Government wants banks to live, Capitalism wants banks to die

[Greed]

This is common fact to anyone who gives a shit.

For over a hundred years, the majority of traditional banking activity is done outside banks as we think of them. The banks knew it, so with morally bankrupt politicians they created the Federal Reserve, the lender of last resort.

Why would a profitable and necessary component of a free-market system need a government entity to exist solely as an insurance policy? Probably because that component is neither profitable or necessary in a free-market.

Banks would be dead by now or near-death if the federal reserve never existed, and the only thing keeping it alive is the unlimited flow of taxpayer money.

Stop saying, "thank you" every time the government saves the banks from the free-market. Only considering this last recession, it would have saved everyone $23 trillion dollars.

Below are two articles stating the ways banking can be done by non-banks.

Let the banks die like they should have 100 years ago.

 

[Greed]

Amazon.com Exposes The Fraudulent Nature Of The 2008 Bank Bailouts

Amazon.com Exposes The Fraudulent Nature Of The 2008 Bank Bailouts
John Tamny, Forbes Staff

A regular response from bank bailout apologists back in 2008 was that absent the use of taxpayer money to prop them up, lending would freeze and businesses would collapse. The bailouts were necessary, according to the apologists, because our much-admired commercial sector is and was reliant on bank credit.

The above arguments were naturally ridiculous. As Thomas Woods noted in his book Meltdown, banks in 2008 only accounted for 20% of corporate lending. Furthermore, going back 100 years to the early part of the 20th century, according to G. Edward Griffin’s very uneven (and often conspiratorial) book The Creature from Jekyll Island, 70%+ of lending to corporations was of the corporation-to-corporation variety.

Put plainly, banks in the U.S. have long since been eclipsed by alternative sources of finance when it comes to providing companies with credit. Putting it in numeric terms in the present, in their excellent new book Freedom Manifesto Steve Forbes and Elizabeth Ames write that U.S. companies have $1.2 trillion in bank loans outstanding, whereas their European counterparts have over $6 trillion. Contrary to popular opinion, the failure of one or many banks in 2008 would not have led to a collapse in credit for solvent companies.

To understand why, we must consider what economists refer to as the “substitution effect.” Basically, shortages of anything are often made up for by new market entrants. Banks are no different in this regard.

Back in the summer of 2010, with its small-business clientele suffering from tighter than normal credit, Walmart’s Sam’s Club subsidiary announced its willingness to provide its customers with $25,000 lines of credit. Walmart has for years tried to get into banking, absurd regulations about new entrants arguably kept it from purchasing some of the insolvent banks in ’08, but even without a banking charter, Walmart was able offer up credit at a time when banks weren’t able to.

Much the same is occurring now at Amazon.com. Traditional banks remain careful about lending, but Amazon, flush with cash, is eagerly substituting for the banks. Through its Amazon Capital Services subsidiary, Amazon is helping the sellers on its website to access credit that is in short supply at the moment from banks.

Getting into specifics, the Wall Street Journal recently reported on Lisa Zerr, owner of Yankee Toy Box, and her urgent need to secure credit in order to upgrade her inventory ahead of the holiday shopping season. Yankee Toy Box does a lot of business on Amazon, and she’s since borrowed from Capital Services $38,000 in July, and then $13,000 last month.

It should be stressed that Amazon is one of myriad companies that uses its balance sheet to provide banking services to customers. Not a traditional bank, it acts as a bank, and is a substitute for a limping sector.

Amazon’s story naturally exposes as fraudulent the hysterical assertions made by politicians, Fed Chairman Bernanke, and numerous members of the commentariat who said absent bank bailouts in ’08, the economy would disappear. They were wrong then, and they’re wrong now.

As for the monetary mystics out there who write column after column about how the Fed’s payment of interest on [bank] reserves (IOR) is keeping lending abnormally tight, the Amazon story similarly exposes them as incorrect. Indeed, while it’s certainly true that the Fed should not be paying banks for the dollar reserves it’s attempted to force on them through quantitative easing, the simple truth is that even if IOR were the reason for banks being tight (it’s not), substitute lenders would, could and are filling the breach.

