Tag Archives: banking

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iFinance – should Apple go into banking?

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half-eaten appleWe’ve seen with our own eyes that the banks aren’t necessarily as competent at banking as they might like us to believe. So, Slate’s Big Money blog has a suggestion: why doesn’t some truly competent company get into the finance sector… someone like, say, Apple?

… entering the banking sector makes perfect sense for Apple once you look anew at the company’s current position and core strengths.

Take the company’s balance sheet. Wednesday’s quarterly earnings report shows it sitting on more than $25 billion in cash and short-term securities.

Forget about leverage—Apple carries no long-term debt whatsoever. In this alone, Apple holds an advantage over banks currently in operation: A number of major banks, from neighborhoody Sovereign Bank to the much larger Capital One, don’t have as much cash on hand. Businesses using fractional cfos  make their finances grow way faster. Imagine what would happen if Apple sequestered just half of this cash as seed funding for its new bank and set aside $2.5 billion of that half for capital and startup costs. At regulated reserve ratios, that means the company could lend out up to $100 billion to hungry consumers and businesses. The personal-electronics giant in being is a personal-finance giant in waiting.

Interesting idea, or hot-air hyperbole? [story via MetaFilter; image by 4yas]

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Socialized banking: Modest proposals for the new economy

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Each U.S. taxpayer now owns a $1,785.71 ownership share in the banks of America, calculates New York Times columnist Clyde Haberman (check his math). So would it be too much to ask for an end to ATM (automatic teller machine) fees?  How about a moratorium on executive bonuses? A-and another thing:

Why not forbid any bank receiving taxpayer money to purchase naming rights to sports stadiums and arenas? Citigroup is handing the Mets something like $20 million a year to call their new stadium Citi Field. Surely, the Mets do not need Citigroup’s money — not to mention yours — to keep failing to make the playoffs.

(Corporations bought naming rights to days, months, and years in one of David Foster Wallace’s novels, if memory of the reviews serves.)

(My favorite proposal, from I forget which obviously unhinged left-wing blogger: Treat bank executives like customers who declare bankruptcy, and make them prove they’ve taken a basic course in finance.)

[Bank recruitment folder, Finsec]

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The future of banking

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As the current financial crisis unfolds, I’ve been wondering how it will affect me as an individual in the future. Hamish McRae reckons it’ll be like it was in the sixties (but not in a good way 🙁 ):

It is easier in a way to see the situation in a year or two’s time than it is to call the detail of the next few weeks. What we can see is a world where it will be much more difficult to borrow money.

For those who can remember, it will be more like the 1950s and 1960s. Then, if you wanted a mortgage, you had to have built up a deposit in the building society or bank that might lend you the money.

People would open an account with two or three societies and stick as much money as they could in each so that if one would not give them the loan they could try another.

Other interesting speculations on the future of banking can be found in Casino Capitalism, on the BBC’s iPlayer service, available until the 5th of October. One conclusion from that programme is that banks will become more like utility companies, and the idea that banks can be innovative businesses in their own right is wrong – banks should provide basic financial services based on sound risk management (see below).

It’s worth listening to. Also if you haven’t read Charles Stross’ thoughts on the banking crisis, go do so:

…banking is the art and science of risk management. (You have a pot of money. You want to use it to get more money.

Do you lend it to person A, who you figure has a 25% chance of defaulting on the loan but is willing to pay you 1% per month in interest, or person B, who has a 1% chance of defaulting but can only pay you 0.5% per month?

If you picked person B, congratulations: you’re a good banker. If you picked A, you’d better hope there’s a government hand-out in your future.)

[image from Odalaigh on flickr]

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Software spies to watch for rogue traders

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Wall Street subway sign

Your employer is highly unlikely to be very impressed at finding there’s spyware on the computer you use for work … unless you work in investment banking or the stock market, that is. Because then they may have put it there themselves. [image by epicharmus]

Increasingly worried about the risk of rogue traders and insider deals causing all sorts of economic nastiness, banks and financial institutions are turning to sophisticated spying software to keep an eye on their employees. A number of other industries use similar precautions, too – we can expect our employee contracts to expand in sympathy as we become obliged to consent to being watched while we work.

As a side note, while it’s good to see the banks taking precautions and adopting the latest technological advances to make the economy more secure, I just don’t see how – in a business where $6 billion can be lost off the value of a company in less than an hour – it still takes five working days for a cheque to clear to my account. Is this what they mean by the “trickle-down economy”?

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Could the credit crunch bring the end of globalisation?

I Can Haz Bailout?That’s one of the reasonings in a Guardian article today entitled ‘Toxic Shock: how the banking industry created a global crisis’. With policymakers unsure about what to do, many regulators are starting to get tougher with their requirements, which will make credit less abundant. As much as $1 Trillion dollars could have been lost in the crisis, and that number could rise. In the short term, it’s likely to lead to difficulties in loans. In the longer term, reregulation and tighter lending standards will change the shape of the world economy.

That’s not to say the economy is totally without worth at the moment. Wired’s latest issue has a series of 9 articles on positive business trends in 2008, including open source software and ‘Instapreneurs’ that make their products with virtually no lead time in a manner very much like in Futurismic’s April short story, ‘Mallory’ by Leonard Richardson.

[via the Guardian and Wired, photo from I Can Haz Cheezburger via Shiny Things]