Tag Archives: Banking

Banking Industry: Sicker, More Concentrated

By James Kwak

The rapid bounce-back of some of the big banks (notably Goldman and JPMorgan) has overshadowed (at least on the front pages of major newspapers) the continued plight of the banking sector as a whole. Calculated Risk highlights the FDIC’s Quarterly Banking Profile, which lists 702 problem banks with over $400 billion in assets — the highest year-end figures on both metrics since 1992, as the savings and loan crisis was tailing off.

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Big Banks Are More Expensive

By James Kwak

From Stacy Mitchell of the New Rules Project, also on the Huffington Post:

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“Please Keep This Valuable Service”

By James Kwak

Here’s a letter submitted by a reader, originally from Chase, encouraging her to keep overdraft protection on her checking account.

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Fear Mongering, Wall Street Style

By James Kwak

Jason Paez points out this Reuters story on the claim that new banking regulations will require an additional $221 billion of capital in the industry as a whole. I would take this a little more seriously if the source for the estimate were someone other than JPMorgan Chase, or even if there were a non-JPMorgan source to back it up.

As it is, I think this counts as another “nice little economy you’ve got there” attempt at hostage-taking or, as Paez says, “a threat levied against the entire non-banking economy if we allow the ‘extreme’ case (using the article’s words) of regulation to pass.” For one thing, I don’t see how any analyst could have come up with any number, given that the regulatory proposals I have seen have no numbers in them. That is, they say things like “capital requirements for large firms should be higher” but don’t say how much higher. (It’s possible I missed something recent here.) So what could $221 billion possibly be based on?

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Tim Geithner Says to Leave Your Money at Big Banks

But he’s not sure why. During an interview with Mike Allen of Politico, Tim Geithner said that the Move Your Money campaign is a bad idea, but didn’t actually give a reason why. Here’s the whole segment of the interview (beginning around the 3:30 mark):

Allen: “Arianna Huffington has been urigng Americans to move money from big banks to neighborhood banks. Do you think that’s a good idea?”

Geithner: “I don’t, but I do think the following is important that people recognize.”

“But wait, why is that a bad idea?”
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Design or Incompetence?

Or both?

In late summer or early fall, Citibank was running a promotion: if you opened a new account or moved a certain amount of money to your bank account, you would get a $200 bonus within three months. Someone I know took advantage of this promotion, but as of Monday he still hadn’t gotten the $200 bonus, so he visited a branch.

“I was given the ridiculous explanation that I didn’t surrender the promotion letter and  that the promotion code NP55 was not linked (?) in the application. I told them that: (1) the letter is not a coupon to be surrendered, (2) I should not have to tell the customer service rep how to process the promotion, (3) there was no requirement that the letter even  be presented (just go to a financial center, it states), and (4) the code only needed to be mentioned if applying by phone. They called me back in the afternoon and asked me to come back this morning. They first offered me some ‘thank you’ points, but I stood my ground.  After calling several places they finally reached a Texas office that would further research my problem. “

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“Appalled, Disgusted, Ashamed and Hugely Embarrassed”

No, that’s not someone talking about the banking industry. That’s Howard Wheeldon of BGC Partners (a brokerage firm) responding to Adair Turner’s statement last September that “Some financial activities which proliferated over the last 10 years were socially useless, and some parts of the system were swollen beyond their optimal size.” (Turner is head of the FSA, the United Kingdom’s primary bank regulator.) That’s from a recent profile of Turner on Bloomberg.

“‘How dare he?’ Wheeldon now says. ‘Markets will decide if something is too big or too small. It’s not for an individual, however powerful, to slam and damn nearly 1 million people.'”

Do we really need to point out that markets don’t always make the right decisions? Markets didn’t break up Standard Oil or AT&T–people did. And how is it wrong for public figures to be publicly stating their beliefs about what the objectives of public policy should be?

But the point of this post isn’t to single out another free-market zealot who apparently doesn’t think about the words he is saying. It’s to talk about John Paulson and Malcolm Gladwell.

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