Bank Lawyer's Blog

Battle of the Titans

According to The Wall Street Journal (paid subscription required), while the world slept, a banking juggernaut chugged onward and upward under the radar of the most vigilant of observers (i.e., Bank Lawyer's Blog). Like a snowball rolling down the frosty back slope of Mount Hillary, the Avis of big bank holding companies is about to put the "Big Hertz" on the current champ.

Bank of America Corp. is on the verge of achieving a goal it has obsessively pursued for nearly 25 years: transforming the once-tiny Charlotte, N.C., bank into a national bank with enough reach to poke its finger in the eye of every competitor in New York.

I hate eye-poking. Unless its Moe boinking Curly, that is. Now, that's funny! I trust that kicking Citigroup's keister will satisfy Bank of America's urge to gouge eyeballs.

Fueled by more than 70 takeovers and a relentlessly aggressive strategy that has roiled the once-genteel banking industry, Bank of America is within striking distance of overtaking Citigroup Inc. as the world's largest bank by market value, an important yardstick for investors. As of yesterday, Citigroup was valued at $235.19 billion, only 1% higher than Bank of America's stock-market value of $232.83 billion. Based on the performance of the two banks' stocks so far this year, Bank of America could potentially seize the lead at any time.

Citigroup still would be No. 1 in the U.S. by assets, a key measurement in the banking industry, and is far larger than Bank of America outside the U.S. and in investment-related businesses that give the New York company clout on Wall Street.

Yet the toppling of Citigroup as the banking industry's king in stock-market value in many ways would reflect the success Bank of America has had in realizing its growth ambitions. At the same time, Citigroup had lost its focus on U.S. consumer banking while trying to build a financial supermarket for the world.

[...]

Bank of America's market value has inched steadily closer to Citigroup's in recent months, as investors warmed to growing signs that the huge scale and convenience built through seemingly nonstop takeovers were finally paying off in outsize profits. For the first time, Bank of America reported higher net income than Citigroup for the second quarter. And fewer investors are spooked by the possibility that Bank of America will make an acquisition with a fat premium. The 1994 interstate-banking law prohibits any U.S. bank from making an acquisition that would give it more than 10% of all U.S. deposits. That cap doesn't apply to internal growth, however.

Bank of America currently holds approximately that percentage. Citigroup had 3.2% of U.S. deposits at the end of 2005. J.P. Morgan Chase & Co., the nation's third-largest bank by market value, had 6.8%, according to SNL Financial.

(Insert Optional Disclosure Here): Bank Lawyer's Blog uses Chase for its personal and business banking. After years of pathetic customer service by a large regional banking institution based in a deep-south state whose name shall not be officially disclosed, but which rhymes with "Bumpus," BLB's proprietor and his lovely spousal unit attempted to become customers of a local B of A branch, but were studiously ignored by numerous young branch personnel for over ten minutes while standing smack dab in the middle of the branch waiting room. On the other hand, Chase branch personnel acted as though they actually valued our business and either were genuinely personable or were well-trained actors who did a marvelous job of faking it. There was no Citibank branch conveniently located to our residence or our places of business, so they weren't even in the game.

Part of the explanation for Citigroup's stumble was neglect of its network of branches -- now one-sixth the size of Bank of America's. Citigroup also struggled to contain expenses, while trying to improve its retail franchise and pay for a costly investment bank.

Ah, well, there you go. No wonder we couldn't find a Citibank local branch.

Even for people well-versed in Internet banking and the latest technology, it's "funny" how personal relationships still count with some of us "old schoolers." There's no magic to marketing a local banking service. It's all about convenience and customer service. Even pricing takes a back seat to the "personal touch" when you're considering switching all of your long-term business to a new bank. Our example also demonstrates how "sticky" those relationships can become once they're established. It took a lot of really lousy customer service over the last five years of the relationship with our former retail bank before we'd finally had enough. Yet, even those of us filled with inertia finally can get sick and tired of being taken for granted.

