Comments on: Three cheers for small banks A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Funda-au Sun, 22 Dec 2013 12:42:17 +0000 It’s amazing how banking has evolved today. Financial services such as interest-free credit finance solutions are now being marketed online. This includes personal loans and business loans as well.

By: yurakm Sun, 08 Dec 2013 02:49:47 +0000 Small banks did not cause the 2008 crash. Thought they participated heavily in the mortgage bubble, most of them sold the mortgages promptly to Fannie Mae or to investment banks.

The previous financial debacle, S&L – yes, small banks caused it.

By: baroque-quest Fri, 06 Dec 2013 18:42:10 +0000 1) Small banks did not cause the 2008 crash: large ones did.
2) Small banks have much better service.
3) We should intervene all large banks, at least the top 50, and split them up.
4) Small banks were not bailed-out with hundreds of billions of taxpayer dollars due to incompetence and fraud.
5) Large, international banks present a clear and present danger to the world because they cannot be dismantled easily.
6) Matt Yglesias is an apologist for the Obama administration, especially for Tim Geither, perhaps the most incompetent Treasury Secretary of all time. Read Neil Barofsky’s book “Bailout: How Washington Abandoned Main Street While Rescuing Wall Street” and Bill Black’s scathing commentary on another Yglesias fairy tale (URL below). ill-black-yglesias-pours-the-geithner-ho lder-breuer-ghb-banksters-immunity-doctr ine-in-our-drinks.html

By: seanbmcnulty Fri, 06 Dec 2013 13:40:22 +0000 “And the FDIC knows what it’s doing”

I’m assuming that was a joke

By: flowergardener Fri, 06 Dec 2013 13:01:41 +0000 I worked 25 years in lending in a small community bank until retiring. The problem facing small banks is that they are left having to make lemonade out of the market segments not desired by large institutions (banks and GSEs) and credit unions. Thus their variety of products is being reduced and they get pushed into riskier loan types or geographic areas shunned by the big boys. So you see banks failing due to overexposure to higher risk loans such as housing/development loans.
In particular something needs to be done about credit unions’ tax exemption which they use to systematically undercut banks in whatever markets they select such as automobile loans.

By: Missinginaction Fri, 06 Dec 2013 11:12:27 +0000 Not only do I prefer smaller banks and credit unions, as a matter of conscience I decided a few years ago to simply stop doing business with any of the big 6. OK, OK, I do have a Citi credit card but I pay it off religiously every month. Aside from that it’s strictly the smaller guys and credit unions. Why would I want to support big banks, for me they are as destructive as big tobacco.

By: strawman Fri, 06 Dec 2013 03:48:52 +0000 “I suspect that community banks are only going to increase their market share going forwards.”

Ach! You had me until the last line. Yglesias had a rare misstep here. The smaller banks I’ve worked for have been very tightly managed. Surprisingly ignorant of the basic mechanisms of, well, banking – but as you say, a feature, not a bug.

But from an insiders view, the past few years have been typified by relentless, constant consolidation. That’s part and parcel of modern banking, but the crisis has hardly helped.

To me, while online banking platforms are a wonderful benefit for the consumer, they’ve been terrible for community banks. It adds another layer of per-user cost when the technology is outsourced to a technology provider.

That plays right into the hands of the big banks, who have the necessary capability to develop and maintain their own propertiary systems. It allows very agile and well funded banks (think USAA) to innovate relentlessly, while small-cap regionals are dependent on third-parties. And in my limited experience, most third party online banking providers are clunky, beholden to far too any clients, and unable to deliver on anything other than mostly dated and re-iterative ideas.

And even those banks that introduce more modern online options struggle. I’ve worked on three OB implementations and none have driven significant market share. Locally, it’s just playing keep up with larger banks. And although having a robust online infrastructure means you could theoretically expand your geographic footprint, that plays against the strength of community institutions which, as you say, are mostly local.

I prefer small and regional banks, but on this one point, Yglesias is right. I don’t see anything other than further growth for the big boys in bankings future.

By: Auros Fri, 06 Dec 2013 01:46:15 +0000 I wonder how hard it would be to construct something like a franchise-able bank? If the essence of the good small-town banker is that he knows who can be trusted with borrowed money, if there’s a way to free that guy up from needing to handle the infrastructure of handling deposits and withdrawals, sending out statements, issuing debit cards and processing their transactions, running a website with features like online bill pay, and all the rest… then providing all of those things seems like a viable business model.

There’s no particular reason that the experience of banking with New Resource Bank needs to be particularly distinct from Lower East Side People’s Credit Union. The big differentiating factor is just their focuses in lending, right? NRB finances clean power installations for homes and businesses, helps guide business clients to energy efficiency upgrades, and that kind of thing. LES People’s presumably has some other specialty. But a single business could probably, with lower overhead, provide basics like a web infrastructure, debit cards, etc, to both of them, and a thousand more local specialty banks.