BankThink

Receiving Wide Coverage ...The Computer Is Killing Brokerage Firms: Trading firm Knight Capital suffered $440 million in losses after its new software system went crazy and swamped the stock market with errant trades. The Times reports Knight bumped up against a deadline and used the software, designed to take advantage of a new Wall Street trading venue, before it had to time to work out the glitches. Fortunately, the market handled the malfunction; it was down less than 1% on Wednesday and Thursday. But the error has called attention to how (even more) perilous the stock market has become as a result of technological advancements and has some regulators clamoring for more controls to be instituted. The Securities and Exchange Commission and the Financial Industry Regulatory Authority are investigating the matter. According to the Times, some SEC officials are pushing for measures that would force firms to fully test coding changes before software is put to public use.

What caused the big failures during the crisis? "Lousy management and lax oversight. Those are the problems we need to focus on," writes American Banker editor-at-large Barbara Rehm. "And whether anyone wants to admit it or not, those are exactly the problems the Dodd-Frank Act went after."

After Sandy Weill's let's-break-them-up bombshell, the authors of a certain major piece of legislation can, by comparison, take a more moderate stance on breaking up big banks.

Resurrecting Glass-Steagall means resurrecting the large, highly leveraged investment banks engaged in high-risk trading for their own accounts.

Phones aren’t the solution, they’re the problem. But behavior analysis helps improve security.

Receiving Wide Coverage ...Making Dollars on Data: As financial institutions turn to technology for revenue, efforts have been made to capitalize on personal data. American Express's Serve, for example, banks on the idea merchants will pay for spending habit data captured by the digital platform. But, as this article from CNNMoney illustrates, there are other, possibly better ways to capitalize on the data craze. According to the article, several start-ups are developing "data lockers," a cloud-based method of essentially protecting a person's data from everyone they don't want to see it. While the article itself doesn't suggest banks compete with the emerging start-ups, it's hard not to see the opportunity here. A big bulk of the data a consumer is going to want to shield from third-party is information financial institutions already have: credit card numbers, checking account information, personal data related to loan applications, etc. Offering to shield this data may be one service for which customers are willing to pay. As one commenter noted, "If the assumption is that customers have a choice, I can imagine many people preferring to have control over their personal data."

The CFPB has taken its first civil action, suing a Los Angeles law firm that it says has preyed on distressed borrowers by offering bogus mortgage loan modifications.

OK, this isn’t your normal DFRW fare, but we can’t quite let this vision go.

FHFA acting director DeMarco's rejection of principal reductions for underwater homeowners led some to praise his judgment and others to call for his termination. What's your take?

Shouldn't we want to preserve the benefits of being big, global and diversified if society can manage these banks' risk exposures and support their stabilizing effects on economic order?