So, to those who say that online banking will do away with branch banking, I'd have to disagree. I think that the statistics - and human nature - point to the opposite conclusion. Our experience with Bank of America also may demonstrate that if Citigroup desires, it should be able to compete at the branch level. At least, it can in our small corner of the universe.

FDIC: Moratorium on ILC Charters

David Enrich and Damian Paletta of Dow Jones Newswire report this afternoon:

In a move that could hurt Wal-Mart Stores Inc.'s (WMT) chance to obtain banking powers, the Federal Deposit Insurance Corp. said Friday it was placing a six-month moratorium on all industrial bank applications because of concerns about new risks posed by the unique charters.
The decision means that the FDIC will not accept any new applications or rule on any of the 14 pending applications until Jan. 31, 2007.

The FDIC also said it would not consider or accept new applications to change control of an industrial bank, which means it also will not issue a ruling this year on the controversial bid filed in May by Home Depot Corp. (HD) to acquire an existing bank.

"Hey, Wal-Mart! Home Depot! Have a nice weekend!"
Yours truly,
Sheila Bair.

"We respect the FDIC's decision to consider these matters carefully," Tara Raddohl, a Wal-Mart spokeswoman, said in an e-mailed statement. "The FDIC's action does not change our commitment to move forward with our application. We will continue to work constructively with the FDIC."

A spokeswoman for Home Depot was not immediately available for comment.

I understand that she was in a conference room stomping a puppy with 6" stiletto heels and didn't want to be disturbed.

As expected, opponents of ILCs were quick to throw rose petals in the path of the FDIC.

  "It is critical that the agency step back and take a broad look," the American Bankers Association said.

"We commend the FDIC for recognizing that these are not routine applications," said the Independent Community Bankers of America.

[...]

Earlier this month, Reps. Barney Frank, D-Mass., and Paul Gillmor, R-Ohio, introduced a bill that would prohibit companies such as Wal-Mart and Home Depot from operating ILCs. They also welcomed the FDIC's Friday announcement.

"This gives Congress some needed time to hold additional hearings and to review the recommendations of the Government Accountability Office," Gillmor said in a press statement. "I hope the Board continues to evaluate whether they have the tools necessary to regulate the parents of industrial banks."

Barney Frank would have commented, but he was otherwise occupied.

I'm stunned that the National Association of Realtors wasn't gloating to kingdom come.They've been all over this issue like flies on...well, there are so many possibilities that we simply can't choose the perfect metaphor. We're sure that they'll be heard from, soon and very loudly. With the Beast of Bentonville temporarily chained to a fence post, they can turn their fire hose of hate on their true bete noire: The OCC [makes the sign of the cross and rips off three quick "Hail Maries"].

And you thought that you could just sneak out of the office and start poppin' a Friday afternoon "frosty" at the corner saloon without hearing some hot banking news, did ya'? Guess again.

Six more months of rumors, lobbying and politicking. It simply doesn't get any better than this.

Citigroup "Collapses" a Couple of Thrift Charters

When Wachovia announced the acquisition of Golden West Financial Corp in May, we speculated on a question raised by an American Banker article: Would there be enough thrifts left to support the continued existence of the OTS?

The article quoted well-known bank lawyer Ron Glancz's speculation that Wachovia would keep the thrift charter. I tended to agree with him. On the other hand, Ron's view was supported by his contention that "several big banking companies, such as Citigroup Inc., value the thrift charter."

Well, apparently "value" is a relative term.

Last Friday, the American Banker ran an article that revealed that Citigroup Inc. intended to surrender two of its thrift charters and fold the thrifts' operations into its national bank. According to the OTS, the loss of Citigroup's thrifts $164 billion in assets "will take a $17.8 million bite out of the its 2007 budget, or roughly 9%." Citigroup will keep a single thrift charter with $20 billion in assets. Although OTS spokesman Kevin Petrasic put a brave Rumsfeldian face on the matter ("Is it a lot of money? Of course it is. Will we survive? Of course we will."), that just had to hurt.

