Slideshow 'Facebook Should Roll Up the Banking Sector': Comments of the Week

Published
  • March 20 2015, 7:30am EDT
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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 a report that investors are willing to sacrifice some tangible book value in exchange for deals that are accretive to earnings (<a href="https://twitter.com/HarvardWinters/status/578157086854553600" target="_blank">via Twitter</a>):

"I guess [Facebook] or [Amazon] should roll up the banking sector, given how [earnings per share] accretive that would be. Danger ahead."

Related Article: Earnings Potential Outweighs Book Value Dilution in Latest Bank M&A

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On the argument that regulators should put more energy into improving bank culture rather than focusing solely on compliance:

"That complaint that the regulators are focusing on compliance with the rules as opposed to promulgating ethical culture rings a little hollow. That's like complaining that the cops are looking for criminals instead of preaching sermons."

Related Article: The Secret to Ethical Bank Culture: Just Remember the Golden Rule

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On a new book by Peter J. Wallison that lays the blame for the housing crisis on the U.S. government rather than Wall Street:

"No doc, pick-a-pay, subprime and essentially risky nonagency loans, fueled by Wall Street securitizations, were the house of cards that collapsed when their basic assumption — housing prices always go up — proved false. Unless we are honest about the mistakes our largest financial institutions made, we are doomed to experience others."

Related Article: Dangers of U.S. Housing Policy 'Hidden in Plain Sight' No More

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On how the Federal Reserve can improve the stress tests meant to ensure that big banks' balance sheets are sturdy enough to survive a downturn:

"The stress tests are a problem because they are stress tests. The lesson learned from the financial crisis was that information wasn't available when needed, and the reliability of data available was suspect. … Today's stress-testing regime is too focused on measurement, and not enough on methodology and process."

Related Article: Fed Should Stop the Stress Test Guessing Game

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On why the Fed is right to keep stress tests unpredictable:

"While neither Mr. Hartley nor Mr. Abbott would like what they discovered, they should take the trouble to learn about Goodhart's Law. Of course they and many others would like greater transparency and clearer rules, but this would totally defeat the point of the stress tests."

Related Article: Fed Should Stop the Stress Test Guessing Game

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On a proposal to increase the transparency of the Fed's stress tests but conduct them on a quarterly basis so that banks are unable to game the system:

"Quarterly stress testing — at any level of simplicity — is impractical and would add extraordinary burden to an already stressed system (pun intended). It is estimated that the cost of the preparation, submission and processing of such tests is estimated to be $1 billion annually, which does not consider the opportunity cost of reduced time spent on revenue-generating activities or efficiency initiatives. Quadrupling this drag on the economy and further increasing the cost of capital to the banking system do not seem like the best solution to the well-stated concern regarding the relative lack of transparency of the stress-testing process."

Related Article: Fed Should Stop the Stress Test Guessing Game

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On a former entrepreneur's decision to join Capital One's innovation lab, in part for the steady paycheck:

"Unless there is jeopardy then you're not an entrepreneur. If you remove the risk then you remove the innovation. Banks have tried to innovate in-house and they've tried to innovate using arm's length incubators/labs, but they can't compete with startups that have no safety net and no cozy medical benefits and for whom it's succeed or die. The best approach for banks (in my opinion) is to get really good at acquiring innovative companies at the right time in their lifecycle." (Via LinkedIn)

Related Article: Capital One Makes Candid Recruitment Pitch to SxSW Techies

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Responding to an argument that the Fed has not sufficiently lowered the debit card fees paid by merchants to banks:

"Both the merchants and the banks are the victims here. What bank's debit card costs haven't increased?" (Via Twitter)

Related Article: How Fed Policy on Swipe Fees Quashes Market Forces

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