REVAMPING SMALL-DOLLAR CREDIT: Banks should embrace the regulation of small-dollar lending as an opportunity to create consumer-friendly products that generate revenue, KeyBank's Bruce Murphy writes. Most deposit advance loans currently on the market hurt borrowers by saddling them with unmanageable debt, he argues. "Let's find ways to offer cost-effective products that allow customers to change harmful financial behaviors, break cycles of debt and live better lives," Murphy writes. Some readers were skeptical about the potential for safe, profitable alternatives to payday loans. "The problem with providing small loans for short terms is the economies of scale it cannot be done at the same rates as larger loans for longer terms," writes commenter gsutton. Another commenter posits that companies offering payday loans are simply responding to consumer demand. "These products exist because Americans want them, and they appreciate the ease and convenience of acquiring the solution to an immediate need, not because they don't have choices or don't understand the cost or risk," writes a commenter posting under the name AllThingsUnderbanked.
BITCOIN'S SAFEGUARDS: Direct consumer oversight of digital currency transactions, aided by cryptographic innovations that leverage Bitcoin's decentralized public ledger, will help protect users and lessen the need for government regulation, predicts the Bitcoin Foundation's global policy counsel, Jim Harper. Several readers raised objections to the Harper's claim that Bitcoin "is fully regulated in its important uses." Commenter MrPotter complains that, despite its name, the Bitcoin ATM operator Robocoin Bank "is not subject to supervision or examination by banking regulators, does not have minimum capital requirements, and consumers' funds are not insured." We seriously doubt Robocoin's putting FDIC stickers on its machines, though. And reader Seth Hoskins noted that Bitcoin exchange businesses are indeed regulated as money transmitters in the U.S., subject to anti-money-laundering and know-your-customer rules. More to Harper's point, and contrary to commenter CharlieBuhl's odd assertion that Bitcoin's use of encryption makes transactions "impossible to audit," Hoskins pointed out that the system is quite transparent. "Bitcoin's encryption serves to disallow double spending, not to maintain anonymity. If you dig into it just a bit, Bitcoin is pseudonymous, with the blockchain being a completely public ledger."
Also on the blog: Arjan Schutte identifies four major trends in financial technology as illustrated by the finalists in a start-up contest. Mobile personal finance apps and cryptocurrencies are on the rise. Alternative lenders are changing the landscape of small business credit. And small data matters just as much as the big kind.
Paul Schott Stevens, president of the national trade group for mutual funds, argues that mutual funds pose no threat to the stability of the financial system and therefore should not be subject to designation as systemically important financial institutions.
Georgetown University professor Adam Levitin makes the case against mandatory arbitration, arguing that it offers justice that is inferior to that of the court system.
Bank board directors should prioritize creating a CEO succession plan in order to hang on to top talent and cut transition costs, according to Peter Thies and Ollie Sommer of the management consulting firm River Group.
American Banker's Washington Bureau Chief Rob Blackwell explains the thinking behind Tim Geithner's pro-bailout stance. As Geithner reveals in his new memoir, Stress Test, the former Treasury secretary worried that the collapse of Washington Mutual would worsen the financial crisis by forcing the bank's bondholders to take haircuts. "Wamu clearly haunts Geithner," Blackwell writes in his analysis.
Unnecessary regulation is usurping the time, staff and money that community banks would otherwise dedicate to financial literacy efforts, according to BancVue's Gabe Krajicek.
Housing finance reform must prioritize affordable housing and lower the payment requirements for borrowers, writes National Urban League president and former New Orleans mayor Marc Morial.
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