Fed's Duke Says Rules May Impair Lending by Small Banks
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Federal Reserve Governor Elizabeth Duke said pending bank regulations may “seriously” impair mortgage lending by community banks, which play a “significant” role in the market for home loans.
Duke, a former community bank executive, said she and other Fed governors, including Chairman Ben S. Bernanke, are concerned about the potential harm from several rules mandated in the Basel III agreement and Dodd-Frank Act. If rules cause small banks to believe they shouldn’t sell mortgages, “it should raise red flags,” and policy makers should weigh whether the benefits of regulation outweigh the costs of reduced lending, Duke said today in a speech in Chicago.