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Taxes, Trump & Regulatory Burdens

Johnny Allison: “An exciting time to be in business”

Home BancShares Inc., of Conway, was listed this week as “America’s Best Bank,” according to Forbes magazine. The financial institution, and parent company of Centennial Bank, topped the list of 100 of the country’s largest and most successful banks.

“It’s a good time overall for the banking industry,” the article reads. And Johnny Allison, the colorful founder and chairman of Home Bancshares, agrees. The manufacturing magnate-turned-banking titan recently sat down with Arkansas Money & Politics to talk taxes, Trump and regulatory burdens.

Last month, Congress put their final stamp of approval on the largest tax code overhaul in decades. President Donald Trump quickly signed the bill into law, marking his first major legislative accomplishment since taking office.

Allison said he’s a huge supporter of the overhaul. He sees tax reform as an opportunity to grow his company and reward his investors and employees.

“It’s outstanding,” Allison said of the Congressional vote. He estimates his company will save anywhere from $50 to $60 million a year under the new code. “We can reward our shareholders. We can give extra bonuses or create additional incentive programs for our people. We can use that capital to acquire additional financial institutions. We’ll put it to work.

“The bottom line is,” he added, “if you have $55 million in a pot, would you rather have the U.S. government spending it or Home Bancshares and Johnny Allison spending it? Who’s going to spend it to best serve the people of Arkansas and their companies? There’s no question; it’s black and white.”

Allison describes himself as a conservative businessman. And though he said President Trump has at times been hard to stand behind, he sees no other viable option.

“Trump’s been hard to stay with,” Allison admitted. “But the problem is, as I told my good friend [former Arkansas] Gov. Mike Beebe, the Democrats left business people no choice. We’ve had regulations coming at us right and left. We’re taxed to death. There was no winning. There was no way to win. Now, there’s hope.”

Allison pointed to the economic potency of Trump’s presidency, with markets rising steadily since he took office. The Dow Jones industrial average rose nearly 5,000 points this year, for the first time ever. According to Allison, the U.S. government has to curb spending in order to take full advantage of real economic growth.

“People like to say that Ronald Reagan created a larger deficit,” Allison said. “He didn’t create a larger deficit, he quadrupled the revenue and they spent more money. That’s the problem. If we can control spending and get 3 percent GPD growth, we’re going to come out of this deal just fine… It’s an exciting time to be in business in this country.”

And though it may be a good time to be in business, bankers like Allison are still forced to bear regulatory burdens handed down to them by the federal government. A prime example of those cumbersome regulations, he said, is the Bank Secrecy Act. The Bank Secrecy Act, passed in 1970, requires financial institutions to assist government agencies in detecting and preventing money laundering associated with organized criminal activity.

“I’m not with the DEA. I’m not with the CIA, and I’m not with the IRS,” Allison said. “These regulations have put us in a box, where we’re playing these roles. And we don’t have that experience. I don’t know what a DEA agent does. I’m not an IRS agent. But we still have that responsibility.

“If we don’t do it, and if we don’t catch it, we get penalized,” he added. “I guess I need to hire a DEA and an FBI and a CIA. I guess I need to hire those people and put them in place. Here, we have people with finance degrees. That’s pretty aggravating to me.”

Earlier this year, Home Bancshares’ assets exceeded $10 billion, placing them in a special category when it comes to financial institutions. Once an institution reaches $10 billion, it’s required to report to the Consumer Financial Protection Bureau, an agency Allison compared to a communist organization with no oversight.

“Somehow, after crossing that imaginary line of $10 billion, we become a giant threat to the world,” he said. “I’m not sure I have the patience for it. We run a great bank. We’re one of the top performers in the country. To be treated as if we don’t have enough sense to get out of the rain is pretty frustrating… The problem is that Washington is in charge.”

Allison said it was the first time in his career he considered retiring. “That was my biggest fear of going over $10 billion,” he said of dealing with the CFPB. “Those people don’t report to anybody.” That changed, Allison said, when Trump pulled the agency’s fangs out. And he believes the president is taking the country in the right direction in regard to business and finance.

“Trump is putting people in place to give regulatory reform to the banking industry,” Allison he added. “I think that is a huge positive.”

The Forbes list of  “America’s Best Banks” ranks institutions on metrics related to growth, profitability, capital adequacy and asset quality. The rankings were based on Sept. 30 regulatory filings, and also includes Bank of the Ozarks of Little Rock (No. 3) and Simmons First National Corp. of Pine Bluff (No. 52).

The full list of banks can be found here.

Photo by Jamison Mosley

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