Ripple Effect: Futurist Dick Samson champions the Ripple protocol, an open-source payment and currency exchange system that he says "could transform commerce and banking by making dollars, yen, euros, bitcoins and even loyalty points virtually interchangeable." Banks can use Ripple to offer speedier, cheaper currency exchanges, develop digital safety deposit boxes and create a range of cutting-edge payment products, Samson writes. American Banker readers were more skeptical in their assessments of the system. "I certainly understand how virtual currencies work and are easily applied to certain exchanges," writes one commenter, "but what I don't understand is who or what backs up the virtual currency" in the event of economic turmoil or loss of public confidence. Another reader argues that currencies on Ripple are not so easily interchangeable. People who receive a dollar on Ripple are actually getting "an IOU, guaranteed by the organization as a Ripple gateway, to repay [the dollar] on demand," writes the commenter.
Expanding Access to Homeownership: Regulators should adjust credit score requirements in order to improve homeownership opportunities for minorities and millennials, according to Pastors Mark Whitlock and Sam Rodriguez. "Pristine credit standards are often artificially defined," the authors write, pointing out that foreclosures unfairly damage the scores of many financially responsible African-American and Latino families who lost their homes only as the result of plummeting home prices in their neighborhoods. They also argue that credit scores paint an inaccurate picture of borrower risk because they do not include on-time rental and utility payments. "Borrowers who lack an artificially pristine credit score should not be barred from securing a 30-year, fixed-rate qualified mortgage," the authors write. "One solution could be to offer such loans to otherwise qualified borrowers who agree to commit to a mandatory financial education and credit counseling program." One commenter chimed in to say that all members of the middle class, regardless of race, are being adversely affected by inflated credit score standards. "As a banker of 35 years, I am insulted by the restrictions placed on my underwriting skills and experience by these artificial standards which in many situations allow for no discretion," writes Craig G.
Also on the blog: J.V. Rizzi warns investors to curb their appetites for covenant-lite loans, which impose minimal financial restrictions on the borrower. Peter Wallison of the American Enterprise Institute argues that the Financial Stability Oversight Council has taken an arbitrary approach to designating firms as systemically important financial institutions. The Greenlining Institute's Orson Aguilar outlines a few steps the Small Business Administration can take to help minority business owners access capital and win corporate contracts.
Banks can defend themselves against disparate impact lawsuits by adopting a centralized credit policy, according to Eric Lindeen of Zoot Enterprises. Paul H. Kupiec, a former director at the Federal Deposit Insurance Corp.'s Center for Financial Research, argues against Federal Reserve Board Governor Daniel Tarullo's proposal to measure banks' capital levels with stress tests instead of Basel III capital requirements. And Dave Martin describes how a week in the Magic Kingdom left him marveling at Disney's talent for product rollout.