[stcredzero]

The critical difference is that in China, the apps effectively are the banks, whereas in the US, regulatory capture ensures that the banks stay the banks and it's the app's problem to figure out how to interface with them.

My wife works in banking, for a small local bank. The regulations are heavily skewed against smaller banks. Regulations around consumer mortgages seem to be designed to keep smaller banks out. Unless you have the resources to engage in sizeable software projects, you will have to write your own software, spend a lot of money on software licensing, or engage in a lot of manual work while risking draconian penalties for little mistakes.

So regulatory capture doesn't just mean rigging the game for banks. It's only the large corporations that do the rigging and gain the benefit.

Tech needs to figure out how to combine the power of small community banks. Small community banks can only survive through having superior local intelligence. That superior local intelligence is worth a heck of a lot in aggregate.

[AmericanChopper]

All regulations are skewed against smaller companies. There's a reason the US has a vibrant startup culture, and Europe doesn't.

[dzonga]

smaller banks also provide protection against 'too big to fail' syndrome. They won't over leverage risk.

[vkou]

If they don't actually own the mortgages that they issue, and instead sell them on the credit markets, then neither big nor small banks overleverage risk.

As I understand it, it doesn't matter if they are Chase, or BECU - most banks don't actually own any of the mortgages they issue.

The problem in 2008 was the fraud, the irrational exuberance, and really dumb investments by the investment branches of a few investment banks. The retail arm of, say, Wells Fargo, which issued a whole bunch of shitty mortgages was fine.

Whether or not you think that investment branches of banks deserve to be bailed out is an exercise for the reader.

[jsmith99]

Not exactly. The savings and loans crises of the 80's was driven by a sector of traditionally small, community banks, fueled by deregulation.

[apocrypher]

Specifically, what you explained stoked the fire, but what poured gas on it and simultaneously kicked the embers about the room, was Rudolf Guiliani taking RICO to make his case against Mike Milken, actually first of all Mike's far more vulnerable brother was indicted, but that aside Guiliani forced Drexel to shut it's trading desks, which drained the market for the junk bonds which had allowed so many tiny thrifts to engorge themselves, and without any mark to market -the whole market consisting of Drexel making two ways all on it's lonesome (who else had a clue what was in those bonds?) - the multitude of vastly bloated regional S&L's couldn't post their accounts, and simultaneously all went belly up.

Not being funny, but Guiliani forced the whole mortgage banking business into insolvency to make a point that some still think was Vendetta. Whatever the case, Guiliani forced a vast capital market to halt, for no reason I've ever learned, and handed a four trillion dollar bill to the taxpayer, for kicks. No wonder Trump likes his advice.