BankThink

The recent $25 billion settlement by 49 attorneys general and the Obama Administration against the five largest mortgage servicers for deficiencies in their foreclosure practices is emblematic of misdirected energy and bad public policy. Like the Dodd-Frank financial reform law, the settlement is living proof that the judgment of politicians can be clouded by fixes that sound good, but miss the target. State and federal governments' need/desire to punish financial services companies is actually constricting lending and impeding the economic recovery.

Explore the negative impact of the Durbin Amendment on small businesses, including increased fees and reduced banking services, contrary to claims of negligible effects.

Receiving Wide Coverage ...The Muppet Show: Greg Smith is leaving Goldman Sachs today, and oh man is he going out with a bang. In an incendiary op-ed/open resignation letter in the Times, Smith, who was an executive director and head of equity derivatives for Europe, the Middle East and Africa, laments that the firm’s “moral fiber” has deteriorated. “I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.” In addition to reporting the use of standard trader slang like “ripping eyeballs out” and “hunt[ing] elephants” (wasn’t that one in Oliver Stone’s original Wall Street movie?), Smith reveals that his former colleagues have coined a wryly condescending name for their unwitting clients: “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail.” In response, Goldman Sachs is telling reporters: “We will only be successful if clients are successful. This fundamental truth lies at heart of how we conduct ourselves.” The op-ed is naturally generating a great deal of blogosphere buzz this morning. There’s already a parody on the U.K. humor site The Daily Mash, entitled “Why I am leaving the Empire, by Darth Vader.” Speaking of Goldman’s treatment of clients, the CFTC has fined the firm $7 million “for failing to diligently supervise accounts that it carried for a brokerage client.”New York Times, Wall Street Journal, Financial Times, Reformed Broker, Business Insider, The Daily Mash.

The go-go years of financial services growth are over. Today the focus is on capital adequacy, strict underwriting standards and conservative investing. The panicked days of September 2008 that spawned the Dodd-Frank Act mean the days of light-touch regulation also are gone.

Until the mid 1980s, most fraud went undiagnosed or misreported. The debate today seems to be whether the increasing digital landscape ends up increasing or decreasing fraud overall.

Breaking News This Morning ...BB&T modifies its agreement to acquire BankAtlantic

A successful payment network would unite banks under a large and trusted external corporation in order to more simply and transparently tackle currently complex financial supply chains.

The Dodd-Frank financial regulatory reform bill included a provision creating Offices of Minority and Women Inclusion in all 20 federal agencies that regulate our financial system.

Receiving Wide Coverage ...Stress Tests: The results of the latest round of regulatory assessments of big banks’ ability to withstand economic shocks are due out this week. The test results “are expected to show broadly improved balance sheets at most institutions,” says the Times. According to the FT, the average share of profits that large banks are permitted to pay out as dividends is seen doubling to 48%. New York Times, Financial Times

Notes from around the Credit Union Community.