Guess Who's Calling to Break Up Big Banks Now

Receiving Wide Coverage ...

Dream State: Just stop for a second. Put down your coffee and consider this: the head of the government said the nation’s biggest banks are too strong, make too much money and need to be broken up.

“Frankly, our banks make profits far too easily,” he said. “Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital.”

OK, bankers, no need to choke on your Niman Ranch bacon and locavore eggs. That’s “Communist” China we’re talking about, and those banks are state-owned. The dude speaking is Prime Minister Wen Jiabao. As the Wall Street Journal noted, “Mr. Wen's comments tap into a rich vein of popular anger against China's biggest banks that has been building in recent months online and in the media. The backlash was initially prompted by frustration at what has been perceived as banks' payments of low interest rates on deposits and indiscriminate levying of fees.”

The Times said Wen’s concerns stem in part for a desire to choke a potential housing bubble.

Eswar S. Prasad, a former International Monetary Fund official who teaches at Cornell University, told the New York Times that the remarks “reflect a growing consensus among reform-minded officials that breaking up the large banks may be an essential step to reduce their political influence and pave the way for broad, much-needed reforms to the financial system.”

So, two questions:

1) If Wen ran for president of the United States in November, reckon he’d get a few votes?

2) Is this why U.S. banks are turning tail on their investments in China’s big banks?

Wall Street Journal

OK, forget the 1% and the 99%. Tired of them, anyway. Let’s move on to the 3%. As the Journal tells us: “Last April, federal banking regulators cracked down on alleged foreclosure abuses by announcing enforcement actions against 14 major financial companies and promising widespread reforms.

“A year later, borrowers haven't received any compensation from banks, officials haven't agreed on penalties for errors ranging from incorrect credit-bureau reporting to wrongful foreclosure, and millions of invitations to start foreclosure reviews have received no response.”

Focus on that last clause for a while.

Only 3% of borrowers have applied for the foreclosure reviews specified in last April's consent orders, the Journal says. Last April, you know, like a year ago. “The post office has returned the banks' own foreclosure-related mailings as undeliverable at almost twice that rate. At least one bank is struggling to get systems in place for handling and testing borrower responses.”

The banks may be paying more on the process of foreclosure reviews than they will end up paying in compensation. (Note to self: next life, go to law school.)

"The letters they sent looked like some of the worst scams people are getting in their mailbox," said Lisa Sitkin, managing attorney at Housing and Economic Rights Advocates, which represents borrowers at risk of foreclosure, trying to explain the low response rate.

Financial Times