David Galbraith goes down the litany of problems with U.S. banks which is familiar to any European in the U.S. or, most likely, to anybody who even knows a European in the U.S. Most of it surrounds the ridiculous difficulty of moving money from A to B: in Europe, it's easy and free, online, or with a phone call. In the U.S., it's difficult, expensive, and nearly always involves some kind of paper check and the U.S. mail.
The reasons for this are fundamentally regulatory -- and are the same reasons why there won't be any global banking regulation in the foreseeable future.
David wonders whether there's a connection between the ridiculously behind-the-curve state of U.S. banks (I give chip-and-PIN a decade before it appears over here) and the problems that the U.S. banking system finds itself in. The simple answer is no -- the problems are simply unrelated to the operation of consumer checking accounts. But more subtly, the single biggest obstacle between U.S. banks and Europe-style checking accounts is the fact that the U.S. banking system is ridiculously fragmented, overseen as it is by no fewer than twelve different Federal Reserve banks (not even counting all the federal regulators), and featuring as it does thousands of small and tiny banks which collectively are very good at stymieing attempts at sophisticated regulation.
So while Sarkozy and Brown are likely to get their desired New York summit on the global banking system, they're not even going to come close to a system of global regulation. Getting all of Europe's banks under one regulatory umbrella is one thing; getting America's under the same umbrella is something else entirely.
The U.S. is particularly queasy about international oversight of big banks. A senior Bush administration official said "ideas like that are probably political nonstarters in the United States, and in a number of other nations."
Remember that it was pretty much impossible even to get U.S. banks into Basel II -- in the end the big ones did join, and the small ones didn't. America, even after the current wave of banking consolidation is over, will have many more small and tiny banks than just about any other country; the (excellent) credit union next door to me, for instance, has total assets of less than $20 million. And while no one wants to bring small and tiny institutions under international oversight, those banks can still derail the idea if they get an inkling that members of the big boys' club will have any kind of competitive advantage as a result.
And they'll probably derail any move towards chip-and-PIN, too, or schemes which make it easier to transfer money from one bank account to another.
The USA is based around regional banks; while there are now three banks which might have aspirations to being national (Bank of America, JP Morgan Chase, and Wells Fargo), all of them have enormous gaps in their national presence, and none of them is based within 500 miles of either of the others. When Hank Paulson wanted to get the CEOs of America's biggest banks in the same place at the same time, he took advantage of the fact that they were all in Washington anyway for the annual meeting of the World Bank. (And even then he had to make do with what he could get: the chairman -- not CEO -- of Wells Fargo, and the CEO -- not chairman -- of Citigroup.)
In other words, the U.S. probably has less ability to herd and regulate its banks, or force them into a new global architecture, than any other major country. And we should all be prepared for disappointment when this summit finally happens.
The banks (and investors) already have a nasty taste of the stick with BS, LEH, FnF, AIG, Wamu, WB.
Now the carrot $700B is being offered for banks to start unfreezing their artificial credit crisis before it spreads to commercial credit.
Bickering is now at works. Hopefully the banks will realize it is futile to go against the force. The sooner (carror) the better, the later (big stick) the worse it gets.
No small banks find it hard to merge because at a merger all stuff on the balances has to be marked to market value. The market value of an average bank is far below it's book value, hence mergers are difficult.
That is the reason you see so little merging going on, only when the FIDC rams in some parts of some banks are taken over. But that comes at the expense of making it to the 'failed bank' list of the FDIC.
Classic problem/reaction/solut... model playing out here. Seems created to gives us a solution that will benefit the world's top 1%.
Problem: credit markets in the USA are almost forzen
Reaction: American People "Oh no...please save us."
Solution: Well how about a nifty world banking regulation to help the good ole USA.
There are way too many good guys around to let this happen.
I'd like to see American Invest in local stock markets. Yeah the yields up at the NYSE are huge, but people will strengthen their communities by investing locally.
I want to start a bank with $100,000.
How do I attract customers?
First, I have to assure them that their money wont be stolen (government police force and legal system of punishments.)
Second, once I have ten million dollars of cash which I am paying 4% interest on and have loaned nine million dollars at 7% interest, I have to assure my customers against a run on my bank while I am vacationing on the French Riviera (FDIC, Government regulation again.)
Third, I have to be forced to keep a certain amount of cash on hand or I will invite a run on my bank after I deposit enough cash in a Swiss bank so that I can face bankruptcy in comfort (government regulation against Ponzi schemes)
Fourth, my customers have to be protected against my innate tendency, as homo economicus, to take more than I give back (make very many bad loans and abscond with the funds and secrete them in a secure place before my bank collapses.)
Without a legal system and the rule of law (regulations) the law of the economic jungle prevails and the intelligent shear money off the backs of the sheeple.
Incidentally, have you noticed that the rest of the world's banking systems are struggling, also with the same problems as ours or worse? And, the standard of living in the rest of the world is far below that enjoyed by the average citizen of the good old and free USA.
KEEP YOUR LIBERAL ONE-WORLD ORDER IDEAS TO YOURSELF. For inspiration, please note the absence of the USSR and the slow but sure onset of capitalist democracy in the PRC. The world envies and despises our great nation. Never forget It is their fondest hope to undermine and destroy our greatness. This latest move to install international banking regulation here is, just, another attempt to bring about our downfall.
Oh, yes, please note the socialist Democrats in the Congress are all for this. If you believe in the American way of life and doing business, vote them out on November 4 or watch your country erode into a second rate nation.
He was against free trade and the ideas of Adam Smith and believed in protectionism.
He founded the first National, Government owned bank in America.
He was, in short, a Federalist.
Hamilton, defending the idea of his bank:
[It] ought to be premised that the objections of the secretary of state and attorney general (to the founding of a national bank) are founded
on a general denial of the authority of the United States to erect
corporations. The latter, indeed expressly admits that if there be
anything in the bill which is not warranted by the Constitution, it is
the clause of incorporation.
Now it appears to the secretary of the treasury that this general
principle is INHERENT in the very DEFINITION of government and ESSENTIAL to every step of the progress to be made by that of the United States, namely: that every power vested in a government is in its nature soverign and includes, by force of the term, a right to employ all the MEANS
requisite and fairly applicable to the attainment of the ENDS of such
power, and which are not precluded by restrictions and exceptions
specified in the Constitution, or not immoral, or contrary to the essential
ends of political society...
Alexander Hamilton
en.wikipedia.org/wiki/...
unimpressedpragmatist. It seems the fiscally conservative's are the ones undermining the capitalist system. That's why I vote Democrat now. The Republicans blow all your money and refuse to admit they are socializing the government and running the common man into bankruptcy as they avoid taxes the rest of us pay. Fascism has discovered socialism and they are delighted with the results. Sick, sick, sick...