Originally published in American Banker’s BankThink
At least in the D.C. area, in front of most schools there are speed cameras, and about 100 yards in front of each is a sign posting the speed limit and noting “Photo Enforced.” As a result, drivers slow down as they approach the school. Most would consider this outcome a success. But it is possible that someone could argue that the goal is not for people to drive slower in front of schools but rather for the government to write tickets.
That same logic is being used by some policymakers to denounce the Federal Reserve and other banking regulators for “rubber-stamping” bank mergers. Bank mergers are almost always approved because banks know what the approval standards are and generally do not apply if a potential merger does not meet them; furthermore, even if their initial analysis is overly optimistic, regulators will warn banks not to apply if they have any reason to believe they will deny the application; and if a bank nonetheless applies, the regulator will pressure them to withdraw the application before having to issue (and justify) a public denial.