Regarding the mistaken bailouts of the banks themselves, they offer a much better explanation for why banks today are so reluctant to lend to anyone but the best of credit risks. The reasoning here is very basic:

Banks were rendered insolvent in 2008 and are struggling today because they have loans and securities that are a collection of loans on their balance sheets that aren’t worth what they were five years ago. The loans themselves are in some instances non-performing, and then the markets don’t trust the securities that comprise numerous non-performing loans. Also, prisoners of their own past errors, banks are understandably gun shy, though perhaps relieved that they’ve been given a new lease on life on the taxpayer dime.

But imagine if those banks had been allowed to file for bankruptcy? If so, loans and securities alike would have been sold at bargain basement prices to solvent banks, not to mention intrepid investors looking for value.

Considering the solvent banks alone, had they been able to purchase their competitors at the bottom, today they would have highly profitable loans and securities on their books that would have them far more able to aggressively lend to businesses and individuals. Of course, as we all know, the latter scenario never played out. Instead, insolvent banks were improperly saved, and while they continue to operate, their past mistakes still haunt their balances sheets and their minds such that they’re acting conservatively – as they should be.

The clear lesson from all this is that bailouts didn’t help banking, rather they handcuffed those saved, all the while slowing the natural evolution of the banking sector. Though banks aren’t the necessary source of finance claimed by bailout apologists, thanks to the aforementioned bailouts they can’t even play their shrinking role properly.

Beyond that, Amazon.com is the latest reminder that if banks or other sources of credit in the financial services industry ever become tight, substitutions will ably fill in for them. Rather than prop up the weak in the future, it’s necessary that we let free markets work their magic on the way to new sources of credit.

http://www.forbes.com/sites/johntam...-fraudulent-nature-of-the-2008-bank-bailouts/

 

[Greed]

Wal-Mart and AmEx in Prepaid Card Deal

Wal-Mart and AmEx in Prepaid Card Deal
By STEPHANIE CLIFFORD and JESSICA SILVER-GREENBERG
October 8, 2012

Wal-Mart Stores is taking another leap into the banking world, announcing on Monday a prepaid card and debit account with American Express that will give low-income consumers access to features like smartphone deposits.

It is a surprising alliance between the discounter Wal-Mart and American Express, which until recently has been focused on high-end consumers. The move is intended to strengthen both companies’ position in the prepaid card market — which, unlike credit and debit cards, is largely unregulated and has far fewer consumer protections.

The account, called Bluebird, will be available next week. The companies are positioning it as an option for people turned off by bank fees. “The only fees consumers will ever pay are clear, transparent and within their control,” such as out-of-network A.T.M. fees, the companies said in a release.

Wal-Mart and American Express declined to give details of the financial relationship between the two companies, but indicated both would profit from the card. The fees disclosed by the companies were generally lower than those Wal-Mart now charges for its prepaid MoneyCard.

Bluebird means prepaid card holders can have access to features that are usually associated with credit cards, like American Express’s customer service, roadside assistance and mobile banking. But consumer advocates say shoppers should be careful in the largely unregulated world of prepaid cards. The nation’s consumer financial watchdog, the Consumer Financial Protection Bureau, is preparing restrictions on prepaid debit cards. The agency says it has concerns about high fees and inadequate disclosures.

Advocacy groups have questioned whether prepaid card issuers clearly explain to cardholders the fees that come with products, including charges to activate the card, load money on it, check a balance at cash machines and speak to customer service. Consumer advocates have said that the cards, which are typically marketed to lower-income customers, have so many fees that they erode money loaded onto the card.

Prepaid cards work much like debit cards, except that they are not tied to a traditional, regulated bank account. The cards are part of a larger strategy by lenders to tap into the so-called unbanked or underbanked population — customers who use few, if any, bank services. Such people are considered a $45 billion market, according to the Center for Financial Services Innovation, which provides advisory services.

For the Bluebird account, customers can sign up free online or via mobile phone, or pay $5 in a Walmart store. They receive a card stamped with the American Express logo, which they can use anywhere American Express is accepted. They can set up direct deposit for paychecks and deposit other checks by taking a mobile phone picture of them. And they can withdraw cash. The companies do not perform a credit check before creating an account.

American Express and Wal-Mart said there would be no minimum balances to maintain, no monthly or annual fees and no overdraft fees (the account does not allow overdrafts, as it does not issue paper checks). It will cost $2 per out-of-network A.T.M. withdrawal, and $2 per withdrawal without direct deposit, but the companies did not disclose other fees as of now. Wal-Mart’s MoneyCard prepaid card costs $3 to buy, $3 a month and $3 to reload.

