It's Not a Wonderful Life
Discover more from BIG by Matt Stoller
It's Not a Wonderful Life
Community bankers ask regulator Rohit Chopra to block Google, Amazon, Facebook, and Apple from finance. And they pushed something called "banking neutrality."
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The Independent Community Bankers Association, or ICBA, is one of the more important lobbies in D.C., representing the thousands of small and medium size community banks around the nation. Generally speaking community banks have a good reputation, a la George Bailey in Frank Capra’s “It’s a Wonderful Life.” It’s not undeserved, community banks are more rooted in their communities than the big guys, they tend to make more commercial loans, and they are run by local civic leaders. In terms of politics, community banks tend to want to stop the Federal government from hassling or taxing them. The ICBA, for instance, opposes rolling back postal banking and Trump tax cuts, and generally wants regulators to leave them alone.
But like much of the commercial world, the financial services industry is fracturing between the big and small, with big tech as a looming shadow over the entire space. For instance, last month, Consumer Financial Protection Bureau Director Rohit Chopra asked for comments on possible rules for dominant tech platforms in the payments space.
The ICBA responded with, well, enthusiasm. “Today,” wrote ICBA Assistant VP Steven Estep in a comment to the Bureau, “these companies already track our movements, our friends, our families and associates, our religious and political affiliations and views, our internet browsing, and our shopping history. Adding personal, financial data would take their capabilities to a new level.”
The community banks asked for data minimization and equalization of standards between big tech and banks. But more than that, the ICBA also made an argument straight out of the Wright Patman playbook, talking conflicts of interest and competition, and even noting a concept I hadn’t heard before: banking neutrality. “Not only would a technology company in control of an ILC be able to dictate who receives loans, potentially cutting off access to credit to competitors, but they would dramatically change the competitive landscape of the U.S. economy as a whole, removing the neutrality traditional banks bring to the provision of credit.”
The civil war in American commerce continues.
It's Not a Wonderful Life
The ICBA undoubtedly knows how to persuade the people who need to be persuaded. So I'm not trying to second guess them! Still, neutrality is the opposite of the proper goal.
Neutrality implies a mechanical process using a single global algorithm. Zillow proved that global algorithms are useless for judging local values. Their algorithm overvalued many of the houses they flipped, because it didn't know about crime or convenience or local perceptions.
A local bank knows which businesses are likely to succed and which aren't, and can't be fooled by a Twitterstorm or similar media push.
Neighbourhood stores, small business and of course small community banks represent values of local culture, local knowledge and local values across world and more so in the US. A local community bank knows the credit seeker and customers know the credit giver. There is an inherent strand of trust that is there which needs to be strengthened, as many of the customers are not aware they are 'algorithmed' everyday by Big Tech.