Hey, Mr. President, Where’s the Banking Innovation?!?

Yesterday, the whole regulatory gang showed up for a meeting at the White House with President Barack Obama. Representatives from the OCC were there, as were folks from the CFPB, FHFA, the Fed, CFTC, FDIC, NCUA and SEC. (Alas, the team from TGIF was not invited to the acronym festival.)

The regulators came to discuss “the significant progress that has been made to strengthen our financial system and protect consumers, including the ongoing implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

They should have been talking about banking innovation.

One of the negatives of Dodd-Frank is that regulators are single-mindedly focused on preventative medicine. How can we avoid a credit crisis? is the predominating stance. Indeed, the president yesterday only reinforced this position. This is from the White House’s official “readout” from the meeting:

Protecting consumers is and has been a priority for the President since day one. He understands that in order to build a strong and secure middle class, we need a stable financial system and common sense protections for families across the nation.

But is that really all that is needed? Would not the middle class benefit from not just a stable financial system, but a better one? I can’t imagine anyone would answer that question “no,” yet the federal government is so saddled with implementing Dodd-Frank that the question is not even raised.

I would argue that no entity within the financial system is better positioned to foster banking innovation than the federal regulators, yet doing so is farthest from their minds. The meeting yesterday, at its core, was about regulators pitching the president on more funding. It should have been about something else entirely.

When President Obama came into office in 2009, he put innovation front and center. Early in his first term, he said the following:

If this is truly going to be our Sputnik moment, we need a commitment to innovation that we haven’t seen since President Kennedy challenged us to go to the moon.

At that meeting on Dec. 6, 2010, in Winston-Salem, N.C., President Obama was talking about clean energy. But why can’t he talk about banking innovation? Why is there a presumption that banking innovation is any less important than clean energy or mobile apps? The truth is, there shouldn’t be.

My hope is that the next time the whole gang o’ regulators treks over to the White House, the discussion should not just center on Dodd-Frank implementation and budget, but on what the administration can do to propel banking forward, not just make sure it won’t fall backward. I’m hoping, but I’m not counting on it.