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The Banks Win, Again

nytimes.com

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Re: The Banks Win, Again

#21

Post by slapshot »

espeed wrote: post #20
slapshot wrote: post #19

Earlier quoted context omitted.

> Is there a service where you can deposit money that doesn't increase a bank's power to lend? That's the most significant way banks make money. It costs money to have branches, tellers, and armed guards (let alone websites, security teams, forensic-level accounting, marketing, ATMs everywhere, electricity, etc). The way that banks cover all this overhead is to take your deposit at 0% or 1%, then lend it out at 5% (m…

It's not that the deposit department supports a loss-making lending division; it's that the two are inseparable. That's the way things have been done, but I don't believe the two are inseparable. You can eliminate much of the overhead you mention by not having branches and thus no need for tellers or armed guards. For ATMs, you could partner with something like the Allpoint ATM network ( http://www.allpointnetwork.co…

So far, I don't see the value proposition. People who don't like big banks use credit unions. Credit union deposits are insured to $250,000, so any risk created by lending is not borne by the consumer. There are plenty of credit unions that still offer free checking with no (or a very small) minimum balance. [1]

The only way you could possibly make money to cover your still-not-insignificant costs (you still need all the accounting, marketing, etc, plus paying Allpoint's access fees---they charge a fee to institutions for the privilege of access, there's no free lunch here) is to charge a monthly fee. [2] You're competing against free, and the "we're not a big bank" marketing card has already been played by the credit unions (there is an ongoing radio campaign that plays on just that point).

[1] E.g., https://www.navyfederal.org/products-services/checking-savin...

[2] You could also sell data about your consumers or do other questionable things, but that won't help your "better than a bank" cause.

Re: The Banks Win, Again

#22

Post by DannoHung »

haberman wrote: post #6

Capitalism can't work properly if risk-takers are insulated from the consequences of bad bets. The #1 priority should be making sure that no institution is "too big to fail" next time we get what is effectively a global margin call.

Capitalism can't work properly when single entities control enormous parts of a market.

Re: The Banks Win, Again

#23

Post by simplefish »

martythemaniak wrote: post #7
haberman wrote: post #6

Capitalism can't work properly if risk-takers are insulated from the consequences of bad bets. The #1 priority should be making sure that no institution is "too big to fail" next time we get what is effectively a global margin call.

And yet, that'll get you labeled a "socialist" in most parts of the country.

The policy he advocated can be spun in a way that sounds socialist. Phrased the way he did it though? No, that's not going to get you labeled "socialist" anywhere.

Re: The Banks Win, Again

#24

Post by espeed »

slapshot wrote: post #21
espeed wrote: post #20

Earlier quoted context omitted.

It's not that the deposit department supports a loss-making lending division; it's that the two are inseparable. That's the way things have been done, but I don't believe the two are inseparable. You can eliminate much of the overhead you mention by not having branches and thus no need for tellers or armed guards. For ATMs, you could partner with something like the Allpoint ATM network ( http://www.allpointnetwork.co…

So far, I don't see the value proposition. People who don't like big banks use credit unions. Credit union deposits are insured to $250,000, so any risk created by lending is not borne by the consumer. There are plenty of credit unions that still offer free checking with no (or a very small) minimum balance. [1] The only way you could possibly make money to cover your still-not-insignificant costs (you still need all…

Banks, and the financial industry in general, exert an enormous amount of influence over the government -- the Occupy Movement and articles like these are indicators of the disgust that has been brewing against the current system, but most feel powerless to do anything about it.

Much of a bank's power comes from people depositing their paychecks -- take away the deposits, and you take away the power (http://en.wikipedia.org/wiki/Bank_run).

More people don't do this because banks are so convenient and there are few good alternatives. Even credit unions partner with banks so using them doesn't really help.

A digital safety deposit box that's linked to your debit card could provide the convenience of a bank, without empowering the banks.

Re: The Banks Win, Again

#25

Post by olalonde »

DannoHung wrote: post #22
haberman wrote: post #6

Capitalism can't work properly if risk-takers are insulated from the consequences of bad bets. The #1 priority should be making sure that no institution is "too big to fail" next time we get what is effectively a global margin call.

Capitalism can't work properly when single entities control enormous parts of a market.

Historically, this hasn't happened a lot without the help of government. See http://www.youtube.com/watch?v=tdLBzfFGFQU and http://www.investopedia.com/articles/economics/08/hammer-ant.... The only one in tech that I can think of at the moment would possibly be Facebook and even then, there are tons of competing social networks.

Re: The Banks Win, Again

#26

Post by tlogan »

martythemaniak wrote: post #7
haberman wrote: post #6

Capitalism can't work properly if risk-takers are insulated from the consequences of bad bets. The #1 priority should be making sure that no institution is "too big to fail" next time we get what is effectively a global margin call.

And yet, that'll get you labeled a "socialist" in most parts of the country.

Yes - even though that is not logical, the label "socialist" is used in most parts of the country to smear people who are true capitalists.

The train of thought on Fox News goes like this: banks are private business, if they go bankrupt, FDIC takes over deposits, FDIC is government, government is socialism - so if you allow banks to fail you are socialist.

Re: The Banks Win, Again

#27

Post by runeks »

espeed wrote: post #18

Is there a service where you can deposit money that doesn't increase a bank's power to lend? For example, a non-bank service where you pay a monthly fee to get the the convenience of a debit card and checking, but your deposit doesn't contribute to a bank's reserves, which enables banks to lend and thus empowers the banking system. A service like this wouldn't have the overhead of banks because it wouldn't have to su…

I believe you are not looking for an alternative bank; you are looking for an alternative currency. The Federal Reserve gives explicit rights to private banks to not have to worry about whether the US Dollars in their possession are 100% backed up by actual reserves of US Dollars. In fact, they encourage banks to not be able to pay you back, through fractional reserve banking, if everyone were to withdraw their deposits. The Federal Reserve has a complete monopoly over how the US Dollar is managed in electronic form. I'm not even sure that a bank that refuses to participate in fractional reserve banking will be allowed to operate, or at least that you will be covered by the official deposit guarantee in case they go bankrupt. I realize there really are no alternatives, which makes my advice somewhat useless, but by using US Dollars (or any other state paper currency) you are supporting the current monetary system (which includes the private banks).

Re: The Banks Win, Again

#28

Post by jeffool »

hnal943 wrote: post #8
martythemaniak wrote: post #7

Earlier quoted context omitted.

And yet, that'll get you labeled a "socialist" in most parts of the country.

Only if you misunderstand who is insulating the banks from risk and advocate for more governmental restriction. The capitalist would advocate for the government to stop unconditionally underwriting mortgages under the guise of promoting home ownership.

haberman said "The #1 priority should be making sure that no institution is "too big to fail"". That is what martythemaniak was saying was oft called socialism.

If you have means other than government interaction to control the size of business, I'd love to hear it. (Unless you're saying that huge, pivotal companies failing and damaging the lives of all those around it should be encouraged and welcomed. But that's what these two are saying needs to be avoided.)

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