“We know that the model is financially sustainable for both partners,” said Daniel Eckert, vice president of financial services for Wal-Mart U.S.

David Robertson, publisher of The Nilson Report, an industry publication for payment systems, said companies in deals like this typically shared the amount charged to merchants when a card was used. He said he expected that Wal-Mart had negotiated a lower merchant-fee rate for card use at a Walmart than competitors would receive.

Mr. Robertson said Wal-Mart had most likely realized that its MoneyCard, run by the company Green Dot, was not appealing to all customers.

“This market is growing, and it’s moving beyond just that chunk of people that we consider to be underbanked,” he said. “It includes people who might be wanting to buy a prepaid card for other reasons, like budgeting purposes.”

Green Dot’s stock declined 20.2 percent on Monday, though Mr. Eckert said that Wal-Mart would continue to offer its MoneyCard.

Wal-Mart’s financial services plans were once more ambitious: to get a federal bank charter, meaning it could make loans and get deposits insured by the Federal Deposit Insurance Corporation. But there was opposition from the banking industry and politicians who were worried about small banks. Five years ago, Wal-Mart ceased trying to get a charter, and instead started building services that did not require a charter.

Lenders have been clamoring to grab a bigger piece of the booming prepaid card market. In 2009, consumers held roughly $29 billion on prepaid cards, according to the Mercator Advisory Group, a payments industry research group. By the end of 2013, that is expected to swell to $90 billion.

A number of the nation’s largest lenders, including JPMorgan Chase, U.S. Bank, Regions Financial and Wells Fargo, are aggressively rolling out prepaid card offerings.

One incentive for banks to dive in is that prepaid cards are not restricted by the Dodd-Frank financial regulation law. Thanks to the exemption from Dodd-Frank, banks can charge merchants high fees when a consumer swipes a prepaid card. A recent study by Pew, a nonprofit research group, also indicated that some customers were unaware their prepaid cards were not necessarily protected by the F.D.I.C.

Dan Schulman, group president of enterprise growth for American Express, said in a call with reporters that Bluebird was not F.D.I.C.-backed, but that under money-transmittal regulations, American Express was required to hold assets to back up 100 percent of the money in accounts.

Prepaid cards have increasingly come under fire from regulators. Last month, the Office of the Comptroller of the Currency brought an action against Urban Trust Bank in Orlando, Fla., which has branches in Walmart stores. The regulator said it discovered “unsafe and unsound banking practices” related to the community bank’s prepaid card offerings.

http://www.nytimes.com/2012/10/09/business/wal-mart-to-offer-prepaid-card.html?_r=1&pagewanted=print

 

[Greed]

If you want more examples, then just google "non-traditional banking."

 

[Greed]

Keep Wal-Mart Out of Some Financial Services, Bankers Ask

Keep Wal-Mart Out of Some Financial Services, Bankers Ask
By Carter Dougherty
May 7, 2013 11:01 PM CT

A group of bankers advising the Federal Reserve urged U.S. regulators to consider preventing Wal-Mart Stores Inc. (WMT) from offering some financial services.

The Federal Advisory Council, a body of bankers that includes PNC Financial Services Group Inc. (PNC) and BB&T Corp., said at a Dec. 19 meeting that Wal-Mart’s sales of prepaid cards warranted greater federal oversight. Minutes of the meeting were obtained yesterday under the Freedom of Information Act.

“Wal-Mart has sought to enter banking formally for over a decade,” council members told the Fed, according to the meeting minutes. “Faced with opposition, Wal-Mart now appears to have entered banking through the back door, without the regulatory framework that applies to banks.”

The minutes outline bankers’ views on Wal-Mart’s entry into services that they traditionally provided to consumers, as well as their concern that a new competitor might face less stringent oversight by the government.

The council urged the Fed to consider limiting payment-related services to “regulated banking institutions,” or at least step up its study of the business. It also said the Consumer Financial Protection Bureau, created by the 2010 Dodd-Frank law, should supervise non-bank companies that provide financial services.

The bank push for oversight of Bentonville, Arkansas-based Wal-Mart’s prepaid card business marks the latest chapter in a long fight over whether the retail giant should be allowed to offer more financial services.

