Archive for December 2010
Bank of America tries a 1996 strategy to save reputation in preparation for possible WikiLeaks problems
This is the most incredibly naive strategy I have ever heard a bank attempt, at least in this decade. At a minimum the person /group who is purchasing the domains should know better and have told BofA that the lunacy of this approach is that now people will actively go after BofA just to make a point
“The WikiLeaks strategy: Bank of America buys up abusive domain names” | Finextra for the original story & Slashdot for some amusing and but insightful comments from folks who know:
According to Domain Name Wire, the US bank has been aggressively registering domain names including its board of Directors’ and senior executives’ names followed by “sucks” and “blows”.
For example, the company registered a number of domains for CEO Brian Moynihan: BrianMoynihanBlows.com, BrianMoynihanSucks.com, BrianTMoynihanBlows.com, and BrianTMoynihanSucks.com.
Lets just count some of the ways this is guaranteed to fail.
- words such as BrianMoynihanSucks can be replicated in incredibly inventive ways. There are thousands of alternatives for just this one. Here are 3 simplistic ones.
- BrianMoynihanSux
- BrianMoynihanSucx
- BrianMoynihanSucks2
Relevance to Bankwatch:
I thought we had learned and moved on. In the 2010 internet world, social media is the driver of at a minimum negative reputations. There are 2 lessons for BofA here:
Lesson 1: you cannot buy your way to information containment, and you cannot contain information. Eventually it will be out. Those days were actually gone 15 years ago. I now understand that the internet/ web thinking at BofA has not matured one iota since the last time I sat in a session on social media at a Forrester conference in 2007 and listened to one of their (BofA) marketing people outline that internet was too dangerous for reputations so they would not be participating in blogging or such things.
Lesson 2: social media is a mainstay today. You layer on the ‘troll’ effect and something like this where lesson 1 has not been learned is simply an invitation to a PR disaster.
What should BofA do?
- definitely prepare defensive remarks
- go on the offence now. Leak your own stuff with your words. I have no idea what the topics are but there are ways to manage information out in chunks that minimise bad impacts and take the wind out of WikieLeaks sails.
- there is damaging and there is illegal. Do your own assessment, and take actions to remove people now that did illegal things. Make changes to correct the damaging things, such as new processes.
- empahsise that your money is safe and make new customer offers that prove it.
- talk to a smart PR firm. Yours are displaying bad judgment here on this particular strategy.
PS… just in case I fell into the troll category, I thought I would independently check the status of some of those urls and if BofA are doing this. I cannot confirm BofA are but I can confirm an unusually high amount of activity to register these domains ALL on 17th December, 2010 by MarkMonitor. Oh and MarkMonitor manage the bankofamerica.com domain (see below).
PPS… Markmonitor position themselves as fighting online brand abuse and this is one of their declared strategies on their site against cyber-squatting. I thought (above) we decided cyber-squatting was something best to ignore back in 1996?
Domain Name: BRIANMOYNIHANSUCKS.COM Registrar: MARKMONITOR INC. Whois Server: whois.markmonitor.com Referral URL: http://www.markmonitor.com Name Server: NS1.MARKMONITOR.COM Name Server: NS2.MARKMONITOR.COM Name Server: NS3.MARKMONITOR.COM Name Server: NS4.MARKMONITOR.COM Name Server: NS5.MARKMONITOR.COM Name Server: NS6.MARKMONITOR.COM Name Server: NS7.MARKMONITOR.COM Status: clientDeleteProhibited Status: clientTransferProhibited Status: clientUpdateProhibited Updated Date: 17-dec-2010 Creation Date: 17-dec-2010 Expiration Date: 17-dec-2012
Domain Name: BRIANMOYNIHANSUCKS.NET Registrar: MARKMONITOR INC. Whois Server: whois.markmonitor.com Referral URL: http://www.markmonitor.com Name Server: NS1.MARKMONITOR.COM Name Server: NS2.MARKMONITOR.COM Name Server: NS3.MARKMONITOR.COM Name Server: NS4.MARKMONITOR.COM Name Server: NS5.MARKMONITOR.COM Name Server: NS6.MARKMONITOR.COM Name Server: NS7.MARKMONITOR.COM Status: clientDeleteProhibited Status: clientTransferProhibited Status: clientUpdateProhibited Updated Date: 17-dec-2010 Creation Date: 17-dec-2010 Expiration Date: 17-dec-2012
Domain ID:D160981071-LROR Domain Name:BRIANMOYNIHANSUCKS.ORG Created On:17-Dec-2010 17:26:45 UTC Last Updated On:17-Dec-2010 17:26:47 UTC Expiration Date:17-Dec-2012 17:26:45 UTC Sponsoring Registrar:MarkMonitor Inc.
