Once upon a time, remittances, especially to Mexico, were the next big thing. In 2002, for instance, Bank of America bought 24.9% of one of Mexico’s big three banks, Serfín, mainly for the remittance business:
A couple of weeks ago, I was at a lunch discussion of immigration policy, of all things, in which I defended Citigroup’s decision to move various risk-management operations from New York to Mexico. I was talking to a woman who was complaining about the move and about the amount of time that the Mexico office would sometimes take before arriving at a decision. But my view was that moving such operations to Mexico was probably a good thing, on net. After all, Citi’s Mexican bank — Banamex — is one of the most efficient banks in the Americas, and makes a lot of money while taking very little in the way of risk. And on the other side of the trade, the New York office was precisely the place where Citi’s risk management was worst. After all, it was New York which missed the entire subprime problem, along with many other incidents in which Citi managed to blow itself up.
Back in January 2010, Barack Obama — flanked by Tim Geithner, Larry Summers, and Peter Orszag — unveiled a new tax on big banks, or a “financial crisis responsibility fee”, as he liked to call it. Of course, this being Washington, the initiative never got off the ground, and was largely forgotten — until now:
Simple began in July 2009, but it took three years before it was ready to actually start sending its debit cards out to members of the public. And now, after just 18 months as a scrappy independent financial-services provider, it’s being bought, for $117 million, by Spanish banking giant BBVA.
Back in 2011, I said that “the only way to save the Post Office will be to allow it to move into financial services”, seeing as how “banks in the US are mistrusted and disliked and many people would love to be able to just bank at the Post Office instead”.
It’s hardly news that in the run-up to the financial crisis, some banks created highly-toxic collateralized debt obligations, and other banks bought those highly toxic CDOs and put them on their balance sheets. The result was that when the crisis hit, and the CDOs plunged in value, a lot of banks needed to take a lot of write-downs.
When JP Morgan paid its record $13 billion fine for problems with its mortgage securitizations, the bank came out of the experience surprisingly unscathed, in large part because Wall Street reckoned that the real guilt lay mainly in the actions of companies that JP Morgan had bought (Bear Stearns and WaMu) rather than in any actions undertaken on its own watch. There was a feeling that the bank was being unfairly singled out for punishment — a feeling which, at least in part, was justified.
Earlier this week, Matt Yglesias wrote a post about what he calls “America’s Microbank Problem”: this country has far too many banks, he says, and they’re far too small. A rebuttal soon came from Rob Blackwell of American Banker, who called Yglesias “dead wrong”. This is an argument which clearly needs to be adjudicated! And in this case, I’m afraid, Blackwell wins.
Last month, I wrote about bond-market illiquidity — the problem that it’s incredibly difficult to buy and sell bonds in any kind of volume, especially if they’re not Treasuries. That’s a big issue — but it turns out there’s an even bigger issue hiding in the same vicinity.