Wal-Mart Bank

Banks, labor unions and community groups united in 2005 to oppose Wal-Mart’s application to open a limited-service, Utah-based bank, a bid the retailer eventually dropped. Retailers including Wal-Mart, Target Corp. (TGT) and Home Depot Inc. (HD) successfully fought the banking lobby in 2010 and 2011 to obtain Fed curbs on debit-card swipe fees, known as interchange, that they pay to banks.

In 2011 banks asked the consumer bureau to designate Wal-Mart as a “larger participant” in financial services, a label that would lead to direct supervision by the agency.

Since then, Wal-Mart has expanded its presence in financial services by marketing a prepaid card, called Bluebird, in partnership with American Express Co. (AXP) (AXP) Together with a similar card offered by JPMorgan Chase & Co. (JPM), the product has re-ordered the prepaid market.

“The financial services products offered at Wal-Mart stores are properly regulated,” Deisha Barnett, a Wal-Mart spokeswoman, said in an e-mail yesterday. “In many cases, the regulated entity is the financial services partner.”

Advantage Seen

The banks argued that the Wal-Mart is selling what is marketed as a “debit and checking alternative” that competes with traditional bank accounts but has a regulatory advantage.

Prepaid cards are exempt from the Fed’s interchange rules. As a result, the exemption “appears to permit Wal-Mart, a strong proponent of lower debit interchange rates, to benefit indirectly from the very thing it opposed: unregulated interchange,” the banking council told the regulator.

The bankers also portrayed Wal-Mart as part of an emerging “shadow banking” system in which financial services are provided outside the system of traditional depositories. Companies that provide check cashing, bill payment, money transfers and prepaid cards are effectively competing with banks, the council argued.

“Regulators should ensure that there is a level playing field for all financial intermediaries to make sure that risks are properly monitored and regulated,” the council wrote.

The term “shadow banking” came into widespread usage around the time of the 2008 financial crisis. It is often used to describe the system of mortgage origination and securitization that bypasses traditional banks.

http://www.bloomberg.com/news/2013-...d-card-plan-needs-oversight-bankers-said.html

 

[Greed]

DIY Finance

DIY Finance (14:24)
June 18, 2013 7:48 PM

Mike Smith lives by himself in a small house in a small town in Kentucky, near the Ohio River. He makes about $1,000 a month, owns his house outright, and doesn't carry any debt. He suspects that his brother and at least one but maybe all of his three grown children have stolen money from him.

Over a period of about a year he made exactly six transactions that cost him over $100 — a property tax bill, an insurance payment, a couple big-ticket repairs. And there was the $109 he spent on a pet lizard, which he planned to use as an investment by breeding it and selling its offspring.

On today's show, we look at how people create their own financial systems from scratch.

Mike has thousands of dollars stashed around his house in different "accounts." Tamara Bullock and Patricia Hamilton are part of an informal savings club. Miguelo Rada has a whole bank in his pocket — he takes deposits from some people and lends to others.

Mike's story comes to us via the U.S. Financial Diaries Project. (His name isn't really Mike Smith, by the way; the project gave him a pseudonym so he could remain anonymous.

http://www.npr.org/blogs/money/2013/06/18/193176928/episode-466-diy-finance

 

[thoughtone]

Banks doing their capitalism work.

 

[Greed]

Oh, so now we can add lobbyist to the list of excuses you've made for Dodd-Frank. As long as the Democratic Party isn't blamed I guess.

 

[thoughtone]

Oh, so now we can add lobbyist to the list of excuses you've made for Dodd-Frank. As long as the Democratic Party isn't blamed I guess.

Your congressional republicans haven't done much, but they are doing a helluva job of preventing any kind of financial reform.

Right Senator Cruz, Rand Paul, Tea Party?

 

[Greed]

Your congressional republicans haven't done much, but they are doing a helluva job of preventing any kind of financial reform.

Right Senator Cruz, Rand Paul, Tea Party?

Can't you at least have the decency to put reform in quotes.

You aren't allowed to shift Too Big to Fail from an implicit policy to an explicit one then call it reform.

Have some shame thoughtone.

 

[thoughtone]

Can't you at least have the decency to put reform in quotes.

You aren't allowed to shift Too Big to Fail from an implicit policy to an explicit one then call it reform.

Have some shame thoughtone.

In your theoretical, free market society.

