Think True Value — but for banks

In a city where special-interest pleading and finger-pointing has been developed to a high art form, there are no bigger whiners than the community banks. When they’re not complaining about excessive regulation, misguided monetary policy and inflated deposit insurance premiums, they’re railing against unfair competition from big banks, savings and loans, credit unions, credit card companies, finance companies and other unregulated lenders.

Considering this mountain of injustice that has been heaped upon them, it’s a wonder these bankers are able to get out of bed in the morning, let alone show up smiling at the weekly Rotary luncheon.

The latest woe to befall community bankers, of course, has been the collapse of the housing and commercial real estate markets, which hit particularly hard since that is where they’ve put the vast majority of their money over the past 15 years. But who can blame them? After all, much of their consumer lending business has been stolen away by bigger and more efficient lenders who have easy access to cheaper funding through Wall Street and the “shadow” banking system. In the process, many had become addicted to the higher yields offered by asset-backed securities and loans to local home builders, developers and land speculators.

Now, with their balance sheet weighed down by under-performing real estate loans and underwater securities, community banks find themselves in something of a pickle. New regulations that limit the fees they can charge depositors for things such as debit card transactions, overdrafts and ATM withdrawals threaten to dramatically reduce their fee income.

A relatively flat yield-curve has reduced the “spread” between the interest they pay to depositors and the interest they can charge borrowers. And although they still have money to lend, many now find they have lost the expertise, risk appetite and customer relationships to make to small- and medium-size firms in sectors other than real estate.

A couple of Washington financiers have come up with a clever answer to their prayers. One is Lee Sachs, a former Treasury Department official in the Clinton and Obama administrations. The other is John Delaney, the just-nominated Democratic candidate for Congress from western Maryland and founder of CapitalSource, a commercial lender based in Chevy Chase. Their new venture, BancAlliance, is a cooperative of community banks that aims to make loans to mid-sized and large businesses that none of its members has the size, expertise or risk appetite to make on their own.

After one year, BancAlliance has signed up 44 banks with collective assets of $40 billion and closed on about $100 million in loans. The goal over the next few years is to get to 200 banks with $200 billion in assets and a syndicated loan book of $10 billion. At that, the alliance would have the scale and scope of a super-regional bank, even as its members remain relatively small. Think of it as bringing to the banking business what True Value or Ace has brought to the hardware business.