Complexity Is 'the Detached CEO's Vanity': Comments of the Week
April 17, 2015 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 from our social media platforms.
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On the argument that the scope of financial firms' activities, rather than their size, poses the biggest threat to the stability of the financial system:
"We have experience at operating massive scale fairly safely (e.g., airlines, energy). The problem comes when we also think that we can safely manage across massively different businesses with very distinct, even incompatible risk profiles, and this problem is only made worse when the business units are tightly interconnected through funding, etc. This is the detached CEO's vanity e.g., [former GE CEO Jack] Welch and some banking titans. After all, [former Wachovia CEO] Ken Thompson declared that once mastered the universal banking model was the ideal, and then he bought Golden West without really understanding the dynamics of that company's business, and destroyed Wachovia."
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Image: Bloomberg News
On whether the breakup of GE Capital plays into the hands of regulators:
"If breaking up large financial institutions truly is the goal of financial regulators which I doubt then this will likely be a pyrrhic victory, as it results in decreased competition and reduced capacity to serve large financial customers, the largest of which is the U.S. Treasury."
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Image: Bloomberg News
On the regulatory crackdowns on nonbank giants like GE in the aftermath of the financial crisis:
"The attack on nonbanks is a very ill-considered policy by regulators because it is retarding credit creation, job growth and overall economic performance."
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On why banks might have been better off had they let Wal-Mart's application for an industrial loan company charter go through without protest:
"Banks may have lost the opportunity of having Wal-Mart's financial services regulated in the same way they are regulated. Industrial banks are regulated just like banks, only with even MORE scrutiny. Now that Wal-Mart has creatively found ways of competing with banks without the same level of regulation, they are unlikely to ever seek more regulation. A consequence banks will deal with for decades to come."
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Image: Bloomberg News
On reports that the Federal Reserve has been lending a sympathetic ear to the troubles of legal marijuana businesses cut off from the banking system:
"Boggles the mind to see the amount of effort the U.S. government is expending trying to secure banking relationships for the pot industry that is still illegal federally, whilst at the same time the government condones widespread discontinuance of bank accounts for legal businesses."
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In response to a suggestion that marijuana businesses locked out of the banking system turn to Bitcoin:
"I think at this time it would be hard because of the volatility of the market. Marijuana dispensaries can't really take a chance at losing profit as they already pay most of their profits to taxes." (via Reddit )
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On Sen. Elizabeth Warren's call for further financial reform:
"Yes, rules are necessary. That doesn't mean that more rules are even better. And how naive to believe that these rules will lead to less and simpler regulation."
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On Sen. Warren's criticisms of the Justice Department and Securities and Exchange Commission for being too lenient with law-breaking firms:
"What is a bit surprising, at least to non-politicos such as myself, is that Senator Warren is going after the SEC and Justice as hard as she is. Five years ago that would have reflected badly on President Bush; now, well into the final two years of his term, it reflects badly on President Obama."
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On whether banks could realistically be unseated by newfangled financial technology startups:
"Tech alone won't disrupt the banks as banking [is] a professional discipline. Tech + pros is another matter." (via Twitter )
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On a claim that improvements in the job market should mitigate worries about student loan defaults:
"Let's not kid ourselves about the 'improved' unemployment rate.
The majority of whatever "job growth" being claimed is lower-paying retail and restaurant jobs.
Not knocking entry-level, low-paying jobs. They're just not the kind of jobs that will ever pay off the overpriced increasingly-meaningless degree we've encouraged people to put themselves into debt for."
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Seconding Sen. Warren's proposal to break up the big banks:
"Reinstate Glass-Steagall and call it a day."
Photo: Sen. Carter Glass, left, and Rep. Henry Steagall
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