We need regional and small banks in order to make American great again. But the problem for these kinds of banks is that they’re constrained by regulations designed to reel in Wall Street banks after a nearly $1 trillion bailout, a secret Fed loan program and the printing of $3.5 trillion to buy back toxic assets from those same banks.

Dodd-Frank legislation regulates all banks with $50 billion in assets, which means banks that are fractionally smaller than Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS) and other ivory tower institutions that took extraordinary risk and enjoyed private gains while sharing the losses with an unwilling public. I’m hopeful there will be a reasonable adjustment to Dodd-Frank.

Meanwhile, big banks continue to shun Main Street when it comes to lending. That might change with the Fed hiking rates and trading revenue flat in a low-volatility environment, but the fact of the matter is that the big banks still have very little need to extend risk to regular folks. They can talk big games, but I’m not buying their excuses, including that there isn’t demand from Main Street for loans.

According to the Federal Reserve Senior Loan Officers Survey, banks expressed the following when asked about willingness to make consumer installment loans in the second quarter of 2017:

  • Unchanged: 83.1%
  • More Willing: 13.8%
  • Less Willing: 3.1%

However, actual lending to Main Street was spotty at best, even as more banks say they have eased standards.

And according to Main Street, demand for loans is actually waning.

Two Portraits of American Lending

With several big and regional banks reporting earnings, there is a clear picture emerging that once again underscores my contention that maybe a return of Glass-Stegall – which forces big banks to split into two entities: one that trades and one that lends – is needed in order to inject cash into the nation’s economy.

Here are some of the latest highlights:

Big Banks:

Wells Fargo’s (WFC) loan balance was down $982 million from a year ago, driven largely by reduced consumer lending.

  • Mortgage origination: $56 billion, -11% year-over-year
  • Auto originations: $4.5 billion, -45% year-over-year
  • Deposits: +$64.5 billion

JPMorgan Chase (JPM) saw a bump in consumer banking but declines in loan originations.

  • Mortgage origination: $23.9 billion, down from $25 billion last year
  • Auto originations: $8.3 billion, down from $8.5 billion last year
  • Deposits: $639.9 billion, +10% year-over-year

Regional Banks:

Headquartered in Cincinnati, Ohio, the epicenter of blue collar economic angst, Fifth Third Bancorp (FITB) saw mixed loan changes with mortgages up significantly and ahead of growth in deposits. However, auto loans were lower on stricter standards.

  • Mortgage loans: $15.4 billion, +10% year-over-year
  • Auto loans: $9.4 billion, -14% year-over-year
  • Transactional deposits: $95.8 billion, +1% year-over-year

KeyCorp’s (KEY) loans increased dramatically and its increase in deposits was well ahead of the pace.

  • Commercial loans: $40.7 billion, +24.6% year-over-year
  • Other consumer loans: $11.4 billion, +118.8% year-over-year
  • Deposits: $102.8 billion, +39.1% year-over-year

Zions Bancorporation’s (ZION) rate of lending to consumers outpaced its rate of deposit growth.

  • Commercial loans: $22.2 billion, +1.3% year-over-year
  • Consumer loans: $10.3 billion, +11.1% year-over-year
  • Deposits: $52.4 billion, +4.2% year-over-year

I look for the regional banks to continue stepping up to the plate, and Wall Street banks will have no choice to join them as the key metric for their share prices is net interest growth and margins.

Not unlike the tax hurdle, I would prefer the Trump administration took small steps toward banking reform rather than aim for a grand record-breaking deal, which has failed with respect to healthcare. They can fix that $50 billion threshold quickly and remove other barriers that will further unleash Main Street growth.

I think recent comments from the CEO of Zions Bancorporation say it all:

As chairman and CEO of Zions Bancorp., I am proud of the impact that my bank has on the local economies we serve, and the larger impact that regional banks make on the nation’s economy as a whole. Regional banks – like Zions and about 20 others – operate traditional banking business models. We take deposits and offer consumer and commercial loans that support small businesses critical to economic growth. My bank has $32.4 billion in loans to businesses, the median balance of which is $72,000. That excludes business credit cards, which would reduce the median balance even further. Relative to money-center banks, regional banks disproportionately provide this type of credit, supplying the financial equivalent of oxygen to small businesses, while presenting a fraction of the systemic risk posed to our economy by the very largest financial institutions.

I applaud Zions Bancorporation and others and think that as a group the regional banks are great investments for the long term. As they growth their Main Street loan portfolios, their share prices should grow, too, and I’ll be focusing on the strongest.