Legislators say they want to clear an obstacle to U.S. prosperity: burdensome regulation of the community banks on which much of small-town America relies. It’s a worthy goal, but Congress isn’t pursuing it the right way.
Typically defined as institutions with $10 billion in assets or less, community banks have recovered from the crash of 2008 more slowly than their larger counterparts. Thanks to mergers and a dearth of new entrants, there are fewer of them—6,410 in December 2014, down from 8,425 in December 2007. Their lending has rebounded lately, but still not to pre-crisis levels. It matters, because they account for about two-thirds of small-business loans and a quarter of mortgages.