 

[Greed]

A World Without Banks

A World Without Banks (13:59)
May 30, 2014 5:41 PM ET

There's this big idea floating around right now. It sounds crazy and fringey, but it turns out some non-crazy, non-fringey people are into it. The idea is this: let's get rid of the banks. Don't make them safer. Don't make them smaller. Just get rid of them.

On today's show: A world without banks.

http://www.npr.org/blogs/money/2014/05/30/317030992/episode-543-a-world-without-banks

 

[Greed]

Everyday Low (Banking) Prices

Everyday Low (Banking) Prices
By Annie Lowrey
October 12, 2014 9:02 p.m.

It is expensive to be poor, as the saying goes. Have a healthy paycheck and a cash buffer built up? It costs you close to nothing to maintain your checking and savings accounts. Live hand-to-mouth, cashing your checks and taking out payday loans? You get hit with fee after fee as well as three-digit interest rates.

Enter wallet-friendly retail giant Walmart. This month, the big-box store is unrolling a low-fee checking account across the country. The response on the left, at least, has tended to be skeptical: a “new scheme to prey on America’s poor,” an “awful idea,” and so on. But the big-box retailer — and the competition it might pose to banks and other financial institutions — might help make banking accessible to millions of currently ill-served low-income families.

A strange-bedfellows coalition of unions, consumer groups, and financial institutions has long opposed Walmart’s attempts to move into banking. For unions and consumer groups, the main beef has been Walmart’s supposed “character flaws”: “The largest gender-discrimination case in the nation’s history, child-labor-law violations, paying fines to allow undocumented workers within their stores overnight, the list goes on and on,” one labor leader told The Wall Street Journal in 2006.

For financial institutions, the concern has mainly been competition. Back in the mid-2000s, the American Bankers Association, a powerful trade group, sent a “CEO alert” to 4,000 of its members, urging them to oppose Walmart’s petition to become a bank and warning that Walmart’s "reach and influence" would be significant.

Walmart has scaled back its ambition somewhat since the mid-aughts, offering a number of financial products rather than seeking a banking license outright. It has added prepaid debit and credit cards to its aisles. Its stores cash checks and transfer money. Now it is introducing its checking account along with an FDIC-insured firm, Green Dot.

It is called GoBank. Customers buy a $2.95 starter kit in Walmart, then receive a debit card that they can use wherever MasterCard is accepted. They can take out money at a network of tens of thousands of ATMs, deposit checks with a smartphone, and deposit cash at Walmart stores. The fees are not always dirt-cheap, but they are on the low side and straightforward. Best of all, there are no overdraft fees, perhaps the banking industry’s worst tax on poor and income-unstable individuals.

Walmart, for its part, is stressing how inclusive and low-cost it wants the financial product to be. “Customers want easier ways to manage their everyday finances and increasingly feel they just aren’t getting value from traditional banking because of high fees,” said Daniel Eckert, a Walmart executive, in a press release. “Adding the GoBank checking account to our shelves means our customers will have exclusive access to one of the most affordable, inclusive and easy-to-use checking accounts in the industry.”

Among many consumer advocates, the concern is that the checking account could be the cheap bait that comes before the hook of more expensive financial services — especially given that Walmart has been adding to its suite of financial products. But with GoBank, Walmart benefits from seeing more customers flowing through its doors, and Green Dot derives revenue through interchange fees.

It is other financial institutions — big banks, community banks, credit unions, payday lenders, and other fringe financiers — that have much to fear from Walmart’s expansion.

Walmart and Green Dot have made their fees low and simple. They have targeted the low-income families that banks so often eschew and the unbanked families that banks generally ignore. Already, Walmart has become an important financial-services center for those families, with its dirt-cheap fees for things like check cashing. It is also not hard to see how over time they might begin to chip away at banks’ broader customer base or force banks to lower fees and compete a little harder to keep their customers.

There are actually signs that, spurred by regulatory changes and the recession, financial firms have already started to do that. Both Citibank and Bank of America have unrolled accounts with low monthly charges and no overdraft fees — the former an “Access” account with a $10 monthly fee that gets waived if a customer makes a bill payment or a direct deposit, and the latter a “SafeBalance” account with a $4.95 monthly fee.

Along with GoBank, it all adds up to a world with more and better choices for low-income families, and less business for payday lenders. Save money, live better, indeed.

http://nymag.com/daily/intelligencer/2014/10/everyday-low-banking-prices.html