Nasty Truths About U.S. Fintech • Hacker News Board

Re: Nasty Truths About U.S. Fintech

#71

Post by spacecowboy_lon » Thu, Jul 30, 2015, 4:29 PM UTC

nickpsecurity wrote: post #67

bsbechtel wrote: post #35

Earlier quoted context omitted.

>> Could anyone imagine if the government let the banks suffocate in 2008? I've heard from multiple sources that Iceland let their banks fail, and they're actually doing better than most now. http://www.washingtonsblog.com/2011/11/key-lesson-from-icela...

Iceland did a combination of things. They put dirty politicians in jail, got better ones in office, seized the banking system, re-focused it on stable growth rather than greed, and knocked out fraudulent debts with laws. The U.S. could've done quite a bit of that. We could've even pitted Wall St's geniuses against each other by talking the companies and then offering financial incentives to those that help ensure bai…

these fraudulent debts would be those UK pensioners and UK local government who had savings with the Icelandic banks.

Re: Nasty Truths About U.S. Fintech

#72

Post by spacecowboy_lon » Thu, Jul 30, 2015, 4:33 PM UTC

hermanmerman wrote: post #2

If you haven't seen it already (was posted yesterday I think), check out Standard Treasury's Series A deck: http://slideshare.net/linhir/standard-treasury-series-a-pitc... They explain why they decided to start their bank in the UK instead of the US. For once, the USA seem to have no competitive advantage.

And the UK government is actively encouraging challenger banks.

Re: Nasty Truths About U.S. Fintech

#73

Post by yummyfajitas » Thu, Jul 30, 2015, 4:40 PM UTC

scurvy wrote: post #66

yummyfajitas wrote: post #58

Earlier quoted context omitted.

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 pr…

Incorrect. GS and worthy oversight would have nipped most of this in the bud. Just look at what these banks had on their balance sheets at the time, and it would make anyone with a modicum of banking background recoil in horror. I'm not trying to sound ageist, but judging from the comments on this thread, it appears as if this generation has not learned from 2008 and is bound to repeat the same mistakes. I went throu…

GS and worthy oversight would have nipped most of this in the bud.

Again, please explain how - i.e., concrete mechanisms, not vague "if we passed this law that didn't really change anything, maybe culture would have been different".

Just look at what these banks had on their balance sheets at the time...

Please be specific. Which banks are you referring to, and how would GS have significantly affected things? As far as I'm aware, the main banks which significantly mixed IB and S&L activity were JPM and Citi, hardly the epicenters of the crisis.

Also, it's odd how the S&L crisis happened before GS was repealed - why didn't the magical culture change of GS cause regulators to magically crank regulation up to 11 and prevent it?

Re: Nasty Truths About U.S. Fintech

#74

Post by nickpsecurity » Thu, Jul 30, 2015, 4:43 PM UTC

spacecowboy_lon wrote: post #70

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…

The main problem here is the fact that states can regulate banking instead of having one license you need 52. But that would require a huge reform of the USA's political system which is never going to happen.

That is a significant problem. However, the corruption problem remains on top of the list. Just look at the description of the New York system. That's a racket and worse than many I've read about. Didn't happen accidentally.

So, you have the corruption-driven blockades at federal and state-levels along with the natural regulation that will exist at either level. Quite a pain to deal with.

Re: Nasty Truths About U.S. Fintech

#75

Post by s73v3r » Thu, Jul 30, 2015, 4:46 PM UTC

devy wrote: post #69

Do those challenges apply to bitcoin startups?

Yes. They mention one in the article. I don't understand why people think that Bitcoin is some magical thing that is somehow exempt from regulation.

Re: Nasty Truths About U.S. Fintech

#76

Post by dragonwriter » Thu, Jul 30, 2015, 4:52 PM UTC

yummyfajitas wrote: post #73

scurvy wrote: post #66

Earlier quoted context omitted.

