'Regulation Is Just Like Pro Sports': Comments of the Week
October 3, 2014 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.
(Image: iStock)
On an alternative to the complexities of the Volcker Rule:
"A simpler and less costly idea is to reinstitute the Glass-Steagall Act. Put the wall in place and create stable utility businesses. There is too much money at play now; the situation is much like pro sports. Teams and the league try to enforce the [performance-enhancing drug] rules and conduct, but really don't want to, and end up looking the other way when possible. It's human nature. Make the solution simple and take the guessing out of the equation."
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(Image: Bloomberg News)
On adding regulations to protect banks against unlikely but potentially devastating events:
"A meteor falling on my house is such an extreme tail risk. It would probably destroy my house and my family if we are at home. Should we therefore build an iron dome over the house to protect against it? I wonder the same thing when I see children on tricycles wearing helmets. We can conjure up all sorts of extreme tail risks to defend against, but at what cost?"
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On opportunities for financial services companies to participate in the so-called Internet of things:
"Maybe when you open the fridge, it can check your bank account balance and, if necessary, say 'Whoa dude. Go easy on those hotdogs. They have to last you the rest of the week.'"
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On more ways that banks can participate in the Internet of things:
"What can't a vehicle's [dashboard navigator] include a way to communicate with a drive-up ATM? Why lean out the window to punch a keyboard, when I have a keyboard on my mobile [phone] and/or on my dash? The opportunities are vast. The Internet of things is a huge opportunity for banks that dare to think out of the box."
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On banks' fear that, like U.S. Bank, they may cut ties with suspicious third-party vendors and get slapped with an enforcement action anyway:
"Otherwise known as damned if you do, damned if you don't. Or the Kobayashi Maru scenario to the Trekkers amongst us."
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(Image: Bloomberg News)
On the argument that hubris leads regulators to believe they understand the financial markets better than the firms that participate in it:
"Banking regulators are captives of the financial sector, as we learn from the Carmen Segarra tapes. The problem is not humility. These people stink of humility. The problem is that neoliberal economics is also quite humble, especially to the interests of the richest among us."
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(Image: Bloomberg News)
In response to the suggestion that financial markets can self-regulate:
"The failure to have systemic perspective on the part of industry actors was a significant cause of the financial crisis. The banking industry has exhibited a strong bias against self-policing. What happened to the times when members of a clearing house would pressure a wayward member to right the ship to protect the network?"
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On the difficulties of regulating the complex financial system:
"I know plenty of regulators who have a very strong sense of self-awareness and their own limitations. Nevertheless, the financial regulatory system rests on unrestrained hubris, and regulators have been given a job too big for them or for their agencies to manage. The financial system is very complex, and so is just about every other aspect of our modern economy, from farming to high technology. The efforts to control all of these activities by regulation is doomed to fail."
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On a Department of Defense proposal to broaden consumer lending protections for active-duty members of the military:
"The overall thing people need to know about the DoD's new proposal is that it continues to ignore the fundamental problem of limited access to credit for members of the armed forces from the banks and credit unions, given preferred locations on military bases. It is virtually impossible for service members to receive their pay any way other than electronically. For most members, this means direct deposit -- most often to an on-base financial institution. It is hard to believe that if these institutions (receiving regular electronic deposits twice a month) were making low-cost credit available to these depositors, they would ignore that credit and instead seek higher-cost credit off-base. Yet nothing in the 2007 and the current vendettas indicate that the DoD has moved to make low-cost credit availability for service members a condition for financial institutions to obtain and retain on-base locations. DoD's case would be far more credible if it began with defending service members' wallets on-base, before targeting off-base credit providers that could only survive if on-base providers weren't doing their jobs."
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