Amazon buying Capital One? Fat chance, but fun to ponder
By Kristin Broughton
Amazon is itching to buy Capital One. No way that could happen … well, er, right, everybody? OK. Admit it. You think that would be illegal, but you don’t remember why anymore. ... Such a transaction would most certainly fail to pass the muster of regulators – and would likely run afoul of decades-old banking laws. “There is a longstanding and firm barrier between banking and commerce,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics, describing it as a “foundational” principle of banking law dating back to the Bank Holding Company Act. The legal principle is designed to prevent various conflicts of interest, such as the flow of deposits into a company’s own enterprises, according to Petrou.
Can bank divestment stop the Dakota Access Pipeline?
By John Heltman
It took less than 24 hours after President Trump signed an order directing an expedited review of the Dakota Access Pipeline for Daily Action, a liberal activist group, to decide where its best hope of leverage was — calling on followers to divest themselves of the U.S. commercial banks involved in financing the project. ...Having a single standard to which all banks must adhere would reduce the variability between banks on the one hand and would bake these types of social considerations into the banks’ loan review process on the other. Karen Shaw Petrou, managing partner at Federal Financial Analytics, said that approach has been attempted at the international level but had middling success, not least because social and environmental benefits can frequently conflict. Biomedical research, for example, can cure disease and save lives, but neither banks nor any other financial institution is required to fund those types of projects.
Why ‘America First’ is bad for American bankers
By Karen Shaw Petrou
An “America First” trade-in-goods policy means a similarly protectionist U.S. approach to trade in finance, including banking. However, such a financial trade policy would not construct impregnable armor that strengthens the U.S., but would rather be something akin to Superman’s “Fortress of Solitude.” After having cut himself off from the rest of the world, Superman would return from his fortress to the civilized world feeling refreshed. But that’s just in the comic books. In real life, a Fortress of Solitude for U.S. banking would lead to the lowest common denominator of regulations imposed differently by each country, which in turn would quickly crumple the financial stability on which even the smallest community banks depend.
Reg relief may not mean lower compliance costs for banks
By John Heltman
Nearly 10 years since the onset of the financial crisis, the once all-consuming demand for improved safety and soundness in banking has been replaced by a single-minded pursuit of a streamlined regulatory structure emphasizing economic growth. ...But other ideas could be more costly to banks. Karen Shaw Petrou, managing partner with Federal Financial Analytics, noted that Treasury Secretary-designate Steven Mnuchin’s nascent support for a “21st-century Glass-Steagall” separating commercial and investment bank functions could potentially be costly for multinational banks depending on how it is executed. In the United Kingdom, for example, regulators have put forward a ring-fencing regime that separates commercial and investment banking activities in a way that appears reminiscent of what Mnuchin has in mind. “I wouldn’t even begin to contemplate whether it’s more or less [expensive] across the board, except to say that it would be at least the same if not more, because here you have different regimes covering different parts of the holding company,” Petrou said. “That means, basically, a lot more [compliance employees] than these banks thought they needed to have when everything was in one place.”
What'll Happen with America's Tax Code?
By Analysts are crediting stock index leaps to a Trump statement about tax reform. But Karen Petrou, managing partner at Federal Financial Analytics, joins us to talk about the obstacles that lie ahead for any changes in the tax code.