Domain Name: BRIANTMOYNIHANSUCKS.COM Registrar: MARKMONITOR INC. Whois Server: whois.markmonitor.com Referral URL: http://www.markmonitor.com Name Server: NS1.MARKMONITOR.COM Name Server: NS2.MARKMONITOR.COM Name Server: NS3.MARKMONITOR.COM Name Server: NS4.MARKMONITOR.COM Name Server: NS5.MARKMONITOR.COM Name Server: NS6.MARKMONITOR.COM Name Server: NS7.MARKMONITOR.COM Status: clientDeleteProhibited Status: clientTransferProhibited Status: clientUpdateProhibited Updated Date: 17-dec-2010 Creation Date: 17-dec-2010 Expiration Date: 17-dec-2012
Domain Name: BANKOFAMERICA.COM Registrar: MARKMONITOR INC. Whois Server: whois.markmonitor.com Referral URL: http://www.markmonitor.com Name Server: NS1.BANKOFAMERICA.COM Name Server: NS3.BANKOFAMERICA.COM Name Server: NS4.BANKOFAMERICA.COM Status: clientDeleteProhibited Status: clientTransferProhibited Status: clientUpdateProhibited Updated Date: 21-jan-2009 Creation Date: 28-dec-1998 Expiration Date: 28-dec-2012
“Banking is a simple business – it’s only when you try to make it complicated that you run into trouble”
A terrific piece for Xmas eve 2010.
Modern bankers have their own Ghost, Mr. Scrooge says
DEREK DECLOET
From Friday’s Globe and Mail
Published Thursday, Dec. 23, 2010 7:05PM EST
They haunt him still. The ghosts, I mean – of Christmases Past, Present, and Yet to Come, who appeared in succession one Christmas Eve, long ago, to pry open the cold heart of Ebenezer Scrooge and teach him a thing or two about generosity and the holiday spirit.
It’s hard to shake the memory of an experience like that, harder still to forget the lessons it wrought. Mr. Scrooge was transformed overnight. The legendary misanthrope who could squeeze a nickel until the Queen gasped for air suddenly became a person of kindness and charity. Many decades later, he still is.
But there is something that is bothering the old man now – several things, actually – and bothering him enough that he is willing to break his long-standing policy of not talking to the press to have lunch at a location that, by his insistence, must remain undisclosed. Why is it, he asks, that mentions of him are still always negative? Why has the word “Scrooge” become a byword for “eccentric cheapskate” and not for “philanthropist”?
And most of all: Why do we insist on bringing up his name when discussing the scoundrels of the economic crisis?
No sooner does he ask that question when he begins to answer it himself, just as a steaming bowl of clam chowder (“This stuff is the secret of my longevity,” he says) is set in front of him. “I understand, I do, that it is quite convenient,” says Mr. Scrooge. “I’m in the lending business, and all bankers are villains, now more than ever.”
Indeed, news agencies seem to produce hundreds of items each year in which “Scrooge” is used to describe some tight-fisted person or unscrupulous corporate titan. Here’s the Canberra Times of Australia: “If you want to see a modern-day Scrooge, just look at how the CEOs behaved towards the laid-off workers during the global economic crisis.” Or the Daily Mirror, in a story about a British politician’s plan to trim public sector pensions: “He’s a modern-day Scrooge.” Each year, The Times of London invites readers to nominate the corporation with whom they are most disgusted; the “winner” receives the “Scrooge of the Year award.” A few years ago, a Times writer began the article this way: “Scrooge-like behaviour in financial services does not happen only at Christmas.”
Bah humbug to all that, says Mr. Scrooge. He resents these references in part because he is nothing like the current generation of bankers – the ones who are haunted by their own ghost, the Ghost of the Great Financial Meltdown.
Sure, in its heyday, Scrooge and Marley LLC was known for a certain ruthlessness with its customers, not to mention its even more famous parsimoniousness with the staff. (“Cratchit would never have even dared to ask for stock options,” he sniffs.) But there was still merit in the way they went about their financial business – the old-fashioned way.
Not for him, the crazy methods of Wall Street’s mathematicians, with their spreadsheets, their too-clever financial products and their schemes to entice customers to borrow ever-greater sums. He has never employed anyone like that and never will.
