I’m reading the live blogging of the Bernanke hearing today, and I’m pretty shocked by the following conversation:
Bad lingo | 3:59 p.m. Emanuel Cleaver, a Democrat from Missouri, condemns the term “bad bank.” He says the term does not exactly inspire support for the program. Maybe it should be called the “Damascus Road” bank, he says, or maybe the Fed should have a linguist look into something else more appealing.
Mr. Bernanke replies that it’s officially called an “aggregator bank,” not a “bad bank.”
Mr. Cleaver says that term is unlikely to catch on, and that perhaps a three-year-old should come up with something that rolls a bit more trippingly off the tongue.
Well, what about “Good Bank”, and what about making it more than just a sweet name?
I’m convinced Americans want good, ethical banking, the kind of banking that focuses on developing healthy communities where they can live and raise their kids. Just like anyone else on this planet. More importantly, they want HOPE, and good banking IS hope.
Bruce Cahan says it very well:
What We Had
The earliest banks were built by business, civic and religious leaders to grow hometowns, in regions they knew best. Community banks and bankers exist as a minority, often still independently-owned.
What We Lost
Today, most deposits (upwards of 80%) in America’s large cities are held by banks headquartered elsewhere, accountable to no one locally, except regulators in Washington or the state capitols who are easily outmaneuvered through lobbyists, industry political donations and complex financial instrument structures that camouflage the transparency needed to see simple causes and effects.
America’s banking system has lost its roots, has lost its way. “Safety and soundness” used to mean bankers living in and knowing their home regions and the people, businesses, governments and nonprofits there. Now Wall Street financial services mega-banks and investment professionals have fractionalized underwriting, ownership and obligation to the point where hedged bets on leveraged obligations (e.g., home mortgages or corporate bonds) create a rapidly cascading morass of multiplexed risk, drying credit up for other purposes in places where the risks are less or could be underwritten more safely and simply. As rogue traders have shown, the whole house of cards can easily unravel, with the use market capitalization and Federal Reserve costs unwinding such positions entails.
What We Need: An Ethical Bank
We need more ethical banks, where decisions are made transparently, its allegiances trace back to community concern and its pricing of credit and investments is directly tied to the contribution each transaction makes to growing regional health.