Learning Change

Learning Change Project: 8 Blogs, 6960 Readings

Archive for the ‘Banks’ Category

Bank says no? Ditch the bank – borrow from the crowd

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What you might not know is that there are technology solutions for banking every bit as powerful as social media such as Facebook that can step into the gap, making it possible, this very minute, for you to borrow or lend money safely online, completely independent of an actual bank. They’re called peer-to-peer (P2P) lending services, and they have been around for years. This kind of “citizen banking” should be reshaping the business of borrowing and lending, and shaking the foundations of the financial industry in a way no amount of Occupy Wall Street protesting could accomplish. So what’s the hold up?

The idea is simple. Lenders meet borrowers through a website that is something of a mash-up between eBay and a social network. To borrow money through Prosper, for example, you set up a profile and apply. The website assesses your creditworthiness, then assigns you a grade and an interest rate. Lenders can then weigh up these criteria to decide whether to finance your loan. They review borrowers’ profiles much as one might review profiles on a dating site, and can finance anything from $25 of a requested loan to the whole thing. Your monthly payment goes directly into the lender’s bank account, including interest. Every part of the process takes place online.

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Written by Giorgio Bertini

December 12, 2011 at 2:16 pm

Posted in Banks, P2P

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Too Much Finance?

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Over the last three decades the US financial sector has grown six times faster than nominal GDP. This paper argues that there comes a point when the financial sector has a negative effect on growth – that is, when credit to the private sector exceeds 110% of GDP. It shows that, of the advanced countries currently suffering in the fallout of the global crisis were all above this threshold, above which financial development no longer has a positive effect on economic growth. We develop a simple model in which the expectation of a bailout may lead to a financial sector which is too large with respect to the social optimum. We then use different empirical approaches to show that there can indeed be “too much” finance. We conclude by showing that the size of the financial sector was a significant amplifying factor in the global crisis that followed the collapse of Lehman Brothers in September 2008.

..we are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity“. James Tobin

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Written by Giorgio Bertini

December 5, 2011 at 4:12 pm

Posted in Banks

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How I Stopped Worrying and Learned to Love the OWS Protests

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Much more than a movement against big banks, they’re a rejection of what our society has become. I have a confession to make. At first, I misunderstood Occupy Wall Street. My initial impression was that it would not be taken very seriously by the Citibanks and Goldman Sachs of the world. We see 10 million commercials a day, and every day is the same life-killing chase for money, money and more money; the only thing that changes from minute to minute is that every tick of the clock brings with it another space-age vendor dreaming up some new way to try to sell you something or reach into your pocket. The relentless sameness of the two-party political system is beginning to feel like a Jacob’s Ladder nightmare with no end; we’re entering another turn on the four-year merry-go-round, and the thought of having to try to get excited about yet another minor quadrennial shift in the direction of one or the other pole of alienating corporate full-of-shitness is enough to make anyone want to smash his own hand flat with a hammer. If you think of it this way, Occupy Wall Street takes on another meaning.

People want out of this fiendish system, rigged to inexorably circumvent every hope we have for a more balanced world. They want major changes. I think I understand now that this is what the Occupy movement is all about. It’s about dropping out, if only for a moment, and trying something new, the same way that the civil rights movement of the 1960s strived to create a “beloved community” free of racial segregation. Eventually the Occupy movement will need to be specific about how it wants to change the world. But for right now, it just needs to grow. And if it wants to sleep on the streets for a while and not structure itself into a traditional campaign of grassroots organizing, it should. It doesn’t need to tell the world what it wants. It is succeeding, for now, just by being something different.

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Written by Giorgio Bertini

November 12, 2011 at 11:29 am

What Occupy Wall Street got right

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The Occupy Wall Street movement has generated a slew of questions from those outside the occupying ranks: Who are these people? What do they really want? Which city will be next? How will our public officials respond? And as the protests have stretched well into their second month, when will it all end? These questions represent an understandable attempt to make sense of a complex, diffuse and divisive movement. They attempt to explain what is happening. But they aren’t the questions we really need to ask. Instead, we should be asking why it is happening. And more importantly, we should be asking what we can learn it.

