New York Community Bank (NYSE:NYCB) is boxed into a $50 billion corner, courtesy of Dodd-Frank. Once the bank reaches $50 billion in assets, regulatory burdens skyrocket and costs escalate. NYCB has been trying to figure out a path forward for a very long time. The bank first mentioned the dilemma in a 2012 conference call:
You know I think that we are contemplating that in combination we would be $60 billion or better in order to basically accommodate the burdens of being bigger than $50 billion.
CFO Thomas Cangemi graphically referred to the $50 billion + SIFI designation as the "lion's den" in NYCB's 2013 conference call. We will have to admit this is a difficult problem. Dodd-Frank imposes heavy and expensive regulatory burdens on banks surpassing $50 billion in assets. This is indeed a "lion's den." To understand how destructive the SIFI designation is, look at what NYCB has done. The bank avoided organic growth for 5 years in order to keep its balance sheet under $50 billion while on a quixotic pursuit of a large acquisition. Unfortunately, NYCB's approach has not worked.
