James Bullard, St. Louis Fed President, is the latest old banker to ring an alarm bell of sorts stating in a fairly emotionally charged use of words that new inventions, such as blockchain technology, cryptocurrencies and ICOs, might “eviscerate” big banks if regulators do not do something about it.
Referring to Dodd-Frank, he said “we are fighting the last war,” before adding that growing competition from fintechs has become the “number one issue.” He says:
“We need to speed up our consideration of the fintech issues and think harder about what is the regulatory environment that is going to be appropriate. I think we have been complacent so far.
That is the battleground for the next ten years. It is not the same as the battleground for the previous ten years.”
Fed’s president worried banks might not be able to keep up even while they try to incorporate blockchain technology, with Bullard stating:
“Banks will always say buy the technology and bring it into the regulated sector. But you kind of wonder: Are these really the institutions that are going to be able to innovate quickly or are they just big bureaucracies that are going to be too slow to run this kind of stuff?”
Bullard said regulators, by which perhaps he might mean banks so being from the Federal Reserve Bank (Fed), might:
“Wake up one day and most of the big banks have been eviscerated and most of that activity has moved elsewhere.”
Hopefully that elsewhere is a too small to bail place so that we can finally get rid of these communial bailouts. But he did not seem to be very happy about that, stating:
“The new issue now for the next 10 years is going to be fintech, and how fintech is going to affect financial intermediation in the US. And if you go out to Silicon Valley, all the discussion is all about how can we strip the profits from the big firms.”
The language we have heard is that of free market based disruption, rather than more communist based profit stripping, but the Fed is apparently worried they can’t keep up with all this new innovation in the land run by the mantra move fast and break things (and let regulators catch-up). With Bullard further saying according to a Business Insider paraphrasing:
“Big banks’ efforts to domesticate some of the new technologies, including investments in blockchain, may not be enough to catch up with the speed of change coming out of the more cash-flush, venture-capital driven tech world.” He further says:
“Weakening Dodd Frank or doing something more with Dodd Frank is beside the point when Silicon Valley is as powerful as it is.”
And that Silicon Valley is not alone, finding an unlikely alliance in politicians themselves, keens to see the banks weakened through free and fair market competition after they bankrupted nations. So backing the millennial generation and their hope this new technology might save us after all.