The Occupy Wall Street movement can be a catalyst for change. But only if we ask the right questions. As of now, next steps for the movement are unclear. Perhaps winter will cause the occupiers to decamp. Or perhaps conditions and fraying nerves will lead to a very violent, very bad denouement. Or perhaps the movement will continue to grow and spread, as it has over these past weeks, to more cities and more people. In any case, the challenge for business is to dig deeper into the roots of the protest and to respond thoughtfully, rewriting our own rules before they are rewritten for us.

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Written by Giorgio Bertini

November 10, 2011 at 10:40 pm

The Banker and the Protesters: A Meeting of Minds on Germany’s ‘Occupy’ Movement

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The “Occupy” movement has garnered support from all parts of the world, including Germany, where protestors have set up camp in front of the European Central Bank in Frankfurt. A dialogue with Axel Fialka and Alexander Sack from the Movement, and Martin Blessing Commerzbank CEO.

The “Occupy” movement began in earnest in New York, where a group of activists formed under the name ” Occupy Wall Street” in mid-September to protest against the sheer power of the financial markets. Since then it has grown to become a global movement, with tens of thousands of participants gathering each week for protests, including several thousand in Frankfurt, the center of “Occupy Germany” activities. Occupy supporters in the German financial center have taken over a small park located directly in front of the European Central Bank (ECB).

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Written by Giorgio Bertini

November 4, 2011 at 10:15 am

Greece, Lehman, and the politics of Too Big To Fail

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The looming second banking crisis raises the question whether banks have learned anything from the Lehman debacle only three years ago. They have indeed learned a lesson, but you may not like it.

So we face another Lehman moment. The sea is rising and the wall isn’t high enough so it should be in the self-interest of the core banks to take precautions and raise more capital to withstand the flood – right? Haven’t they learned anything from 2008?

Actually, they have. They have learned from Lehman that they are now bigger and more systemically important than ever. So if they refuse to recapitalize, then the problem is simply passed back to the state to sort out. Oddly, Germany’s entire banking industry has just joined forces to attack the EU’s recapitalization plan. In effect, playing the immoral hazard card. They know there is trouble coming, but sorting it out themselves would cut into profits. Far better to pass it back to the state with a reminder of the consequences of their failure. The lesson of Lehman has indeed been learned – it’s good to be too big to fail. It’s a truly immoral hazard.

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Written by Giorgio Bertini

October 17, 2011 at 4:40 pm

Posted in Banks, Defaults, Euro, Europe, Financial

Tagged with , , ,

Goldman Sachs foray into Higher Education – A Predatory Pursuit of Students and Revenues

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Just as the subprime mortgage bubble was giving way to a bust that would help trigger a devastating financial crisis, Goldman Sachs, a firm that had been at the center of Wall Street’s rampant mortgage speculation, found its way to a new area of explosive growth: In claiming what would eventually become a 41 percent stake in Education Management Corp., Goldman secured itself a means of tapping into the boom in for-profit higher education. The federal government was boosting aid to college students nationwide, just as a declining economy prompted millions of Americans to seek refuge in higher education, leading to dramatically expanding enrollments at many institutions.

But unlike in the mortgage markets, where some unwise or unlucky investor got saddled with the bad loans after the festivities ended and home prices fell, this new market in higher education boasted seemingly unlimited growth potential at virtually zero risk. The burden of college loan repayment falls entirely on students’ backs, shielding corporations from the consequences of default. The colleges essentially receive all their revenues upfront, primarily through federal government loans and grants for tuition, regardless of whether students are able to gain employment and pay back their loans.

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Written by Giorgio Bertini

October 14, 2011 at 2:17 pm

A Step-by-Step Guide to Leaving Your Big Predatory Bank

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A major goal of the Occupy Wall Street protest that’s been happening in New York City for nearly a month is to teach the banks that ruined America a lesson. Bank Transfer Day may be the solution everyone is looking for.

Bank Transfer Day is a grassroots effort to get anyone upset with large predatory banks to move their money to nonprofit credit unions by Saturday, November 5. People vote with their dollars far more often than they vote at the polls, and taking your money away from an institution with which you disagree is perhaps the best way to get back at big banks. Money talks to these people, so how about making your money silent?

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Read also:  A Field Guide to Closing Your Bank Account

Written by Giorgio Bertini

October 14, 2011 at 3:22 am

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