Small business rescue earned banks $10B in fees • Hacker News Board

Re: Small business rescue earned banks $10B in fees

#21

Post by tyre » Wed, Apr 22, 2020, 3:32 PM UTC

lordnacho wrote: post #3

Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank t…

You’re describing “narrow” banks.

While they make sense for consumers, our banking system is tightly coupled with another: mortgages. The money that you deposit is loaned out. Could the federal government do the too? Sure, and the government (talking about the US here) does end up owning a large chunk of mortgages via Fannie Mae and Freddie Mac.

But the expertise and the manpower around vetting the mortgages is a _lot_ of work. Work that the federal government couldn’t decide to take on tomorrow, might not even want to, and if they announced that they were going to try would shake the core of the stock markets. (And yes, stock markets matter for more than just making rich people richer.)

On the other hand you suggest de-coupling: “Find a lender.” If you take away the deposits, who has that much money to lend out without being dangerously leveraged?

If you were to design an economic system, this might be the one you’d design. Given the one we have, narrow banks are difficult to allow without some significant “turbulence”.

Re: Small business rescue earned banks $10B in fees

#22

Post by Etheryte » Wed, Apr 22, 2020, 3:32 PM UTC

alexpetralia wrote: post #13

theplague42 wrote: post #6

Earlier quoted context omitted.

There have been suggestions over the years for the post office to offer banking services. They have branches literally everywhere, they're independent yet still a government agency, and have no profit motive.

I could not imagine the amount of financial, operational, technological and regulatory infrastructure that would need to be ported over, however.

I think the problem really isn't as complicated as that list might make it seem. In my home country (EU), local shops offer basic banking services (withdraw, deposit money) in rural areas where banks have no incentive to have a branch. They're already integrated into the wider cash flow system, money is moved to and from the locations securely regularly, etc. Postal offices would tick all those boxes as well with the additional contextual benefit of being government-run.

Re: Small business rescue earned banks $10B in fees

#23

Post by toomuchtodo » Wed, Apr 22, 2020, 3:35 PM UTC

tyre wrote: post #21

lordnacho wrote: post #3

Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank t…

You’re describing “narrow” banks. While they make sense for consumers, our banking system is tightly coupled with another: mortgages. The money that you deposit is loaned out. Could the federal government do the too? Sure, and the government (talking about the US here) does end up owning a large chunk of mortgages via Fannie Mae and Freddie Mac. But the expertise and the manpower around vetting the mortgages is a _lo…

It is rare today that banks hold mortgages and use depositor funds to fund them. Most (government backed, such as FHA, Fannie, and Freddie) mortgages are securitized and sold on the secondary market to bondholders (there are caveats for small banks, credit unions, and non-qm lenders).

A narrow bank does not require lending to service deposit accounts. It doesn't even need to pay interest to account holders. It simply needs to accept, store, and distribute fiat on the behalf of its customers via ACH, debit, and credit processing networks. Think prepaid card with no fees and no overdraft capability.

The Federal Reserve is culpable in that it will not approve banking licenses for narrow banks [1], as it challenges the business model of existing entrenched banking organizations. Can you build a narrow bank without getting the Fed to sign off? That is a conversation I would be interested in having over a cup of coffee.

[1] https://www.spglobal.com/marketintelligence/en/news-insights...

Re: Small business rescue earned banks $10B in fees

#24

Post by AndrewKemendo » Wed, Apr 22, 2020, 3:40 PM UTC

eezurr wrote: post #9

That's about a 2% fee which doesn't seem out of line with other transaction processing fees that are out there. That fee probably has built in insurance for fraud and other failures. And also the cost of the transaction. I bet that fee is the same fee as a year ago?

That's exactly it. In effect it cost 2% to use the banking system to complete this transaction.

With these kinds of insane numbers ($350B!) even tiny percentages are huge.

Re: Small business rescue earned banks $10B in fees

#25

Post by Ididntdothis » Wed, Apr 22, 2020, 3:40 PM UTC

solarhoma wrote: post #2

No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years.

There will be plenty reporting about corruption and nothing will happen. This is just a continuation of 2008. People have accepted this corruption as normal.

Re: Small business rescue earned banks $10B in fees

#26

Post by kitotik » Wed, Apr 22, 2020, 3:40 PM UTC

solarhoma wrote: post #2

No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years.

It’s a shame that finding the corruption in a few years is generally the best case scenario in these type of situations. Long after the public has any real memory or care to actually do anything about it. A handful of scapegoats get prosecuted and the world continues on as normal.

Re: Small business rescue earned banks $10B in fees

#27

Post by volak » Wed, Apr 22, 2020, 3:40 PM UTC

Banks make somewhere around 450 billion in revenue each year. https://www.statista.com/forecasts/409713/banking-revenue-in...

This program made them 1/3 of 1 month's normal revenue

Re: Small business rescue earned banks $10B in fees

#28

Post by Bombthecat » Wed, Apr 22, 2020, 3:45 PM UTC

theplague42 wrote: post #6

lordnacho wrote: post #3

Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank t…

There have been suggestions over the years for the post office to offer banking services. They have branches literally everywhere, they're independent yet still a government agency, and have no profit motive.

Germany did that (post bank) didn't want so well...

Re: Small business rescue earned banks $10B in fees

#29

Post by seph-reed » Wed, Apr 22, 2020, 3:46 PM UTC

Ididntdothis wrote: post #25

solarhoma wrote: post #2

No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years.

There will be plenty reporting about corruption and nothing will happen. This is just a continuation of 2008. People have accepted this corruption as normal.

I solemnly swear to stand by those who fight corruption, even when they go too far I will recognize and respect their intent, I will remember them as heroes, and I will do everything I can to make their sacrifice not be in vain.

Re: Small business rescue earned banks $10B in fees

#30

Post by solarhoma » Wed, Apr 22, 2020, 3:46 PM UTC

kitotik wrote: post #26

solarhoma wrote: post #2

No surprise here. Yes, these programs will help out small businesses. But, the rich need their cut first. Hopefully investigative journalists will be able to find the corruption/fraud in a few years.

It’s a shame that finding the corruption in a few years is generally the best case scenario in these type of situations. Long after the public has any real memory or care to actually do anything about it. A handful of scapegoats get prosecuted and the world continues on as normal.

Nail on the head with that comment. The scapegoats are usually the ones who committed gross amounts of fraud or they are not influential/connected enough to avoid prosecution.