, the thousands of community banks from coast to coast that are dedicated to serving the needs of America's small businesses.