Viewpoint: Montana farmers could struggle under bank rule
Ted Dick
Montana agriculture is not only vital to our state but it's a way of living and part of who we are. During the COVID-19 pandemic, our farmers and ranchers showed the grit and determination needed to sustain our state and local economies during such a pivotal time in our state’s recent history.
After the turmoil they faced, our farmers and ranchers should be able to return to business as normal, but unfortunately, a new proposal being considered by the Federal Reserve that would increase capital requirements on banks threatens to impede the return to normalcy. You may be wondering, what's that have to do with Montana agriculture? Well, let me break it down for you.
Under this plan, the largest U.S. banks would be forced to bolster their capital reserves by about 20%, providing a larger buffer against potential losses stemming from market volatility or economic downturns. The proposal is poised to reshape the face of banking regulations, marking the most substantial alteration since the implementation of the Dodd-Frank Act. However, questions arise regarding the necessity of such a move, and the potential ramifications of overregulation.
The proposed regulations could exacerbate the existing challenges faced by rural communities in accessing financial services. Many agricultural operations, particularly small and family-owned farms, already struggle to secure affordable credit and banking support due to their perceived risk and the volatile nature of the agricultural market.
An increase in capital requirements could further dissuade banks from extending loans to these key stakeholders, impeding their ability to invest in essential equipment, land improvements, and sustainable practices necessary for long-term viability.
Heightened requirements would also constrict the flow of credit, particularly to small and medium sized businesses, thereby stifling entrepreneurial endeavors, deterring investment, and hindering job creation. At the same time, everyday folks eyeing loans may find themselves facing higher interest rates, making it tougher to fund critical endeavors like homeownership or education.
This proposal is bad for Montana’s growth and threatens our agriculture communities. The Federal Reserve Board must learn from past lessons and chart a course that prioritizes recovery and prosperity for all.