“That is the trouble with bankers these days,” Mr. Scrooge confides. “They think they are far too smart, and as a result they fail to understand the most important attribute of a successful banker, which is not intelligence but self-control. Banking is a simple business – it’s only when you try to make it complicated that you run into trouble.”
He pauses to ask the waiter for more bread, then continues. “My great-great-great-great-great-great grandnephew is a derivatives trader in the City of London. A derivatives trader!” The very idea is preposterous to him. Derivatives, he observes, are a zero-sum game, meaning that for every dollar gained by someone, there is a dollar lost by someone else, leaving the participants “not an hour richer” than they were before.
Mr. Scrooge turns his attention to the traumatic events of 2008, when the global financial system was on the edge of collapse, saved only by a series of government bailouts and emergency measures, at extraordinary cost.
“Now what caused all this?” he asks. “Hubris! The banks had borrowed too much, to give out loans to people at rates that were preposterously low, given the risk involved. This is obvious now.”
I can’t help but interject that he is, to many, the original subprime lender, known for making usurious deals. (I refrain from reminding him that when the Ghost of Christmas Yet to Come gave him a glimpse of the future, he saw to his horror that his debtors were actually cheered by his death.) But Mr. Scrooge brushes aside the comparison. Did he and Jacob Marley make loans against flimsy collateral, as U.S. banks and mortgage companies did? No. Did they lend to people they did not even know, or outsource the collection of debts to third parties? Never. “We always knew our customer. And rarely did we lend money to someone who was already in over his head.” When I tell him about the recent comments of Toronto-Dominion Bank chief Ed Clark, who suggested that it was up to the government and not the banks to rein in Canadians’ habit of borrowing too much, Mr. Scrooge is aghast. “The government? They have enough to do. They must run the prisons, the workhouses, and many other things. Why can’t these bankers just take on the responsibility for themselves? Humbug.”
For a moment is sounding exactly like the Ebenezer Scrooge of old, and I have to wonder how much he has really changed. Then something happens that makes it perfectly clear that he has. The bill arrives, and before I can even raise my hand, he snatches it away and pulls out his wallet.
“Merry Christmas,” he bellows. “God bless us, everyone!”
International Monetary Fund Review of Canada
A quick summary of the Canadian economy from the IMF is generally positive but notes the potential risks already identified by the Bank of Canada, namely consumer debt and impacts felt from the elephant south of the border.
One is we see Canada having weathered the global recession very well, in part, thanks to a big monetary and fiscal stimulus that’s helped to support demand. Another factor we’d point to: unlike in a number of other countries, the financial system has avoided systemic pressures so that it’s maintained the ability to provide credit through the recovery.
The other we’d point to is that the economic recovery is moderating from where we saw in the first half of this year. There remain a number of risks on the horizon. Two factors that we’ve flagged in the report are high household debt levels, and on the external, risks particular to the U.S. economy.
That said, we see macroeconomic policies as having the right tilt. Monetary policy tightening has paused and monetary conditions remain on the accommodative side, which we think is right given the slowdown in the economy and the risks. Fiscal policy also has smoothed. Some steps have been taken to support the recovery on that end.
PA Securities Commission issues a strange notice and assessment of P2P Lending
Regulators have a tough job, and while they are subject to criticism few would disagree with the need for regulators. However when I see hints of politics based on subjectivity creeping in, then they have to be called on it. (hat tip Social Lending Network)
The Pennsylvania Securities Commission has released an alert that I believe is misleading. The overall intent of the release is to set out the risks associated with P2P Lending. What is most intriguing is that the release does this by pointing out the strength of banks as something that can be relied on as a counterpoint to the ‘risky’ P2P lenders. The notice identifies points of contention that apply solely to P2P Lending.
Lets look at some examples from the release at PA Securities Commission Helps Assess Risks of Peer-to-Peer Lending or here and compare to experience with Banks in similar contexts to assess fairness of this notice.
“Peer-to-peer lending allows individuals and small businesses to receive loans that might be difficult or costly to obtain from traditional banks in our current economic climate,” noted PSC Chairman Robert Lam “
Their opening claim in the notice essentially states that P2P Lending is for sub prime. Where on earth would they get that idea? In 2005 there were examples of that which no-one can deny. In 2010 there are no examples of such lending in P2P amongst any regulated P2P Lender. Minimum credit scores are the base level entry requirement. This is clearly documented in the regulation documents filed with the SEC (Securities and Exchange Commission). If someone is not willing to accept the minimum score then request those lenders increase the standard. To my knowledge the minimum score eliminates borrowers that would be classified as sub prime.
