Breaking News This Morning ...
Sandy Weill Calls for Return of Glass-Steagall: No, you are not dreaming, and this is not a parody from The Onion. This is real. In a CNBC interview this morning, the architect of Citigroup says, “What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.” Now he tells us.
Receiving Wide Coverage ...
Bad Service, Good Investment? Dick Bove, the provocative bank stock analyst, is making headlines again, this time for observing that customer service has a cost, one that he’s concluded outweighs the benefits to shareholders. Frustrated by his treatment as a Wells Fargo customer, he moved his money, but he still likes the stock. From the bottom-line perspective, Bove tells the Times, “Spending time solving problems with people is not selling products. … It’s wasting time.” The implications of this are sobering, and undermine what we thought we learned in Econ 101. As Bove says, “One of the core beliefs you have about any company is that the quality of their product is the determinant of the company’s financial success. … It doesn’t work here.” New York Times, Dealbreaker, American Banker
Beach Reading: Treasury Secretary Timothy Geithner said in a television interview that he’s “deeply offended” by Neil Barofsky’s portrait of him as captured by banking interests in the former Tarp special inspector general’s new memoir. The Times has a critical review of the book by Washington correspondent Jackie Calmes. Blogger Yves Smith is critical of the review. … Got any better book suggestions? Email our American Banker colleague Jeanine.Skowronski (at) SourceMedia.com, who’s putting together a summer reading list for commercial bankers that we’ll be publishing soon. The books don’t necessarily have to be contemporary titles; even moldy oldies that changed the way you think about banking or offer insights on the current state of the industry are fair game.
Fed Kremlinology: In previews of next week’s Federal Open Market Committee meeting, the Times and the Journal parse recent public statements by central bank officials and find that even the inflation hawks are softening their stance against further stimulus. On the Times’ “Economix” blog, Casey Mulligan from the University of Chicago writes that monetary policy really makes little difference in the financial markets or the real economy. And while we thought Philip Maymin was pushing the envelope when he compared the modern banking system to the U.S. Postal Service in a BankThink post yesterday, Judy Shelton goes him one better. In a Journal op-ed this morning, she likens the Fed to Gosbank — the central bank of the Soviet Union in its waning days. (Shelton works at the Atlas Economic Research Foundation; the “Atlas” doesn’t mean what you think it does.)
Regulatory Misses: The Bank of England knew about the risks being taken by JPMorgan’s London traders more than a year before they produced big losses, but didn’t alert other regulators, the Journal reports. Meanwhile, the Times reports that the unfolding global, industrywide Libor-rigging scandal has once again put the New York Fed on the defensive, several months after the regulator had to explain itself in the JPMorgan mess. Wall Street Journal, New York Times
Goldman Sachs’ bank subsidiary has more than doubled its deposit base since late 2008, to $57 billion at the end of June, with considerable help from sweep accounts at independent investment firms with which it partners.