Municipal Misfires? A fresh wave of cities and states are considering public banking, but the Cato Institute's Mark Calabria says that government-owned banks are a cure worse than the disease. For one thing, he says, they're prone to corruption and mismanagement; for another, history shows that their "lending decisions become increasingly driven by politics rather than economics." But commenter "masaccio" argues that public banks are still a better alternative than megabanks: "At least the public banks can be made transparent by enforceable laws." And commenter "McVoice" leapt to the defense of the state-owned Bank of North Dakota, arguing that its partnerships with community banks allow small lenders to "make significantly larger-sized loans with more lines of business than their counterparts in other states."
TLAC Shortcomings: The Financial Stability Board's total loss-absorbing capacity proposal doesn't go far enough to ensure that banks can fail without requiring government bailouts, writes Christopher Whalen of Kroll Bond Rating Agency. The fact that the OTC derivatives market prioritizes counterparties over other creditors in the event of a bank failure remains a big problem, since there's still the possibility that "governments would be forced to subsidize payments to the derivatives counterparties in order to avoid financial Armageddon." Commenter "deancw" was on board with Whalen's analysis and added that there's another threat to worry about: "Grossing up real estate prices to cover debt through asset inflation is blighting the built environment and degrading the good faith in [the] market."
Also on the blog: Subprime consumer lenders may think they've got risk-adjusted pricing models all figured out, but they're giving too little consideration to consumers' income and debt ratios, according to former Wells Fargo senior credit officer and Berkeley Research Group managing director Neil Librock.
New York Community Bancorp president and chief executive Joseph Ficalora warned that vague language in draft legislation to change Federal Home Loan Bank membership requirements could damage the local focus of the system.
Former federal attorneys Peter Skinner and Matthew Schwartz alerted banks to an uptick in trade-based money-laundering.
Lawmakers who fail to see community banks' need for regulatory relief should consider the fact that even federal and state regulators are now pushing for changes, writes Louisiana Bankers Association head Robert Taylor.
Building smaller branches, in more convenient locations than typically found today, can help community banks increase human interactions with customers even smartphone-crazed millennials, writes consultant Dave Martin.
Do customers really want to pay $10 a month for access to ATM machines? It's a counterintuitive idea for mainstream banking customers, but one that may make sense for people who'd rather not be surprised by the cost of fees that accumulate over time, according to PaymentsSource editor in chief Daniel Wolfe.