“Banks historically build impressive edifices out of bricks and mortar to underscore how stable and reliable they are. On the Internet, it’s much more difficult to a reputable institution from ‘castles in the sky.’”
Words fail me in this one – “castles in the sky” ? What kind of regulatory oversight did the SEC agree to with Lending Club and Prosper – do they have a new category for ‘castles in the sky’.
What did the Penn Securities Commission think in Feb 2009 about reputation and ‘impressive edifices’ as represented in this photo when the chief edifices were grilled by Barney Frank for irresponsibility and more. Lets not forget the CEO’s were hauled in together and held to account on serious charges of at best misleading customers and investors.
The Securities Commission alert also warned investors to be aware that the identity of the borrower is often not available to them, making it impossible to verify independently the status of the borrower’s finances and business prospects. The lending platform may not do a thorough background check of the borrower, and borrowers may incur additional debts to other lenders.
Lets compare this allegation to foreclosuregate ‘If the chain of title of the note is broken, then the borrower no longer owes any money on the loan’. In this case Banks took depositors money and made loans that had many potential defects including identity of the borrower and of imperfect collateral.
“It takes time to fully assess the risks and rewards of financial innovations such as peer-to-peer lending,” Lam said. “Investors should proceed with caution when considering new investment vehicles like P2P.”
This is one claim I can agree with. I would prefer to not single out P2P because the statement works for any ‘new investment’. Nonetheless P2P is relatively new and certainly quite new in terms of seasoning credit risk while under the auspices of the SEC.
Relevance to Bankwatch:
Just as there is a need in the investment world for a fair, balanced and considered assessment of all the risks, this is equally true when issuing notices such as the Penn SC notice. Factors such as prime vs sub prime, identity verification, stability and reliability, are all valid considerations for risk. However the first part of risk assessment is to gather a set of facts relative to each risk and then perform the assessment. The nature of this notice reads that the factors are based on opinion related from side conversations, gossip and out of context one-off examples and if that is the case this is no way to perform a risk assessment.
In fact I would propose that the Pennsylvania Securities Commission release the entire report that supports this notice to highlight the methodology utilised in determining the extent of the risk associated with P2P Lending. There is a supporting report and analysis, right??
RBC introduces a very robust mobile banking app for multiple platforms
I had the opportunity to chat today with James McGuire and the folks at RBC today about their new mobile app.
I had already picked up the iphone version when it was launched Friday, and today James, Eddy and Jill took us through the Blackberry version.
With the blackberry in particular it minimises the inherent device sluggishness with a very tight integration to the device native function keys, so I would see no reason for any learning curve for this app.
The iphone version is just plain fast.
This is I believe the first set of true apps for banks in Canada. The other candidates rely on the browser which is usually sub standard for performance and usability on most of these devices. This is particularly the case for the blackberry which may as well not have a browser based on my observation of peoples use. (The advent of html 5 apps will change all that and improve time to market by allowing one app to run on all devices, but that day is not here yet.)
RBC mentioned that 80% of people have mobile devices and 44% of them desire mobile banking. So this launch with coverage of all devices is a great way to go and sets the bar high for the competition.
Lots more information on the web site at rbcroyalbank.com/mobile and you can download the blackberry app there. The iphone version is obviously in the app store where it already has 346 positive reviews just in the 3 full days since last Friday.
UK is ahead of US in tackling debt
Gillian Tett at the FT makes a profound point. The US government and people have not seen nor sensed the international shock from the economic crisis that is plainly evident in Europe and in particular UK. Osborne, Cameron and Clegg are on to something that is certainly months but probably years of the US situation with a lame duck government.
The American government are very caught up in politics or infighting. This is not a good sign.
Drama needed to jolt Americans into tackling debt | ft.com
The US has hitherto faced extraordinarily little market pressure for fiscal reform. Instead, investors have continued to gobble up treasury bonds, even as US debt has spiralled. And though US yields have risen recently, this has not been dramatic enough to concentrate political minds.
Right now, US leaders certainly prefer it that way. But the rub is that without some form of external shock, there is little chance of an end to US political gridlock. Or, to put it another way, some drama is probably needed to concentrate political minds on the need for medium-term reform.
BMO purchase of Marshall & Ilsley comes down to adequacy of price
The purchase of Marshall & Ilsley by BMO provides some instructive and fascinating insight into what is bad about the US Banking crisis during 2007 – 2009.
