'Complexity Has a Way of Creeping Back In': Comments of the Week
March 12, 2015 4:21 PM
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 from our social media platforms.
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In response to an argument from M&T Bank chairman and CEO Robert Wilmers that banks should be regulated by complexity rather than their size:
"The problem with allowing gigantic size is that complexity has a way of creeping back in. Citibank has been bailed out four times by the taxpayer. Prior to each of the crises that precipitated government action, we were assured that regulators / regulations had them (and other banks) under control."
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(Image: Bloomberg News)
On the news that two activist groups have asked federal regulators to investigate whether OneWest Bank made donations to community groups in exchange for their support of its proposed merger with CIT Group:
"I thought that was whole purpose of these public comment periods on bank mergers. To shake down the banks for contributions to the 'community activist' groups. I guess these guys didn't get their checks."
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On why a bill that would allow regulators to use discretion in designating systemically important financial institutions could backfire on regional banks:
"So if the designation of a SIFI is not based on asset size, but rather on regulatory discretion, then a bank UNDER $50 billion could be designated a SIFI. Regional banks should heed the warning 'be careful what you wish for.'"
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On a bill that would empower the Fed to determine the financial benefits that big banks receive because the markets believe the government would bail them out in a crisis:
"Expecting the Fed to reveal the subsidies of [too big to fail] is like putting the wolf in charge of the hen house. It was the Fed that delivered hundreds of billions of subsidies in the form of cheap credit to insolvent institutions under the guise of liquidity. It was the Fed that granted bank charters virtually overnight to the failing non-banks."
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On why well-managed megabanks should be treated differently than their troubled peers:
"I constantly wonder why regulators are incapable of differentiating between well-managed big banks and banks that, almost on a yearly basis, make huge mistakes
There is no sense in breaking up a successful institution just because it is 'big' or even 'complex' if it is managed well, is a good corporate citizen and does nothing to threaten the country's financial well-being."
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On a proposal to overhaul U.S. housing policies in order to better reflect the economic realities of the post-crisis era:
"While we're at it, let's consolidate Federal Housing Administration, VA, and Rural Development into one agency. You could still offer targeted programs for vets, rural areas, etc. But why do they have different standards? I just (reluctantly) switched an application from RD to FHA because apparently FHA money is sprinkled with magic dust that makes the ineligible credit circumstances for RD go away. This business is driving me nuts."
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On the suggestion that the government develop a plan similar to 529 college savings accounts that would allow renters to save for housing tax-free:
"I like the 529 plan analog-my two sons have very modest & manageable student loan debt because we (their parents) were able to invest tax-free in a college savings plan. Had we been able to do so for their future housing, we would have."
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On the need for the Consumer Financial Protection Bureau to explore whether class action lawsuits actually benefit the plaintiffs:
"The big issue not addressed in the CFPB study is how class actions have worked in other areas such as shareholder derivative lawsuits. That is one of the greater judicial scandals. Actual payouts to shareholders have been extremely low
Legal fees are the only reason these cases are filed and the only beneficiaries are the attorneys. In reality this is not a matter of fairness to bank customers, it is an opportunity for the plaintiffs' bar."
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On the fear that the Federal Reserve's stress tests will overshadow other important regulatory efforts to ensure that big banks can withstand future economic downturns and crises:
"I continue to be concerned that stress testing may take on too important a role in supervision, negating the essential insights of experienced examiners regarding asset quality, operations weaknesses, internal controls and risk management decision execution. Let us never forget that the first modern application of stress testing, mandated by statute, was for the supervisory oversight of Freddie and Fannie. Useful but by no means infallible."
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(Image: Bloomberg News)
On the argument that contrary to regulators' fears, Bitcoin is actually a poor tool for money laundering (via Reddit):
"Bitcoin itself is not going to launder money (i.e. make it look like it came from a legit source) but it would be possible to build a front business that "accepts payment in Bitcoin" and launder the money that way.
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