One of my first priorities was to connect personally with small bankers in each of our 50 states. Day in and day out, I met with the hard-working people who run community banks and credit unions. Over the course of nearly a year, I met with hundreds of people who are on the front lines in keeping a small financial institution running. Those meetings were enormously valuable. Working closely with community bankers, the agency took the first steps to level the playing field by following one basic idea: Simplify the rules. With simple rules, we could push down the costs of compliance.
This is precisely what Washington needs to do more often. We need to reduce complexity and cut compliance costs. We need to make changes that level the playing field between big corporations and small businesses.
I believe that clearer, simpler regulation - regulation that is designed to work for small businesses and consumers--can help make markets work better. The financial crisis showed us what happens when regulations aren't enforced and giant Wall Street businesses have too little oversight. Deregulation certainly didn't help the small banks and credit unions that got swept up in that mess. But we also can't keep layering on one regulation after another, adding more and more complexity, without assessing the effects on families and small businesses.
We need a new approach that includes a serious assessment of the compliance cost of current regulations and whether adequate protection for consumers can be accomplished using cheaper, simpler approaches, or, in specific cases, if the regulations are so heavily layered on top of each other, that some can be cut altogether.
The annual cost of regulation – $1.75 trillion, according to the Small Business Administration – is greater than the total of all income taxes collected last year. It equates to approximately $15,500 per household in 2011 dollars without accounting for the cost of all the new regulations added since 2008. Regulation costs fall most heavily on America’s 27 million small businesses, which employ approximately half of all U.S. workers, produce half of the GDP, and have generated 65% of new jobs over the past 17 years. Businesses with fewer than 20 employees spent $10,585 per employee in 2008 to comply with federal regulations, 36% more than large firms. Put another way, for every four employees earning $40,000 per year, small companies’ regulatory compliance costs would have more than paid for hiring one more worker. Excessive regulation kills jobs.
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