Highlights for the period 2006 – 2009:
- Capital is relatively unchanged
- Loans and mortgages grew $4 BN
- Brokered deposits grew $4BN
Conclusion for M&I – recipe for disaster. The management team should be fired and I would assume that is part of the purchase arrangement. They had $1Bn + in TARP assistance and the above is a classic example of why.
That aside, this is a bank with a lot of history and presumably serving a group of customers in solid towns and neighbourhoods.
There remains two questions:
- Is the discounted price of $4BN enough of a discount?
- Will BMO/ Harris be able to implement a sufficiently efficient integration to reap the $250 million annual cost saving projected.
Re 1. my money is on Downe and team and their capital market background – the discount will be adequate.
I worry more about 2. This integration opportunity is 100% technology. There is no opportunity to close proximate BMO and M&I branches.
At the end of the day this feels more like a buy low and sell later at a profit kind of deal. Time will tell.
The Financial Crisis Inquiry Commission (US) is getting heated and close to a (heated) finish
The issue of delayed foreclosures in the US as a result of flawed documentation is coming to a head as the Congressional enquiry gets close to end of job. You will recall this was a result of loss of collateral interest in mortgages where the chain of legal rights had been lost due to the complexity of the securitisation process.
Clearly there are some background interests trying to stymie the inquiry and further investigation. Careers, reputations and legal recriminations are all on the line. January will be interesting.
The crisis commission is also looking into the matter, said Phil Angelides, the panel’s Democratic chairman. The Republicans on the panel are resisting further inquiries, according to people familiar with the matter. Angelides said in an interview that "there are very powerful interests" seeking to undermine the panel’s investigation.
"People who have trillions of dollars at stake who have been watching our efforts closely," Angelides said. "There have been efforts throughout the year to undermine me and my fellow commissioners."
Simple products consultation launched by HM Treasury in UK
A consultation has been launched with a view to increased simple and understandable products to be made available to the mass market consumer. There are two papers on this site, one introducing the consultation and requesting responses and the other detailing lessons from prior ‘simple product initiatives.
The main lessons seem to be that enforced government ‘simplicity’ can increase provider costs, and that pricing caps hinder the development of more expensive simple products. This is interesting because it infers the result might be simple and expensive products? Anyhow, here are the details.
Simple financial products consultation | HM Treasury
The Government is committed to helping consumers take responsibility for their finances. This consultation sets out the Government’s proposed principles for a new category of simple products, giving consumers a straightforward option for comparing and buying products. Simple products should ensure that people understand the products they need, help them make better choices, and encourage competition in the market.
Alongside the consultation we are also publishing an independent literature review by Professor James Devlin on previous simple products initiatives, namely CAT standards and stakeholder products.
This consultation is open to all members of the public with an interest, particularly those in the financial services industry and consumer groups.
Simple financial products: a consultation Literature Review on Lessons Learned from Previous “Simple Products” Initiatives
Some momentum in UK towards breaking up Lloyds and RBS
Lord Myners was financial services secretary from 2008 to 2010. He indicates in this op/ed in the Financial Times that he has had a change of heart and recognises the British banks are simply to large and expose the UK economy to too much risk.
To ensure a further contribution, Sir John should note that Britain’s banks are too concentrated and that each individually represents too great a portion of gross domestic product. Indeed its high operating margins and return on equity suggest the UK has one of the world’s most concentrated and least competitive banking systems. Two lines of inquiry follow. First, is such concentration good for banking and its customers, given there is no compelling evidence that scale provides economic or service gains? Second, after Sir John’s commission, will any of the banks remain too big to fail, financially or socially?
He goes on to make the case for more smaller and more nimble banks in order to encourage a healthy and lasting banking system. Britain is similar to Ireland in that it has large banks that form a relatively large part of the British economy and carry implicit government guarantees by virtue of government ownership. They form therefore part of the national debt in event of a failure.
Worse, consolidation has accelerated over the past decade, with the crisis leading to yet more mergers, increasing the power of existing banks. The implicit support the most important of these receive from government is now a competitive advantage and barrier to new entrants. Yet some argue it follows that these large, concentrated banks create a more stable system than a market filled with numerous, smaller competitors.
This is not necessarily the case. In fact, competition is not the opposite of stability or security – because stability emanates not just from size and status, but also from diversity and pluralism. Inadequate competition can produce excess profits, poor customer service and a dearth of innovation, none of which are likely to create a stable system
But Lord Myners’ views echo a growing belief that the five-member Commission on Banking, chaired by Sir John Vickers, will focus more on the issue of high-street competition than the complex structural question of whether retail and investment banks – “casino banks” – should be allowed to remain under one roof as so-called universal banks.
