BY JOHN FEEHERY
Reprinted from TheFeeheryTheory.com

Sometimes the private sector does it to itself. That’s what makes Washington such a confounding place to do business.

Purists like to talk about how the government shouldn’t get involved picking winners and losers.

It is a nice thought. But making that nice thought reality is not always possible.

From outside the beltway, it looks so simple. Those damn politicians, who think they are holier than thou, get their sense of glory by regulating the poor old business sector, an innocent bystander that would act efficiently if only the government would stay out of their business.

Sometimes, though, some bad actors in the business community require politicians to step in. And sometimes, businesses come to Washington to achieve a strategic advantage.

And sometimes, when they do that, they make it more difficult on themselves.

There are plenty of examples where government needs to set common-sense rules of the road to promote commerce. Food safety is a good example of that. So is pollution control.

But sometimes, some businesses try to use politicians to skew the rules to help them achieve short-term objectives.

An example of that comes with what community banks are trying to do to national banks. The Independent Community Bankers are at war with banks that are big enough to serve a global audience. They just released a report that calls for these big banks to be required by the government to set aside an unrealistic amount of money in their vaults or to be broken up by government fiat.

They say that because these banks are too big, they have an unfair advantage in the marketplace.

As the ATT commercials point out, bigger is usually better, but that is not always the case. And indeed, the banking marketplace is diverse enough to have banks of all shapes and sizes.

But having global banks has real advantages for the American business community. They tend to be much more stable in economic downturns, they have the capital to help finance really big deals, they make the majority of home loans in this country, they make the vast majority of small business loans, and they provide essential services to the global economy.

Anybody who has ever watched “It’s a Wonderful Life,” understands why setting capital standards too high will hinder lending and stifle economic growth. Who can forget the scene when Jimmy Stewart tried to explain to his panicked neighbors why he didn’t have all the money that was in everybody’s accounts in the Savings and Loan, because he had lent it out to help finance the American dream for all of his customers.

It’s the same thing with the entire banking industry, big and small. Requiring an unnecessary amount of capital in big banks would have a disproportionately negative impact on the American economy.

But that is exactly what the ICBA is demanding that policy makers do to the bigger banks. And the reason is pretty simple. They want them to have to face more regulations in the hopes that the smaller banks will have a competitive advantage.

Now remember, that the ICBA is the same group that helped to facilitate the passage of Dodd-Frank in the hopes that would give them a competitive advantage over the bigger banks. But it turns out that Dodd-Frank is actually making it harder for smaller banks to do their jobs of lending to consumers, and it has actually helped make job creation more difficult as a result.

This is dangerous ground.

The ICBA obviously believes that the government is so finely tuned, so efficient, so precise that it can call for limited government regulation that will only hurt their competitors and not their members.  But experience dictates another outcome. Usually, when a business sector calls for the government to step in on their behalf, it ends up stepping all over the place, and who know where it ends up.

I am not a purist. I believe that government does have a limited yet important role in regulating the marketplace and protecting consumers. But when a part of the business community attempts to screw its competition by going to the government to set favorable rules, they usually end up screwing themselves.

The ICBA ought to stick to its knitting and quit trying to stick it to the big banks. They aren’t doing themselves any favors by calling for a massive intrusion of big government into their industry.

Editor’s Note: John Feehery worked for former House Speaker Dennis Hastert and other Republicans in Congress. Feehery is president of Quinn Gillespie Communications. He is a contributor to The Hill’s Pundits Blog and blogs at thefeeherytheory.com.