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Congressman Tom MacArthur

Representing the 3rd District of New Jersey

Op-Ed: Federal banking rules hurt N.J.'s efforts to keep, grow small businesses

December 8, 2016
Press Release

Like most of us in the Garden State, I'm proud to call New Jersey home. All of us who live here know New Jersey is actually in the sweet spot of the U.S., a best kept secret with beaches and mountains and easy access to two major U.S. cities. Couple our location with being the most densely populated state and the 11th most populous state overall and there is little explanation needed for why so many businesses set up shop in our state.

However, data continues to show more small businesses are exiting New Jersey than starting in the state -- a troubling trend that is happening nationwide as well. This is why it is important for us to examine the state's business environment,  identify barriers to small business entry and success, and fight for changes that make sense for everyone.

As a former business owner, I have seen these challenges first-hand and have leveraged my experience to fight for small businesses during my time in Congress. I know how difficult it is to secure the necessary resources to open and expand companies, and because of this background I have been recognized by many business groups as an ally, mostly recently with the "Guardian Award" from the National Federation of Independent Business (NFIB) for being a reliable small business advocate.

Supporting small business is not a partisan issue; it's a priority for both sides of the aisle. If our nation's small businesses are not thriving, it sets off a chain reaction, affecting our Main Streets, households, property values and more. Because of this, it is critical for Congress to continuously look at policies to determine the impact on small businesses and ensure they are not inhibiting growth.

This has unfortunately not been true of Dodd-Frank, a law with 22,000 pages of regulations on the banking industry, which actually has had adverse effects on small businesses instead. The way Dodd-Frank was written imposed rules based on an arbitrary $50 billion asset level with no justification or research, and this has been particularly difficult for regional banks. A bank should be evaluated by its individual business profile and its potential risk to the financial system as a whole,  not an arbitrary number.

Not only do regional banks lack the large-scale resources, in terms of money and time, needed to comply with overly-restrictive regulations, but such regulations also reduce their ability to lend to consumers and business owners. Regional banks are collectively responsible for nearly $2 trillion in lending, but have seen their lending capital reduced by at least $2 billion each year. This means a reduction in small business, real estate, farming and other business lending - all of which are vital factors in a strong economy.

Is it any wonder the start-up rate in New Jersey has failed to recover from the recession?

One avenue for change -- which already has bipartisan support -- is examining bank risk from a multi-faceted approach, instead of just based on size alone. The nation's largest banks have very different models from community and regional banks, which typically focus on consumer and business deposits and lending,  rather than complex financial products.

We can't afford for these trends to continue in our state nor our country as a whole. We need to find bipartisan solutions that allow these banks to serve their customers. New Jersey is home to several regional bank branches -- Capital One,  M&T, PNC, and TD Bank to name a few --  and it is in our best interest to ensure these banks have the resources needed to foster business growth.

All banks are not the same and our regulations must reflect that. It's time for members of Congress to work toward relieving the pressure placed on smaller and regional banks by inappropriate one-size-fits-all policies. While I will work with my colleagues in the House, I call on my counterparts in the Senate to address this issue as well. We are a stronger state (and nation) when we can support entrepreneurs in their pursuit of the American Dream.