consolidation apply to all the size classes of banks, given the extensive list of new or enhanced requirements created by dodd – frank and their associated compliance costs. as it affects community banking, my concerns are tempered somewhat, though not completely alleviated, by the small - bank exceptions that have been granted to several of the new law ’ s more costly requirements. see “ that which is seen, and that which is not seen, ” in essays on political economy, by m. frederic bastiat, london : provost & co., 1872. bis central bankers ’ speeches unfortunately, the same cannot yet be said for the case of regional banks. the act indicates that all banking organizations with more than $ 50 billion in assets should be subject to enhanced supervision. some of the related regulatory proposals have already been distributed for comment. still other proposals for new, stricter “ enhanced supervision ” rules for these banks will be unveiled soon. yet, few really believe a $ 50 billion bank poses a systemic threat to our $ 17 trillion banking system. nor is a $ 50 billion bank qualitatively similar along risk dimensions to the very largest ones that exceed $ 2 trillion in size. the top 10 banking organizations have a cutoff point of $ 300 billion. i posit that this group should constitute the primary target for enhanced supervision. interestingly, despite its large share of industry assets, this group holds only about 20 percent of the small - business loans on bank books. clearly, these institutions are engaged in substantial activities outside the traditional banking role. it is within these very largest banks, and perhaps a few slightly smaller yet highly complex or interconnected ones, that systemic risk is concentrated. if the enhanced - supervision requirements are not highly graduated and imposed primarily on the very largest banks, it is not difficult to imagine how the costs associated with such supervision could lead mid - tier banks that exceed the $ 50 billion threshold – yet fall well short of megabank status – to seek merger partners in order to achieve sufficient scale by which to help cover the cost of regulation. this would compound the problem rather than alleviate it. with regard to enhanced standards for such important factors as capital and liquidity requirements, leverage limits and risk management, dodd – frank instructs regulators to differentiate among these banks. enhanced supervision can be implemented on a graduated scale, based on the extent of assets beyond $ 50 billion and possibly other factors. let us do that fully, then, applying these measures along a highly graduated scale, with only minimal

fail poses for the effective conduct of monetary policy. in looking at regulatory reform and implementing dodd – frank, i think a key point worth repeating is that the distinction between “ commercial banks ” and “ the shadow banking system ” is a false one. the two became intertwined beginning with the bypassing of glass – steagall strictures by sandy weill and citicorp and the deregulatory initiative of gramm – leach – bliley. the fact is that the largest commercial banks played a major role in many of the more problematic phenomena of the recent credit boom and ensuing crisis, including the spread of what i have previously referred to as financial stds, or securitization transmitted diseases. in the aftermath of the panic, these viruses linger. last week, the new york times printed an interesting article by joe nocera, who drew upon the observations of a highly regarded regional banker from buffalo, robert wilmers of m & t bank. 10 wilmers claimed that of the see the dodd – frank wall street reform and consumer protection act, http : / / frwebgate. access. gpo. gov / cgibin / getdoc. cgi? dbname = 111 _ cong _ bills & docid = f : h4173enr. txt. pdf. see “ restoring american financial stability, ” a summary of the bill, http : / / banking. senate. gov / public / _ files / financialreformsummaryasfiled. pdf. see “ paradise lost : addressing ‘ too big to fail, ’ ” speech by richard w. fisher at the cato institute ’ s 27th annual monetary conference, nov. 19, 2009, and “ minsky moments and financial regulatory reform, ” speech by richard w. fisher before the 19th hyman p. minsky conference, april 14, 2010. also see note 5 and “ the blob that ate monetary policy, ” by richard w. fisher and harvey rosenblum, wall street journal, sept. 28, 2009. see “ the good banker, ” by joe nocera, the new york times, may 30, 2011. bis central bankers ’ speeches $ 75 billion made by the six largest bank - holding companies last year, $ 56 billion derived from trading revenues. nocera noted that “ in 2007, the chief executives of the too big to fail banks made, on average, $ 26 million … more than double the compensation of the top