The line that stuck out at me most was that this crisis will divide the financial community into two parts – financial utilities and financial risk takers. Now I was under the impression that things were divided in such a fashion anyway with investment banking and retail banking playing very different roles in our economy. But I digress.
The term financial utility stuck with me. I lived in London in the late 90s and the one institution that I marvelled over was the Post Office Savings Bank, which had been in existence in one form or another since 1861. It was originally created to offer banking services to rural and impoverished customers. And to provide the government with a source of cheap capital. It has long since been privatized but the idea that a government institution provided banking services sounded strange to these 'free-market' ears. Oddly enough, the U.S. had a similar system, from 1911 to 1966. As one can imagine, this system was relentlessly attacked by private banks, who railed against government competing against the private sector. This article here in the NY Times from 1912 discusses this conflict.
Now that most of the major banks in this country have been 'nationalized' in all but label, how will that change the way they interact with their customers? What changes will financial institutions need to make in order to regain the trust of their customer base?
This brings me to the idea of illegibility that I've discussed before. It is impossible to have a conversation about banks without fees being mentioned. Part of the anger behind fees is how unpredictable they can be and how difficult it can be to avoid them. In other words, the fee structure is illegible. It will be interesting to see what changes in finance in the months to come. I have a few thoughts but I need to develop them further.
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