BankThink

In our increasingly detached world, where folks spend more time staring at little screens in their hands than interacting with people, the things that create real customer relationships are as simple as ever.

"It would be hard to imagine a more thorough rebuke of how America's Securities and Exchange Commission … tries to discipline financial firms," The Economist’s Schumpeter blog says of New York District Judge Jed Rakoff's rejection of Citigroup's settlement with the SEC.

Two DMV employees and two others are accused of using their positions to obtain and sell Social Security numbers and other personal details.

An OWS subgroup discusses what would constitute a truly “alternative bank,” how much could be borrowed from the credit union, community bank and mutual models, and how to take it several steps beyond.

Receiving Wide Coverage ...‘Raked’ over the Coals: “The company neither admitted nor denied the SEC’s charges.” That stock disclaimer is nearly as common in the financial pages as “terms of the deal are fluid and the talks could still fall apart.” But a ruling Monday by U.S. District Court Judge Jed S. Rakoff could discourage boilerplate settlements in which the defendants pay a fine without addressing the substance of the case. Rakoff rejected the SEC’s proposed $285 million settlement with Citigroup over allegations the bank misled investors in the sale of a CDO that went kablooie. While he dismissed the settlement amount as “pocket change,” the judge’s main beef was what he described as “the SEC’s long-standing policy – hallowed by history, but not by reason – of allowing defendants to enter into consent judgments without admitting or denying the underlying allegations.” Such deals, he wrote, are “frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies.” The case may now head to trial; the parties could appeal, but doing so would risk “a ruling that would enshrine Judge Rakoff's tough stance for use by other courts,” the Journal says. The paper’s “Heard on the Street” column approves of the judge’s refusal to rubber-stamp seemingly weak settlements. To serve the interests of investors and the public, “some cases need to go to trial for the facts to be established, whether that means a win for the SEC or not,” the column says. But an analysis in the Times’ “DealBook” identifies some practical issues with this approach: “Requiring some acknowledgment of wrongdoing by defendants is likely to result in fewer settlements and more trials, which are costly for an agency already laboring under budgetary constraints.” A comment posted by a Times reader goes further: “The flaw in the judge’s reasoning is that he misunderstands the public interest as consisting solely of the resolution of this one case, rather than in the SEC's overall effectiveness in enforcing the law. … The time it will now spend either appealing this order and/or trying a case that could have been resolved by consent is time that [it] will not spend looking for and prosecuting other violations of the law.” Aside from saving face, a big reason companies like to settle without admitting or denying they broke the law is that admitting violations would prevent them from denying them in subsequent private litigation, the “DealBook” article notes. Wall Street Journal, New York Times, Financial Times, Washington Post

It's hard to pin down precise numbers, but anecdotal reports in news outlets across the country suggest that hundreds of thousands of Americans responded to "National Transfer Day" campaign by switching their deposits from major banks to credit unions.

During the last century, economic growth in the United States was unparalleled. A large portion of that growth came from the explosion of capital formation for small companies. It is high time that America gets back to that future.

The credit union business model (is supposed to be) all about the sharing of Best Practices with other credit unions.

Receiving Wide Coverage ...Stress and Confidence: The Journal's "Heard on the Street" column deems the Fed's upcoming stress tests appropriately stringent. "The lack of investor confidence in banks justifies a harsh approach," the column says. The idea is the sector will need a credible assessment of its health, and/or more capital, so U.S. banks don't run into the same problems raising funds in the credit markets as their European brethren have recently. Separately, an op-ed in the Journal by two UCLA professors makes a similar argument but takes a somewhat more urgent tone. "The recent volatility in bank stocks is a signal that U.S. banks, large and small, are not as healthy as many analysts assume," the authors write. "The Fed's best shot is to apply this latest stress test broadly across banks both large and small and to insist that banks put forward clear plans to build up much stronger capital positions soon." The FT succinctly illustrates the aforementioned funding challenges for European banks with this statistic: "European banks have sold $413bn worth of bonds this year, equivalent to just two-thirds of the $654bn that is due to be returned to investors in 2011 as the debts mature" - making this year "the first time European lenders have collectively been unable to replace their maturing debt with new bonds for at least the past five years." Which brings us to …

Banks are going to need to make hard decisions to exit some traditional businesses. The question is how to do it to maximize what you get at the exit, and in such a way that remaining businesses can thrive.