BankThink

The nonexistence of "too big to fail" is swell news. Now taxpayers can stop worrying about future bailouts, the Federal Reserve can ease monetary policy and the Justice Department can prosecute the banks purportedly "too big to jail."

In the past, it was tough for customers to change banks. So, we could charge them—and treat them—pretty much as we pleased. Technology renders switching banks easier and cheaper—making banking more competitive, less profitable.

Receiving Wide Coverage ...Bernanke in No-Man's Land: When the history of the financial crisis is written, Federal Reserve Chairman Ben Bernanke will no doubt take flak for many things but timidity about stimulating the economy is unlikely to be among them. A half decade after the crisis, and with the labor market on the mend, the Fed is still buying $85 billion of mortgage-backed securities and Treasuries each month. It's financing the expansion of its portfolio by creating bank reserves. That means banks will be at ground zero regardless of whether the Fed's eventual unwind of its record-setting $3 trillion balance sheet goes smoothly or sparks the next crisis. Fretting over how it will play out has gained renewed urgency in the past week amid new signs of economic strength and the Fed chairman's appearance before the House Financial Services Committee. Even Bernanke admitted he's in uncharted territory, telling lawmakers that no country has ever had a comparable increase in the size of its portfolio and unwound it "in the precisely analogous way." (Ah, to live in a world of Fed-speak!) Bernanke & Co. are now reconsidering bond sales in response to criticism that their third round of purchases is exacerbating the potential for the central bank to, "in a robotic fashion, dump assets" on the market, causing interest rates to climb rapidly, Ethan Harris, co-head of global economics research at Bank of America (BAC) in New York, told Bloomberg. There is growing chatter that the Fed might try to restrain inflation through the rates it pays on bank deposits or by hanging on to its bond holdings until maturity—prospects Bernanke discussed with a scholarly sense of confidence that left some observers unconvinced the Fed knows what it's doing. "Their [Federal Reserve officials'] models are one thing, but the real world is another," says Robert Eisenbeis, an economist at Cumberland Advisors and former research director at the Atlanta Fed. (Eisenbeis and others may be getting the heebie-jeebies recalling the confidence with which Bernanke assured the world shortly before the financial crisis that bad subprime mortgages posed no threat to the broader economy.) Money managers who play with their own and clients' money are voting with their wallets on the prospect that when all talk is over (or, more likely, as it blathers on) interest rates will start rising. "Figuring that the Federal Reserve won't be able to keep a lid on interest rates forever, large money managers such as BlackRock (BLK), TCW Group Inc. and Pacific Investment Management Co. are getting ready for the day when rates take their first turn higher," reports the Wall Street Journal. "It isn't coming anytime soon, these investors say. But when it does, they worry, the ascent will be swift and steep." The moves include: buying floating rate debt, interest-rate swaps and inflation-protected bonds that will increase in value; and shorting U.S. Treasuries. "We don't subscribe to the view that once the fire starts, we'll be able to outrun everybody through the door," Stephen Kane, managing director for U.S. fixed income at TCW in Los Angeles told the Journal. "Rates could be up 50 basis points before your traders can get all the sell orders through." Bloomberg, Wall Street Journal

What Frank Diekmann found while rummaging around the bottom of his GAC attendee bag.

Marcus Schaefer, CEO of Truliant FCU, explains why having followers is not always ideal.

Arp Trivedi, manager of administration with Motion Federal Credit Union, explains how Motion FCU makes itself look larger.

Even if regulators restrict banks' ability to charge overdraft fees, those consumers who value banks that cover their overdrafts will find a way to reward institutions providing the best service.

The Federal Deposit Insurance Corp. responds to two recent posts that cited its underbanked survey results.

Produce a video for members of Congress to watch that focuses on a typical banking transaction and shows the various laws, regulations and other issuances that come into play at every stage of the process.

The Federal Reserve Board released the first round of results from stress tests required under the Dodd-Frank Act. American Banker's Joe Adler asks and answers everyone's frequently asked questions.