After we last year proposed “Equality Banks,” ideas flooded in on possible charters. We also heard from those who so distrust any venture involving private finance that they believe only a public bank suffices to ensure fair delivery of equality-essential deposit, loan, and payment products. In this blog post, we build on prior work to lay out an array of charter options suitable for different types of Equality Banks owned by different types of financial or private investors. We reiterate our worries about public banks, adding to our prior evaluation of state and municipal efforts with an analysis of “low-income” credit unions and of the only equality-focused federal public bank to date. Each of these well-intentioned initiatives in fact made U.S. inequality a little bit worse, providing important lessons as progressive Democrats ready a raft of proposals not only to craft public banks, but also even to make the Postal Service or Federal Reserve become one. Continue reading “More Ways to Make an Equality Bank Make a Difference”
Tag: OCC
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”
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.
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”
Paternalism, Payday Lending, and the Post Office
By Karen Shaw Petrou
It is a truth known to all who seek consumer protection from predatory lending that payday lending is a scourge. However, it is also a truth among business analysts that financial institutions will not willingly go broke. Regulated companies will exit a business which cannot generate profit regardless of unmet demand. It is also a truth among business analysts that unregulated companies then rise to meet this demand, often undeterred by the social-welfare scruples that underpin the consumer-protection rules.
Continue reading “Paternalism, Payday Lending, and the Post Office”