'Banking Is Like Marriage': Comments of the Week
May 13, 2016 7:30 AM
American Banker readers share their views on the most pressing banking topics of the week. Comments are excerpted from reader response sections of AmericanBanker.com articles and our social media platforms.
On what to expect if and when the Office of the Comptroller of the Currency makes available a "limited-purpose" charter designed for fintech companies:
"Banking is like marriage: it is an honorable institution, but be ready for the commitments."
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On the paucity of new banks created since the crisis:
"After the crisis the word went out, informally via the FDIC and the chartering authorities themselves, not to bother filing for new charters, because the FDIC would sit on them. Seven new charters in five years. That says it all. To blame the economy is indeed hogwash; new charters, ably run, in fact do better at the depths of a crisis because they do not suffer from the drag of underwater loans. FDIC did not want new competition for existing banks that were suffering. The least they could do is admit it."
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On whether marketplace lenders' recent setbacks are a sign of their downfall or just growing pains:
"To maintain growth, will marketplace lenders have to take more risk? Lower rates to borrowers? Increase spending on advertising? What impact would these actions have on credit quality, yields, and investor appetite for the loans? The author also overlooks the fact that traditional lenders can and will acquire the technology used by marketplace lenders, thereby replicating their origination costs, while avoiding the problems of the gain on sale revenue model. Marketplace lending is certainly not buried, but its health is very fragile."
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On banks planning to compete with payday lenders by offering a small-dollar installment loan product:
"Sounds like the banks' 'secret plan' is to compete if the regulators will let them. Banks already offer the two most popular sources of small-dollar credit, namely credit cards and debit overdraft. But in our very diverse economy, there are customers who either choose not to use these sources or for various reasons (and/or regulations), do not qualify. Banks like to have customers, so no surprise that they would like to find ways to serve these customers, too."
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On the slew of recent troubles for marketplace lenders:
"What did anyone expect? No regulation
borrowers and lenders don't know each other
impersonal online agreements
no capital to back up commitments
inexperienced lenders (and probably VERY experienced borrowers)
no inspection or verification of collateral (if there is collateral)
what could possibly go wrong?"
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In response to Google's decision to ban payday loan ads:
"Is Google an arm of the consumer groups? What about banning banks because of overdraft? What about higher priced student loan originators? This is another Operation Chokepoint using the Internet monopoly."
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On whether tougher capital ratios and better examination can fix the "too big to fail" problem:
"The notion that continuous examination could protect the body politic in some way in our age of regulatory capture strains credibility asking the fox to walk through the hen house every day really won't do much to help maintain the supply of eggs. The leverage ratio does, however, hold out promise. I just don't see why it can only work if the banks are allowed to grow in an unlimited fashion. We may not like the cost of limiting the risk associated with scale, but we do know that we will pay for it sooner or later."
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Challenging the notion that marketplace lenders can recover from recent woes:
"The argument essentially boils down to 'this time it's different.' Hmmmm. Of course their cost structure is lower. They don't have to bother themselves so much with pesky little things like 'regulation' and 'CFPB' (yet). Maybe they can get a credit union charter and avoid taxes while they're at it."
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