From The Wall Street Journal, Bernanke and the Slow-Growth Crew by Peter Wallison
The regulations and restrictions on small banks have most acutely affected small businesses, particularly startups. Though most new employment in the U.S. economy comes from small business, entrepreneurial startups provide most small-business employment growth. A 2013 study published in the Review of Economics and Statistics shows that over time firms aged 0-5 years account for 20% of total job creation in the U.S.
This part of the economy has been hit hardest by Dodd-Frank rules that have driven up costs for small banks, reduced their number and applied large bank lending standards to the small outfits that have always met their communities’ needs with the flexible standards startups require.
A 2015 Goldman Sachs study shows that large firms—500 employees or more—have grown at a pace consistent with past recoveries, but small businesses have remained stagnant. The study concludes that, since Dodd-Frank, small businesses—which rely largely on small banks—have been unable to find the credit necessary for growth, while large firms have access to credit through the capital markets.
If Mr. Bernanke had used his academic skills and the Fed’s data to determine what actually caused the crisis, he might not have pushed Congress to fill “the gaps in financial regulation.” Had he advocated instead changing destructive housing policies, Dodd-Frank might never have happened and the economic recovery would have been far more robust.