Inside Financial Services

Commenter: Elizabeth Does Too Know Enough About Banking

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Commenter charlie1939 doesn’t agree with my skepticism, posted on Monday, regarding the depth of Elizabeth Warren’s understanding of the banking business:

Your condescending commentary on Sen. Warren’s knowledge or lack of knowledge is a silly exercise of no value.

If you wanted to make a useful and insightful commentary, you could have addressed SPECIFICALLY WHERE she is lacking knowledge of the banking system and what that impact could be.

Personally, I feel she knows enough to know that the big banks are too big, that the leaders of the big banks are able to rely on goverment handouts if they screw up, that they can continue to draw ridiculous compensation for mediocre performance and that they will never suffer any real consequences for their corporate, financial and ethical misdeeds.

Wait. I thought I did address SPECIFICALLY WHERE Warren’s understanding of the banking business might be suspect. In particular, I said I thought she doesn’t understand the finer points of bank accounting. There is no dishonor in that. Bank accounting can be incredibly convoluted. I just don’t see why Sen. Warren feels she needs to insist that “I fully understand the system and I understand how [banks] make their money,” when after a moment’s reflection, one realizes that that can’t possibly be the case. Nor does her less-than-encyclopedic understanding of banking necessarily make her criticisms of banks invalid. I even happen to agree with some of them, believe it or not.

Charlie1939’s pushback is a good example, I think, of the knee-jerk mentality that guides the thinking of too many big-bank critics. To them, big banks are always bad—even though the best-run big banks came through the credit crunch scarcely missing a beat. Bank executives never face the consequences of their bad decisions—even though the CEOs of the biggest crackups lost their jobs in a hurry and endured significant financial losses. Bank executives are all overpaid. Really? Tell that to Warren Buffett. Reasonable people can differ on issues like this, of course. Unfortunately, too many bank critics prefer instead to lap up Sen. Warren’s anti-bank line without thinking too much about it, and then reflexively defend whatever nonsense she comes up with to say.

As to my comments being condescending, I plead guilty.

What do you think? Let me know!

14 Responses to “Commenter: Elizabeth Does Too Know Enough About Banking”

  1. PureDakota

    When trying to design a solution to a problem, one must be mindful that the solution considered may cause more problems. So at least as much careful thought must be given to these undesirable consequences as is given to the the specific problem you are trying to address. Of course, proponents of reform don’t like to talk about the negatives — they don’t fit well into the sales pitch. DFA is a great example of this failure. It was poorly focused and punitive, and as a result, it caused many problems that were not part of an understood trade-off.

  2. Paul O'Connor

    Tom, I too found your comments snarky. Would you question whether Jaimie Dimon understood Roberts Rules of Order works when he criticizes Congress? As an 11 year alumni of Bank of America (Continental Bank), in my humble opinion senior management barely understands how their own company works at that size. While I don’t agree with Senator Warren on many things banking related, the big banks have not distinguished themselves. Nearly every week an announcement of some wrong-doing or settlement is made. The stock performance of these companies has not been stellar but CEO compensation continues to increase. Defending the performance of these institutions over the last 5-7 years is not easy from a factual standpoint. I don’t know Dimon and don’t pretend to understand whether he is the best banker or not. I think it is high time he helps Senator Warren understand the positive thing that bankers do. Too big to fail is not going to change or improve. We have had similar too big to fail crises every decade since the 1960s and probably well before then. The only difference is big banks now control 82% of all deposits versus 62% in 1999.

  3. Pat O'Brien

    Because so many people thinks the banks are always bad they are the perfect straw man for a demagogue like Warren.

    • Wilab

      I also vote ING. They are online only so they can pay hieghr rates. They are also a reputable, publicly traded company. Though Ally seems to be a decent choice, I have never tried them.

  4. Cruncher Strongboy CPA

    Read my comments posted to the article late yesterday about the root cause of the problem and LET ME KNOW.

    That in my opinion is what is wrong with so many of our legislators, judges and administrators. What we wanted to happen is not what happened when people follow our rules.

    But, and this is the big but because they are being big butts, they can’t admit error so it not their error. So their solution is to add more new and more complicated rules. That goes to prove how smart they are as they say we created a new solution.

    Previous Post….
    Princes Summer Fall Winter Spring was best when she was on the on Howdy Doody show. Then she didn’t have to remember how the Affordable Housing program started under Clinton encouraged no income verification mortgage loans. Originally based on the 1990’s Community Relations program (I think that’s the right name).

    After all President Bill Clinton, Congress, Fannie Mae & Freddie Mac all said cheating was ok so everyone cheated. If you didn’t accept the cheating loan applicant information you were sued by the government as non-compliant with public policy and worse, institutionalized racial discrimination. After the financial disaster they needed to blame someone. Oh, not me the program creators said. Then they said of course not the ordinary fraudulent loan applicant, the person who got the money from the original faulty loan application (they were victims they said) as were already being penalized because they borrowed money and bought to pricy a house they couldn’t afford and then couldn’t or wouldn’t pay the loan.
    So they were left with only the companies they forced to accept the real cheaters. Rational? Companies are not real people. Unfortunately they are staffed, owned and administered by real people and thy didn’t count to the bureaucrats who were seeking to find anyone to blame but themselves.

  5. Michael K

    Tom- Your comments are on target. The Senators lack of understanding of the financial system is very apparent. Populist political rhetoric combined with academic platitudes is all she spouts. I am sure she has a good handle on many issues that a law student would need to know to pass the bar but she is way over her head in her current position.

  6. MacArthur

    Warren is another impenetrable airhead.

    • Aron

      I think its a mistake to copamre both channels only because both are “mobile”. Something we are learning in Spain is that there isn’t competitiviness between channels because… There are customers for each channel!! its the customer who choose the channel, not the bank.regards,

  7. Tom Gates

    Given Senator Warren’s past in both academic and political exploits i find it very hard to give her much credibility. There has been plenty written about the lack of scholarship shown in her consumer credit research along with UVA President Teresa Sullivan, another piece of work. I suspect that Senator Warren’s reflectance to run for President is influenced in part due to her wanting to avoid further scurtunity which would be a treasure trove for her opposition.

    That said, as an old line retired banker of 30 years, it sickens me to see what the banking business has become in terms of how it treats its clients, and employees. I would never counsel any young person to go into the banking business as it stands. Despite Tom’s comments to the contrary I have found Wells Fargo, personally and professionally, to be a mess.

    • Angelika

      I don’t see the connection bewteen the derivative bubble and the fed debt-based system. However, I do have thoughts on both.The administration needs to work with congress to repeal the CFTA (Commodity Futures Modernization Act of 2000) to re-regulate commodity futures. (Plus a lot more. Such as repeal Gramm-Leach-Bliley (1999).)As for the fed and the debt-based system, sure, too much debt is bad. However, what would do you do when there’s an emergency and you (or a loved one) might die if you don’t run up your credit cards? Well, of course, in almost every case, you’d use the credit cards. Chances are some day (as we’ve done before) the debt can be paid down especially if we don’t overspend. Clinton did it!

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