Robinhood and the Sheriff of Nottingham: The Fintech Financial-Inclusion Illusion

By Karen Petrou

On December 14, a fintech venture dubbing itself Robinhood launched a consumer-banking product touting a no-fee, high-return, and yet somehow still profitable checking, savings, brokerage, and payment product.  It didn’t take long to see that Robinhood would steal from the poor to feed the rich.  Speculative investors have somehow bid the company up to a $5.6 billion valuation despite, as even a cursory analysis of public documentation shows, a flawed business model premised on a series of increasingly improbable assumptions about the transformative powers of financial technology and the malleability of U.S. financial regulation.  Continue reading “Robinhood and the Sheriff of Nottingham: The Fintech Financial-Inclusion Illusion”

SIFIs and Sisyphus: The Latest Bank-Regulation Rewrite

By Karen Petrou

Starting in 2010, U.S. regulators erected a pyramid of complex, costly, and stringent safety-and-soundness, resolution-planning, and conduct regulations for the largest U.S. banking organizations that have come to be called SIFIs (i.e., systemically-important financial institutions).  Starting in 2018, the agencies began to demolish the still-incomplete SIFI pyramid, issuing on October 31 two sweeping proposals (here and here) not only to implement new U.S. law, but also to go farther.  Bankers say this is nice, but not enough; critics lambast the proposals as forerunners of the next financial crisis.  Either could be right – the proposals repeat the most fundamental mistake of post-crisis financial regulation:  rules piled upon rules or, now, rules subtracted from rules without even an effort to anticipate how all of the revised rules work taken altogether in the financial marketplace as it exists in the real world, not in a set of academic papers or political edicts. Continue reading “SIFIs and Sisyphus: The Latest Bank-Regulation Rewrite”

How to Craft a 21st-Century Equality Bank

By Federal Financial Analytics

Reflecting a lot of questions and commentary, the American Banker last week published an op-ed by Karen Petrou showing how to build the bankers’ banks to solve at least some of our economic-inequality problems.  Many proposals seek to do so via the U.S. Postal Service, but an Equality Bank is at least as powerful and comes only from the private-sector. Continue reading “How to Craft a 21st-Century Equality Bank”

Profits, Purpose, and Payday Lending

By Karen Shaw Petrou

On May 23, the Office of the Comptroller of the Currency (OCC) issued a bulletin allowing national banks into the short-term, small dollar lending often stigmatized as payday lending.  The policy shift is intended to spur regulated banks into a business prone to predatory practice, thus giving vulnerable borrowers a better way to tide them over short-term financial hardships.  Will banks start making short-term, small-dollar loans now that they have the OCC’s blessing?  Not if they can’t find a way to make money. 

Continue reading “Profits, Purpose, and Payday Lending”

Very, Very Safe Banks and a Very, Very Unequal Economy

By Karen Shaw Petrou

On April 13, federal banking agencies released their plan to require regulatory-capital recognition of the FASB’s new current expected credit loss (CECL) accounting method.  Doesn’t it sound technical, dull, and irrelevant to economic equality?  The integration of capital regulation with CECL is indeed technical and often dull, but it’s absolutely critical to the ability of U.S. banks to make the long-term, higher-risk loans essential for reversing at least some U.S. income and wealth inequality. Continue reading “Very, Very Safe Banks and a Very, Very Unequal Economy”