Incorrect. GS and worthy oversight would have nipped most of this in the bud. Just look at what these banks had on their balance sheets at the time, and it would make anyone with a modicum of banking background recoil in horror. I'm not trying to sound ageist, but judging from the comments on this thread, it appears as if this generation has not learned from 2008 and is bound to repeat the same mistakes. I went throu…

GS and worthy oversight would have nipped most of this in the bud. Again, please explain how - i.e., concrete mechanisms, not vague "if we passed this law that didn't really change anything, maybe culture would have been different". Just look at what these banks had on their balance sheets at the time... Please be specific. Which banks are you referring to, and how would GS have significantly affected things? As far…

> Also, it's odd how the S&L crisis happened before GS was repealed

Not really. The 2000s banking crisis happened not long after banking regulations were repealede, the S&L crisis happened after S&L regulations were repealed. (In both cases, the repeals were justified on the basis that the increased freedom would strengthen the deregulated industry and the broader economy.)

Re: Nasty Truths About U.S. Fintech

#77

Post by thinkcomp » Thu, Jul 30, 2015, 4:59 PM UTC

saucetenuto wrote: post #62

reviseddamage wrote: post #60

Earlier quoted context omitted.

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

I think he means that YC literally has not helped: they haven't made things any worse, but neither have they tried to make things better.

No, I mean what I wrote:

"In fact, they and just about every VC-backed portfolio company have made the situation far worse..."

Re: Nasty Truths About U.S. Fintech

#78

Post by ethbro » Thu, Jul 30, 2015, 5:04 PM UTC

pjc50 wrote: post #46

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…

following a European model where banks have historically turned a blind eye toward (or even actively courted) criminal clientele I don't think this is particularly a US/EU distinction. Switzerland's history of banking privacy and neutrality, possibly.

(Yes, I know UK != Europe, but presume it's indicative)

This popped up on the BBC a couple days ago: "Foreigners must not be able to buy UK homes with 'plundered or laundered cash' as part a global effort to defeat corruption, David Cameron has said." http://www.bbc.com/news/uk-politics-33684098

I assume the takeaway is that it's enough of a problem that it needs to be focused on. The article cites $1tn/year being taken out of poorer countries by corruption, and $190bn worth of property in England and Wales owned by offshore companies.

Re: Nasty Truths About U.S. Fintech

#79

Post by roymurdock » Thu, Jul 30, 2015, 5:04 PM UTC

markbnj wrote: post #55

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 availabl…

Hawala [1] presents an interesting case study here. Through Hawala, individuals can transfer value without the use of promissory notes; it is a scheme based entirely upon trust, and it works well in the regions and cultures in which it has been established.

The CIA estimates that around $1.6bn is transferred yearly in Africa through this scheme.

The takeaway in my opinion, is that the barriers to entry are high and rising because we are promoting a culture of venomous distrust in the US. Honor is not a value that is rewarded by our current system. Thievery and manipulation of the justice system are. This increases the amount of regulation required around the fintech industry, ultimately hurting a large portion of the end users who simply want to get money from point A to point B.

[1] https://en.wikipedia.org/wiki/Hawala

Re: Nasty Truths About U.S. Fintech

#80

Post by markbnj » Thu, Jul 30, 2015, 5:14 PM UTC

roymurdock wrote: post #79

markbnj wrote: post #55

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 availabl…

Hawala [1] presents an interesting case study here. Through Hawala, individuals can transfer value without the use of promissory notes; it is a scheme based entirely upon trust, and it works well in the regions and cultures in which it has been established. The CIA estimates that around $1.6bn is transferred yearly in Africa through this scheme. The takeaway in my opinion, is that the barriers to entry are high and r…

The Hawala system, which I had not heard of by the name, seems identical to the system of letters of credit that prevailed before the evolution of formal payment networks. In the Hawala case the password replaces the physical letter from one trusted agent to another, but otherwise it seems identical. This sort of system was the historical precursor to banking as we know it today.