Oh, Go Disrupt Yourself

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Disruption and Disintermediation: In her widely discussed takedown of Clayton Christensen's theory of disruptive innovation, The New Yorker's Jill Lepore trots out TD Bank as an example of a company that succeeded by eschewing innovations. We won't second-guess Lepore's overall critique of Christensen (plenty of others have, including Christensen himself) but we're calling baloney on the bank example. Sure, CEO Ed Clark avoided convoluted financial "innovations" like asset-backed commercial paper, a decision that proved wise in retrospect. But Clark also introduced evening and Saturday branch hours to the Canadian retail banking market when he ran Canada Trust, a predecessor to TD. Maybe that was just a "sustaining innovation" in Christensen's lexicon rather than a full-blown disruptive one. Still, surely one could argue that Commerce Bank, the New Jersey institution TD acquired and rebranded as part of its expansion in the U.S., was a disruptive force. On a related topic, FT columnist John Authers writes that "banks' centrality to the economy is being nibbled away" by everything from crowdfunding and peer-to-peer lending at the retail level to bond markets on the corporate side.

Wall Street Journal

"BNP Near Settlement With U.S. for Up to $9 Billion" — It would include a guilty plea and a very temporary ban on the French bank's ability to transact in U.S. dollars.

The "Heard on the Street" column reviews a recent New York Fed study measuring securities dealers' reliance on short-term repo trades for funding (an unhealthy habit that contributed to the demise of Lehman and Bear Stearns). The good news: overall, the industry is less vulnerable to runs on this especially fickle form of short-term financing. The bad news: a good number of firms are still exposed to trades that expire in a short period of time. Worse, the study doesn't identify those outfits. "These known unknowns can become dangerous if markets come under stress," the column warns. "[W]hen markets suspect that some financial institutions are critically weak but can't identify which ones, liquidity dries up for everyone."

"Incoming House Majority Leader Kevin McCarthy said on Sunday he wouldn't support reauthorizing the charter of the Export-Import Bank of the United States, placing in doubt the future of a major agency that facilitates U.S. exports" (and guarantees a lot of loans for commercial banks).

Financial Times

"Banks speed up shift to forex automation" — Motivation: "to slash costs and reduce the risk of further price manipulation scandals."

New York Times

"An Employee Dies, and the Company Collects the Insurance" — A morally fraught look at corporate-owned life insurance notes that "banks are especially fond of the practice," in part because these policies count toward Tier 1 capital.

Ex-Treasury secretary Hank Paulson writes an op-ed comparing the bubble that led to the financial crisis to climate change and urging people to act.

"It's Official: The Boomerang Kids Won't Leave" — In large part because of student loan debt. Augurs poorly for home buying, and hence purchase mortgage volume.

"Held Captive by Flawed Credit Reports" — Columnist Gretchen Morgenson describes the Kafkaesque experience of consumers who struggle to get the credit bureaus to fix errors in their files.

"Wall Street's Latest Must-Have? A Volcker Helper" — Law firms are pitching compliance systems to banks, and the Times is on it.

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