The Repercussions of Reform

The nation's financial regulatory system needs fixing, and bankers can be certain changes are coming. But after months of Congressional hearings, debates and some hysterics, that's still about all the industry knows for sure. Only the broadest outlines of the new regulatory regime have emerged, and Capitol Hill watchers say the window for sweeping changes to occur quickly — and some worried in anger — has probably closed. Instead, regulatory reform is shaping up to be a slow grind through Congress that may last a year or more. Some say the real deadline for passage is not until the summer of 2010, when mid-term campaigning kicks off in earnest.

On balance, this is probably a positive development. Bankers, especially community bankers, fret that a rush to enact reforms — particularly in an industry as complicated, fractured and heavily regulated as financial services — could unfairly target banks that bear little responsibility for the financial crisis. In fact, there is even cautious optimism among some community bankers that the reforms under discussion — from those that would raise the capital levels of too-big-to-fail institutions, to the push for national, uniform standards on regulating particular financial instruments such as mortgages — might actually give outgunned smaller banks a better shot in certain markets and products.

Brian Gardner, a vice president at Keefe, Bruyette & Woods, says, "We could end up with a bifurcated system, with a core banking system [made up of the too-big-to fail banks] that has more regulations and capital requirements. For smaller banks, that could be beneficial."

Historically, community banks have held more capital than big banks, and larger banks have used their funding advantages and their scale to offer better pricing on loans. Requiring larger banks to hold more capital could change the math on a range of products, bankers say, particularly business-related loans and mortgages, giving community banks a chance to compete for business they have been ceding to big institutions. "The new capital rules will change a lot of business plans," says Tom Hoy, CEO of the $1.7 billion-asset Arrow Financial Corp., a two-bank holding company in Glens Falls, N.Y. "I think community banks will be very competitive coming out of this. I'm very optimistic."

Smaller banks have been losing market share in virtually every loan category for years, as the biggest banks and nonbank financial institutions consolidated their power and reached deeper into consumer and small-business lending. From 1998 to 2008, commercial banks with $10 billion of assets or more increased their market share of 1-to-4 family home mortgages from 56.3 percent to 79.7 percent, home equity loans from 66.7 percent to 88.1 percent, and individual loans — including credit cards — from 57.6 percent to 88.6 percent, according to Federal Deposit Insurance Corp figures. Smaller banks even lost ground in their strongest loan categories. From 1998 to 2008, banks with $100 million to $10 billion of assets saw their hold on the commercial-loan market fall by 18 percent.

There are no guarantees, of course, that these trends will be markedly reversed under a new regulatory structure, but the prospect of stepped-up capital requirements for large banks is a welcome change for their smaller competitors.

Just a year ago the international community was poised to lower capital ratios for big banks through the Basel II accord; smaller banks protested bitterly that lowering capital requirements for large institutions would crimp their competitiveness even more. That prospect appears to have faded, though Bert Ely, an industry consultant in Alexandria, Va., warns against community banks taking anything for granted so soon in the regulatory reform process. "I understand the argument" that higher capital requirement for big banks could help smaller banks compete, Ely says. "But it's all incredibly fuzzy right now. It's difficult to discuss these [regulatory] proposals at this time because we just don't know the specifics."

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Credit Card Debt: Learn How To Pay Off Your Credit Cards NOW

Nearly half of all households in the country have substantial credit card debt. Your credit card debt may not have been worrisome to you in the past, but with the financial crisis in full swing and prices for everyday items through the roof, you may have become concerned about the amount of money you have going out to pay credit card and other bills as compared to the amount of income coming in.

You are not alone in your concerns - most families are struggling to meet previous obligations while paying outrageous prices for housing, groceries, and gasoline just to survive. You can take steps to pay off your credit cards and live a life free of high interest and minimum monthly payments, starting today.

Make A Commitment To Pay Off Your Debt

The secret to paying off your credit cards lies in your commitment to do so. Most credit card companies offer you the option of just paying the minimum monthly payment. This feature comes in handy if you are strapped for cash, but paying just this small amount each month means you will take many, many years (a decade or longer) to pay the bill in full.

In most instances, the minimum monthly payment does not even cover the interest that is charged to your account each month. You can just imagine that paying off your credit card balance in this manner could be a never-ending activity. A better way to pay on your credit card is to make at least double the minimum payment or triple that amount if you can possible swing it.

Negotiate A Better Rate

You should also all your credit card company to negotiate a lower interest rate on your credit card. Most credit card companies are willing to at least discuss this option if you have been a good customer who has made diligent and on-time payments. It never hurts to ask, and you might negotiate to knock off a couple points in interest - even if you have to make repeated requests.

Transfer To Zero Interest

You might also consider transferring your credit card balances over to a new credit card that features zero percent interest on balance transfers. Be sure to read the fine print in order to get this great rate for at least the first year. During that time, you should be able to pay down most of your credit card debt by making extra payments above the minimum monthly payment.

Consolidate Your Card Balances

Another option is to consolidate your credit card debt into a credit card consolidation loan. This would be a loan that pays off the principle of all the cards that you own - and you would, in turn, repay the lender of your credit card consolidation loan in monthly installments. Taking out a consolidation loan for your credit card debt can allow you to pay off all your balances at once and negotiate a payment amount that suits your budget. Do not plan to pay longer than five years on your consolidation loan - this will save you tons on interest.

Shop Online And Save

You might shop online to receive great balance transfer options for new credit cards as well as credit card consolidation loans. Online lenders often offer lesser interest rates than traditional banks and have higher rates of approval for borrowers of all credit types, including those with less-than-perfect credit histories, derogatory credit files, or those with limited credit. 

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