BankThink

The truest way to reach your personal goals is to show your people, in actions and words, that your priority is helping them reach theirs.

"So what does designating some institutions as SIFIs mean for small businesses?" writes Forbes contributor Ryan Caldbeck. "While we don’t know the whole story yet, the answer, to date, appears to be very little."

Banking powers, specifically the power to accept demand deposits, should be limited by Congress to institutions qualifying for federal deposit insurance. Otherwise we face uncontrolled systemic risk from inconsistently regulated entities.

Receiving Wide Coverage ...'Water, Fire, Darkness': Hurricane Sandy is wreaking havoc on the East Coast. Streets are flooded, millions are without power, dozens of homes have been destroyed by a fire and a nuclear plant in New Jersey is on, well, low-to-medium alert. The New York Stock Exchange will be closed for a second straight day Tuesday, a decision that the Journal says is raising questions about the market's disaster preparedness. NYSE and other exchange operators will test a new contingency plan, which involves keeping the Big Board closed but using its all-electronic Arca platform to handle trading of NYSE-listed securities and opening and closing auctions. (The previous contingency plan called for operating the NYSE itself using Arca's systems.) Insurance companies could pay an estimated $5 billion to $10 billion in claims related to the storm, making Sandy one of the 10 most expensive hurricanes in history. According to the Post, it's getting harder and harder for actuaries to predict losses from weather-related damage. The Journal has a thorough run-down of the disaster's impact on various businesses, including JPMorgan Chase, whose "facilities will be open during the storm except for major office centers in lower Manhattan, and only key personnel would work out of the affected buildings while business activity was being relocated to other sites." Despite the interruption to business and destruction of property, economists tell the Times that the event "could actually pump up growth temporarily in a few sectors, like construction and retail sales, when cleanup begins in earnest in a few days." "Temporarily" being the operative word: "Eventually, most spending or other activity is simply pushed forward, a phenomenon known in economics as intertemporal substitution." Or, perhaps, pushed from one sector to another: Suggestions that the hurricane would stimulate the economy were quickly countered by citations of the nineteenth-century economist Frederic Bastiat’s "Broken Window Fallacy." (If you never heard it before, the parable goes roughly like this: Baker's son throws rock in bakery shop window. Baker yells at son. Fellow Parisians tell baker to cut the kid some slack, that it's all just as well, since the money he now has to spend fixing his window will fatten the carpenter’s wallet, allowing said carpenter to buy himself a nice bottle of wine with his usual baguette. Baker says, "yeah, but I was going to spend that money to buy myself some new shoes." You get the idea.) While we're getting deep and philosophical about Sandy, Reuters Breakingviews columnist Rob Cox sees a lesson for banking from the storm: "It is better to stand ready for the worst-case scenario than to skimp," whether that means sandbags and preventative evacuations before a hurricane or building up large capital buffers to absorb future financial hits. His Reuters colleague, the blogger Felix Salmon, sees a different analogy for finance in this disaster. Building skyscrapers in flood zones, but according to sophisticated probability models, is no substitute for the common sense practice of just building them on high ground; hence Goldman Sachs is now reduced to placing sandbags outside its Manhattan headquarters near the waterfront. Likewise, Salmon argues, "dumb regulations like Glass-Steagal[l] and Basel I, which weren’t very sophisticated" nevertheless work better than fancy risk models to mitigate financial calamities.

After absorbing the OTS, the OCC abandoned a comprehensive and sophisticated approach to monitoring interest rate risk.

Two shopping experiences and a well-timed commercial from Isis indicate tapping a payment-capable phone against a reader may, in fact, be so much easier than swiping a plastic card … so long as merchants have complete buy-in.

The Dodd-Frank QM rule will restrict the availability of credit, but it can be less invasive if the CFPB develops a model that weighs all relevant risk factors, not just a few measures of capacity to repay, writes BankThink's Risk Doctor columnist.

Learning to tap into the more creative right hemisphere of my brain enabled me to think in a unique manner about both the problems and opportunities facing my bank.

Ann-Marie Bartels, CEO of EPCOR, works to make ACH easier to explain.

Three little letters. One extraordinary year.