Washington continues its dot-connecting on the financial crisis. Yesterday, the aptly-named Financial Crisis Inquiry Commission summoned four financial services titans to a hearing on what went wrong and how to fix it.
One titan opined that he knew his bank was selling mortgage-backed securities loosely (but succinctly) described as "crap" WHILE SELLING SHORT the very same securities, a strategy he justified by saying "Hey, our buyers are sophisticated enough to know what they're buying and it's THEIR problem if we sell them crap and bet against them!" (That's not a direct quote, just a pretty accurate paraphrase.)
The financial services industry remains in deep denial over the level of populist rage, the loathing and distrust, directed at "them" in general and high-earning "bonus babies" in particular. This time, I doubt the tried-and-true "hunker down and wait it out" approach will save them.
Business as usual? Not in these unusual times.
The status quo ante? Gone and not coming back.
Customer trust? How many ways can you spell R-A-G-E?.
Sure, big deals generate big fees. But those deals are financed by millions of us "little guys" earning, saving and investing. And we're all feeling pretty peevish.
In fact, we're watching a real-time experiment in the consequences of pissing-off customers AND sticking them with the bill. Given enough time, and some credible options, customers act in all sorts of unexpected ways. Mostly, though, they just leave.
It may take time to develop, but watch out for the coming disintermediation of financial services. Gone are the money center financial supermarkets. They may be "too big to fail" but that doesn't confer immunity from the hurricane of shifting customer loyalty. There's no such thing as "too big to be stupid."
While the Feds worry about technical issues - mortgage-backed securities and other such ticking time bombs, bankers' worry ought to be more visceral: vanishing customer loyalty. Time bombs can be defused, given enough taxpayer money. But you can't "bail out" loyalty earned over decades and lost in the blink of a "crisis eye."
One titan opined that he knew his bank was selling mortgage-backed securities loosely (but succinctly) described as "crap" WHILE SELLING SHORT the very same securities, a strategy he justified by saying "Hey, our buyers are sophisticated enough to know what they're buying and it's THEIR problem if we sell them crap and bet against them!" (That's not a direct quote, just a pretty accurate paraphrase.)
The financial services industry remains in deep denial over the level of populist rage, the loathing and distrust, directed at "them" in general and high-earning "bonus babies" in particular. This time, I doubt the tried-and-true "hunker down and wait it out" approach will save them.
Business as usual? Not in these unusual times.
The status quo ante? Gone and not coming back.
Customer trust? How many ways can you spell R-A-G-E?.
Sure, big deals generate big fees. But those deals are financed by millions of us "little guys" earning, saving and investing. And we're all feeling pretty peevish.
In fact, we're watching a real-time experiment in the consequences of pissing-off customers AND sticking them with the bill. Given enough time, and some credible options, customers act in all sorts of unexpected ways. Mostly, though, they just leave.
It may take time to develop, but watch out for the coming disintermediation of financial services. Gone are the money center financial supermarkets. They may be "too big to fail" but that doesn't confer immunity from the hurricane of shifting customer loyalty. There's no such thing as "too big to be stupid."
While the Feds worry about technical issues - mortgage-backed securities and other such ticking time bombs, bankers' worry ought to be more visceral: vanishing customer loyalty. Time bombs can be defused, given enough taxpayer money. But you can't "bail out" loyalty earned over decades and lost in the blink of a "crisis eye."
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