[dkimerling]

I beg to differ. In a world of fraction-reserve banking, banks are in the business of capital aggregation and debt issuance - in order to generate all important "spread". But, that world - the world for the past ~700 years - is disappearing.

We live in a world with collapsing credit spreads and Basel III will tighten them even further. In the US, Dodd-Frank's prohibition on lots of fee based income (which was a huge profit center for banks) and the disappearance of debit inter-change due to Durbin makes banks very concerned about the future of their business.

Banks are increasingly turning to transactional systems to make money.

[eldavido]

Hi Dan

I have a friend inside Capital One who tells me they're very concerned about the future of the industry. In a nutshell, C1 makes money three ways: (1) debit interchange, (2) net interest margin (NIM) and (3) fees.

Dodd-Frank basically killed debit interchange and fees (esp. with the overdraft changes). If you think spread will keep collapsing, I'm not sure what's left revenue-wise.