GSE Reform: Congressional efforts to reform the government-sponsored enterprises were a hot topic on BankThink this week with Clifford Rossi writing in his latest Risk Doctor column that legislators' recent moves were a reminder of what is wrong with the housing reform process. "Several signs emerged last week from the House and Senate that securing an economically and fiscally sensible approach to housing finance reform is taking a backseat to entrenched political views on both sides of the aisle," he wrote. Alex J. Pollock of the American Enterprise Institute argued that both the Corker-Warner and House GOP bills were right in their aim to end Fannie Mae and Freddie Mac while Scott Simon, a retired mortgage-backed securities trader, supported a government guarantee. "The GSEs have massive information, skills, systems and efficiencies. They also have an incredibly profitable core business," he wrote. "I'm a conservative, but as a taxpayer I'd rather see the government make the money than a private equity firm." We'd add that his argument is conservative in the Burkean sense of favoring slow, incremental change over radical restructuring: "I believe in small government and free markets. I also recognize the importance of initial conditions.
To remove the guarantee without crippling damage would take decades."
Future Model of Banking, Part II: This week's Future Model of Banking posts continued to promote the idea of banks using big data to rebuild trust and intimacy between banks and their customers. "Identity management and trust in the online world may be the new business of banking," wrote Innotribe co-founder Kosta Peric. Dave Birch of Consult Hyperion concurred: "The bank isn't a place to store your money; it's a place to store your data
to safely and securely leave your reputation. Under lock and key, but available to all those with permission to use it." Readers were quick to reiterate that consumer trust in banks may be a hard sell. "Today the general level of trust in our industry is the lowest of the financial services, and below that of many other industries," one reader wrote. "It seems to me a prerequisite for this service is to be a broadly trusted industry, so this future is now at risk." But Bradley Leimer, who leads digital strategy for Mechanics Bank in Richmond, Calif, argued banks had no choice but to adapt. "As we move further into digital experience, the next decade will be even more incredibly disruptive than what we saw in the recent economic downturn," he wrote. "There will be blood." One reader agreed: "Banks have to abandon conservatism and embrace innovation if they are to keep being relevant in the current and future new technological environment where clients are more and more empowered to
spread their opinion!"
Feedback Wanted: Help BankThink wrap up its Future Model of Banking Series by joining us and series contributors for a Tweet Chat on Thursday, Aug. 1 at 2 p.m. to 3 p.m. ET. A lucky participant who tweets a question or comment including the hashtag #TheFutureofBanking, selected at random, will win a free registration to American Banker's ATM, Debit and Prepaid Forum in Las Vegas in October. Readers are also encouraged to weigh in our Future Model of Banking Discussion post. Some answers will be included in a slideshow running next week.
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