By Neil Milner, President and CEO, Conference of State Bank Supervisors

WASHINGTON, D.C. – “The Conference of State Bank Supervisors commends Federal Reserve Chairman Ben Bernanke’s recent comments on the ‘too-big-to-fail’ issue (1). State bank supervisors have long recognized the disparate treatment accorded very large financial institutions dating back to the ‘80s with the government takeover of Continental Illinois National Bank, manifested most recently in the bailouts of Bear Stearns, Fannie Mae and Freddie Mac, and AIG.

“Chairman Bernanke’s acknowledgement that there are too many firms that are in some sense systemically critical is right on the mark and must be addressed. We are all experiencing first hand the enormous challenge of resolving these institutions and the broad economic stress and lack of confidence it causes." 

“We also applaud his appreciation of community banks’ role in the local economy and his views on the value of diversity in the nation’s banking system.

“We were also pleased that FDIC Chairman Sheila Bair’s recent public acknowledgement that community banks continue to serve their communities’ credit needs in spite of the credit crunch affecting the larger banks (2). Her comment that ‘Wall Street should take their cue from Main Street’ is a tribute to community banks, the vast majority of which are state chartered, and the local knowledge they bring to credit decisions.

"As policy makers contemplate the future of our regulatory system, it will be critical that their decisions recognize and support the value of a diverse banking system, which allows regional and community banks to thrive and fuel local economic development.  We must also recognize and mitigate the risk posed by large, systemic firms, ensuring their problems can be resolved without jeopardizing the economic health of the entire nation."

(1) Chairman Bernanke's comments were made at the Economic Club of New York on October 15, 2008.

(2) Chairman Bair's comments were made on C-SPAN on October 2, 2008.