I'm still trying to digest Gabriel Sherman's New York Magazine piece on "The End of Wall Street as They Knew It," suggesting that the great barbecue is over in money-center banking, and not coming back. You'd kind of hope that part of this is true though it reads so much like a PR man's dream you can't help but wonder whether Sherman wrote it as a job application. There is one thread I want to pull at the moment, though. Specifically Sherman, observing that JP Morgan Chase seems to be sailing relatively unscathed through the troubled waters "unlike that of his rivals at Goldman, has a real, physical business to fall back on"--i.e., old-fashioned deposits and loans, or as we used to call it "banking." I stack that one up against the cover story in Forbes about Wells Fargo "The Bank that Works," as the headline writer announces.
I'm struggling to avoid swallowing the hype here, and I'm writing almost totally unencumbered by actual knowledge. And god knows old fashioned banking has its own history of crimes and follies (the watch list of troubled banks still stands somewhere in the 900s, I think." But recall that old-fashioned banking tended to be (a) boring (b) not very profitable and (c) often pretty steady. Could it be the boring and not very profitable parts are what is holding the ship above water now?
[Ed.--Buce, this is incoherent. B of A and Citi are both huge in old-fashioned banking (as you call it) and they are both a mess. Buce--wal,yes I suppose so, but maybe without old fashioned they would be an even bigger mess? Ed.--Buce, now you are floundering.]
4 comments:
Thanks for sharing
The more old-fashioned kind of old-fashioned banking did not include commercial real estate lending. The modern kind of old-fashioned banking does. Commercial real estate killed the thrifts in the 1980's, and is killing the smaller banks today.
You would be amazed at how narrow the 19th-century concept of safe banking could be. The only permissible assets (at least in theory) were govvies, gold, deposits in other banks and "real bills": short-term self-liquidating loans, such as those involved in the processing, storage, and distribution of goods. Of course, the 19th-century bankers kept pushing against these constraints whenever they could
And the history of 19th C banking, at least in the US, is not pretty.
"B of A and Citi are both huge in old-fashioned banking (as you call it) and they are both a mess. Buce--wal,yes I suppose so, but maybe without old fashioned they would be an even bigger mess?"
If they didn't have the retail banking (Citi from competition, BofA due to monopoly agreements), they would both be mercifully shuffled off this mortal coil (to borrow from Dickens's predecessor) and no one would even again have to pretend that Vikram Pandit, Charles Prince, Ken Lewis, or Brian Moynihan was capable of managing traffic on a street corner in an exurb of Dubuque.
(Sandy Weill is turning over in his grave--and I don't believe he's dead yet. Probbly watching the end of the second Harry Potter movie over and over, stopping the video before Fawkes cries, and saying "That's me!")
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