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Nasty Truths About U.S. Fintech

venturebeat.com

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Re: Nasty Truths About U.S. Fintech

#51

Post by ch4s3 »

cm2187 wrote: post #24
nickpsecurity wrote: post #17

The article seems to overlook the main obstacle: the banking cartel. The big bankers in the U.S. are among its most powerful lobbyists. The current system benefits them plenty. They like it the way it is. They'll sure push to streamline red tape where possible but a near-zero barrier to entry would eat into their profits. So, they'll continue paying politicians to ensure the status quo and collecting all kinds of fee…

It's rather the excess of regulation due to anti-bank sentiment that creates these barriers to entry. Banks are rather calling for less regulations, and when they got it their way in the 90s, it is what happened. But it is true that the excess of regulation is reenforcing the position of the incumbents. Banks have to staff full time employees just to read the amount of draft regulations and consultation papers publis…

I don't think these are the regulations that I read about banks trying to have removed.

Re: Nasty Truths About U.S. Fintech

#52

Post by TheOtherHobbes »

yummyfajitas wrote: post #39
TheOtherHobbes wrote: post #32

Earlier quoted context omitted.

Glass Steagall did an excellent job - until it started being ignored, and before it was repealed.

Would preventing WaMu and Countrywide Financial from running prop desks (which they didn't do anyway) have somehow prevented the crisis? Or would preventing Bear Stearns from issuing mortgages (which they didn't do anyway) have somehow prevented them from going bust? Please be specific on what would have happened differently if Glass Steagall were still in force.

With something like GS regulators would have been able to say "Wait, you're doing lots of securitisation? That's not a good idea, is it?"

It's not always the specific regulatory details that matter, so much as the culture they create.

As long as GS was taken seriously, the culture remained "If you're a bank, don't do really stupid shit just because you think you can make a quick buck."

Once it started being eroded the culture became "Wheee!" - and unsurprisingly everything exploded and the wheels came off.

IMO anyone who would argue for less regulation after that isn't living at an address in the reliable side of town.

The important arguments have to do with quality of oversight and the culture of people who will consistently try to be as irresponsible as they can be if they're not regulated.

Regulation is a means to that end, not an end in itself.

Re: Nasty Truths About U.S. Fintech

#53

Post by tbrownaw »

zekevermillion wrote: post #37

Ripple consented to pay a fine and restructure their operation, to settle civil charges related to Ripple's failure file a SAR on the aborted purchase of xrp by Roger Ver (who by the way was a Ripple investor). The underlying behavior that drew the attention of regulators was that their compliance program was basically a sham during the period in question. The transaction was not "suspicious" in any conventional sens…

Unfortunately I don't think the answer is as easy as just letting providers self-police, or following a European model where banks have historically turned a blind eye toward (or even actively courted) criminal clientele.

They should follow transportation/telephone/common-carrier rules, because they're just as necessary to life in modern society.

Re: Nasty Truths About U.S. Fintech

#54

Post by condescendence »

This is sort of easy to explain, the United States makes the processes difficult because it wants the money kept here.

What interest are you to the United States if you work here and then don't spend any of the money in the economy? If a majority of your paycheck is being spent in other markets, then you're actually running against the US economy.

This is just a short lay-man's terms explanation of how I see the situation, but it seems to be somewhat true.

Re: Nasty Truths About U.S. Fintech

#55

Post by markbnj »

The inefficiencies of federalism comprise one of the inherent trade-offs in the U.S. system, and it is worth remembering that you can't actually transfer value over a wire: you can only transfer a promise. The value of promises is based on the integrity of the entities making them, and so the barriers to entry into the business of moving money are high, as they were high 150 years ago when the only mechanism available was letters of credit exchanged between well-known international bankers. I'm not sure you want those barriers lowered.

Re: Nasty Truths About U.S. Fintech

#56

Post by skhatri11 »

Good piece, but more specific to money licensing companies.

One more thing: Unlike most regulated industries, this is not a space where you "do and ask for forgiveness later". You have to be super aggressive when it comes to compliance. Otherwise you will get shut down. Think of it as "preventative health" to the extreme :)

Re: Nasty Truths About U.S. Fintech

#58

Post by yummyfajitas »

TheOtherHobbes wrote: post #52
yummyfajitas wrote: post #39

Earlier quoted context omitted.

Would preventing WaMu and Countrywide Financial from running prop desks (which they didn't do anyway) have somehow prevented the crisis? Or would preventing Bear Stearns from issuing mortgages (which they didn't do anyway) have somehow prevented them from going bust? Please be specific on what would have happened differently if Glass Steagall were still in force.

With something like GS regulators would have been able to say "Wait, you're doing lots of securitisation? That's not a good idea, is it?" It's not always the specific regulatory details that matter, so much as the culture they create. As long as GS was taken seriously, the culture remained "If you're a bank, don't do really stupid shit just because you think you can make a quick buck." Once it started being eroded th…

tl;dr; GS wouldn't have done anything, but it might magically change the "culture" and cause regulators to do other unspecified things which would have done something.

Um, ok.

Also, the main "make a quick buck" bank was Goldman. They did just fine. It was the "make long term safe bets" banks that had problems, e.g. Countrywide, WaMu, Citi. Also, there is nothing inherently wrong with securitization. The underlying problem was the mortgages themselves; securitization merely shifts the risk around.

Regulation isn't just a magic lever that you can switch to "more" or "less". Your post is as clueless as a PHB saying "we need more code, lets switch to J2EE so we'll have lots more lines of code!"

Re: Nasty Truths About U.S. Fintech

#59

Post by reviseddamage »

pbreit wrote: post #15

It's understandable that there are some hurdles involved in businesses that handle customer money like this. But obviously the current situation is far from ideal. I know there's at least one company (Precash) where you can sort of rent their licenses. I'm not familiar with how forward thinking they are or how onerous/costly their service are.

Venmo and a few other companies have benefitted from Precash's oversight, but asymmetric agency relationships are no longer a viable option.

Re: Nasty Truths About U.S. Fintech

#60

Post by reviseddamage »

thinkcomp wrote: post #14

I testified before Congress on this issue. http://www.aarongreenspan.com/writing/20131118.hsgacstatemen... CFPB comment (mostly the same, some exhibits also) here: http://www.thinkcomputer.com/20140214.cfpbcomment.pdf Nothing has changed, and Y Combinator certainly hasn't helped. In fact, they and just about every VC-backed portfolio company have made the situation far worse by convincing legislators that everything…

What is YC's involvement in this? What are you referring to?
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