The past few months have been a turbulent time for the financial services industry. With all that’s going on, I thought I’d give the confused, perplexed, and uninitiated a simple way to figure out who’s who in the industry.
Fundamentally, there are four types of firms in the industry. Those that:
1) Were banks, are still banks, but don’t want to be banks.
2) Weren’t banks, but now want to be banks.
3) Weren’t banks, don’t want to be banks, but tell the regulators that they are banks.
4) Aren’t banks, don’t want to be banks, but are told by regulators that they’re banks.
Firms in Category 1 include Bank of America and JP Morgan Chase who were banks (and still are), but through acquisitions of firms like Bear Stearns and Merrill Lynch (not to mention Countrywide) clearly don’t want to be banks.
We used to know Category 2 firms as investment banking, brokerage, and credit card firms. Everybody from Goldman Sachs to American Express is applying to be a bank, so they too, can get in on the deposits gold rush of ’08.
Category 3 firms are sometimes called credit unions. While they tell consumers that they’re not banks, they tell the regulators that they are, so they can get some of that juicy TARP money.
Firms in the fourth category are sometimes known as P2P lenders. Maybe you’ve heard of Prosper and Lending Club. While they say they’re not banks, the regulators aren’t buying that for a New York second.
Any questions?
Technorati Tags: Banks, Credit Unions, TARP
Yes, more questions
- What happens when regulations and the incentives change again in the future?
- What happens when the wave of impedning over-regulation comes?
- Will they still want to be banks after the get the money?
- Are there any banks that say they are a bank to customers, investors, regulators, executives and employees? Who is telling a consistent story throughout the marketplace?
Amazing how “bank” has come to draw a negative conontation…
@Taylor: Damn. I thought I had edited out the “any questions?” line.
What about the credit unions who are so credit union and anti-bank that they say they don’t want the TARP money, but would rather get it from the NCUSIF?
…I guess credit unions ARE asking for TARP funds (http://www.ncua.gov/news/press_releases/2008/MA08-1113.htm) for some credit unions, but there are some in the CU industry against this, yes? Am I misinformed?
@Ashli: Hmmm…. so maybe there’s a 5th category:
Firms that aren’t banks, don’t want to be banks, aren’t telling the regulators they’re banks…. none of which matters because the vast majority of consumers think they’re banks.
Again
I’m sure when regulations change down the road they will be anything that gets them what they want. Less competition and less accountability.
Tom Kelly
CRM Review
@Tom: Absolutely. Of course, they will call for more competition and accountability….