The Fed as Backseat Driver: The Federal Reserve says it wants to usher the financial industry toward developing faster payments without issuing any directives, and Eric Grover hopes the central bank will keep its word. Grover, a payments consultant, suggests that the private sector is better suited to the task than the government, and further argues that the Fed lacks the authority to issue a mandate. Several readers took an opposing view, writing that the Fed must take the reins on faster payments. "The free market cannot move [the banking] system without critical mass," writes Brett King, of Moven and "Breaking Banks" fame. "Critical mass is hindered in this instance by the existing payments ecosystem. So unless there is a clear federal directive, that critical mass won't come in the timeframes required to keep the U.S. competitive" with foreign countries. Another reader, Gary Lewis Evans, suggests that the Fed should take a central role and facilitate real-time clearing of transactions through the Internet.

Too Big to Fix? Like the Stay Puft Marshmallow Man, the world's largest banks are tough to wrangle, according to financial regulation expert Mayra Rodríguez Valladares. She argues that while it's too early to know the efficacy of all the regulations aimed at ending "too big to fail," there's clearly reason to worry about big banks' operational risk and the validity of their living wills. The post is the latest in a continuing debate over TBTF on BankThink. Those in need of a refresher can check out an op-ed by Boston University professor of banking law Cornelius Hurley and a response from The Clearing House Association president Paul Saltzman. Separately, Valladares makes the case for H.R. 888, a bill that would require banks to accumulate capital equal to the amount of market subsidy they receive.

Probe Your Customer: Fresh revelations about money-laundering and tax evasion at HSBC's Swiss banking unit should serve as a reminder of the importance of beneficial ownership rules, according to Mary Beth Goodman of the Center for American Progress. "It is essential that banks know the identity of the living, breathing person who controls bank accounts rather than the corporate entity," she writes. Several readers took issue with this argument, including Wayne Abernathy of the American Bankers Association, who warned in the comment thread that if Goodman had her druthers, bankers would have to become even bigger busybodies than they already are. "Her approach would turn the Bank Secrecy Act into the Bank Surveillance Act," Abernathy wrote. "Yet one more major step to drive people--the vast majority who are not criminals but neither are they fond of the government sifting through their bank accounts--out of the banking system. When banks become part of the nation's policemen, don't be surprised if people are reluctant to go there voluntarily."

Reader "Masaccio," a regular BankThink commenter (and frequent Abernathy sparring partner), was incredulous: "Bank Surveillance Act? Really? Banks have the information on all of us poor people already, and if the government wants it, it's a subpoena away…. Why shouldn't the filthy rich drug lords, Ponzi schemers, cheats and frauds, and trust fund babies be subject to the same rules as the rest of us?"

Speaking of bankers being deputized by law enforcement, former Federal Deposit Insurance Corp. chair William Isaac says Operation Choke Point still casts a long shadow over the industry even as the FDIC works to reel it back. And speaking of Choke Point, consultant John McMickle notes that the recent nomination hearing for prospective attorney general Loretta Lynch characterized banks as the targets of outsized scrutiny under the Justice Department's probe, rather than as predators. This suggests Congress may be ready to ease up on banks, he writes.

Also on the blog: When Coca-Cola starts peddling high-protein milk, it's a sure sign that shifting consumer preferences can shake up even deeply entrenched business models, according to Karen Shaw Petrou, managing partner at Federal Financial Analytics. She warns that nonbanks will gladly edge out traditional financial institutions unless banks figure out a way to rebuild their franchises.

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