Some End-of-Week Thoughts

A few random thoughts today:

• The Washington Post reports that the federal government is having success in persuading banks and credit unions to provide banking services to marijuana retailers in states where selling marijuana is legal. This federal effort is happening despite the fact that, state laws notwithstanding, possession and sale of marijuana continues to be illegal at the federal level. Thus the government is pressing banks to provide services to businesses that are clearly violating the law, while at the same time pressing banks to not provide services to customers engaged in other business that are obviously legal. I will leave it to you to ponder the irony.

• The $17 billion Bank of America is said to be ready to pay to settle with the Justice Department still isn’t enough for some consumer activist types. “These settlements are a public relations scheme to try to convince the American people that they’re on their side when the facts show they have been there for the banks,” Bruce Marks CEO of the Neighborhood Assistance Corp. of America, tells the New York Post. “[Previous settlements] have not provided significant benefits for the homeowners even though the homeowners were the most victimized very little was done to help the homeowners.”  A couple of points: First, if $17 billion isn’t enough for these people, one has to wonder what number would  be. Too many bank critics seem to be professional grievance mongers who’ve decided to not be satisfied with the banks no matter what the banks agree to. Bruce Marks in particular is a particularly disgusting example of this type; he’s made a career of whining about banks since the 1980s, when he used to regularly lambaste the old Fleet Financial for its mortgage lending practices. Being permanently unhappy is part of his business model. And second, defaulted homeowners were the ones “most victimized” by the subprime mortgage bubble and implosion? Please. It’s hard to see how defaulted borrowers were victims at all. These people freely and knowingly entered into contracts—mortgage loans—and then failed to hold up their end of the bargain. After they defaulted, many of them got to live in their properties rent-free for months on end. If anything, of all the groups affected by the subprime fiasco, defaulted borrowers might be seen as net winners. Among the biggest victims meanwhile you might consider employees of the banks like Countrywide and Bear Stearns, who lost their jobs as a result of the imprudent decision made by the people in charge. They didn’t do anything wrong, and their lives were turned upside down.

• Regarding my piece Tuesday on Stanford economics professor Anat Admati’s plans for bank balance sheets, I hadn’t realized until I read in the New York Times on Sunday that the professor doesn’t have a background in banking, and only came learn about it in any detail as the financial panic unfolded. Fair enough. But my question is this: how can any tenured professor of economics, in any specialty, not have a basic understanding that banking involves leverage?

• The Office of Minority and Women Inclusion at the Consumer Finance Protection Bureau “found that staff believed their supervisors micro-managed projects, were unclear about their priorities and lacked uniform standards for employee performance,” Reuters reports. “CFPB employees said they did not understand the bureau’s hiring, promotion and pay practices, which contributed to the impression those decisions were unfair, the report said.” This news is latest piece of evidence that the CFPB is apparently an ongoing managerial and bureaucratic disaster, and has been from the moment it opened its doors. Still, if this is how the agency treats its own employees, one has to wonder what kind of holy hell is in store for the entities it regulates.

What do you think? Let me know!