It puts even more importance on Wamu, the nation's largest thrift. The OTS had a neat response to oft-heard allegations that Washington Mutual  will exert an inordinate influence on its regulator: the OTS will have to act like Caesar's wife in its dealings with Wamu, since everyone already scrutinizes the relationship with an electron microscope. That's likely been the case for some time and will continue to be. My personal (and entirely biased and uninformed) opinion is that the last time the OTS' predecessor, the Federal Home Loan Bank Board, worried so much about saving its independent bacon that it let its constituency run roughshod over it, it didn't work out so well. Anyone recall the "Southwest Plan"? Does the name "Danny Wall" ring any bells? Probably not to the younger generation.

It would to Bert Ely, though. The consultant who seems to be quoted every week somewhere (and was an early critic of the FHLBB's plan to prop up insolvent thrifts back in the 1980s), notes in the American Banker article that the OTS has gained "powerful allies" in the investment banks and insurers who own thrift charters.  That's certainly true. Of course, they're not exactly the type of allies that I'd trust to watch my back without simultaneously keeping a couple of eyes open in the back of my skull. As Hyman Roth once observed to Michael Corleone, "this is the business we chose." If they get a better deal elsewhere, they'll drop you like a hot potato.

It's also true that in certain lines of business, especially residential real estate lending, the OTS has long institutional expertise that gives it an edge in understanding the "game plan" of its institutions. Come to think of it, to some of the clients I've represented in the past, that would have been a detriment. The OTS understood them all too well.

The OTS has also been an agressive "preemptor" of state laws that impinge upon the activities of thrifts (they were into preemption before preemoption was cool). They've also been creative in interpreting the incidental and express powers of federal thrifts in ways that give the charter flexibility. Being the junior partner of the OCC, they've been able to fly under the radar scope of Congressional wrath and industry pitbulls like the National Association of Realtors. Obviously, a number of insitutions agree with the "experts" quoted in the article, that there is "value" in a federal thrift charter.

Whether that value will be enough for the OTS to survive if one more big dog leaves the yard is the question on the table. Bert thinks it may, unless the big dog is actually a whale named "Wamu."

"They may have to downsize further, they may have to hike their fees, but I think there is enough of a constituency out there to keep the thrift charter," he said. "If Wamu were to change charters or get acquired, then that's a different story."

UPDATE: I apologize to any reader who accessed this post through an aggregator such as Bloglines. Apparently, instead of saving the first rough draft as a draft, I inadvertently published it. Regular readers of this blog likely believe that this a common occurrence, although I deny that it is. Unfortunately, you can't edit a post once a news aggregator has "picked up" the post. I offer in my defense what will soon become a classic: "The Hasslehoff Excuse."

LONDON - A spokesperson for David Hasselhoff denied a report Thursday that the former "Baywatch" and "Knight Rider" star had been turned away from a British Airways flight because he was drunk.

Judy Katz, the actor's publicist, called the story by the tabloid Sun "totally untrue."

Katz said Hasselhoff had not been drinking, but felt unwell after taking some medication for a recent arm injury and wasn't able to get on a flight Wednesday from Heathrow Airport to Los Angeles.

Yeah, I hurt my arm and took a few "pain killers." I wasn't plowed when I wrote this blog post, I was merely "unfit for travel."

Yeah, that's the ticket!

So The Public Thinks Someone Other Than A Lawyer Might Be A Whore?

I'll be following this arbitration proceeding with "baited breath."

Goldman Sachs Group, the blue chip investment bank, wants a Netherlands man to change the name of a sex-oriented Web site called Goldmansex.com.

Goldman Sachs last week submitted a complaint to the National Arbitration Forum, arguing that Goldmansex, whose domain name would might be confused with its own, contained links to objectionable "adult" material. Goldmansachs.com and Goldman.com are registered domains of the bank.

The owner of the Goldmansex.com web site (whose name is, strangely enough, not "Goldman" or "Sachs" (or even "Sex"), claims that the "Goldman" moniker was given to him by pals because of his Midas touch. The "sex" part he picked up on his own. Maybe yes, maybe no. Whose to say?

We at Bank Lawyer's Blog suspect that the real reason that Goldman Sachs is perturbed is not because of possible confusion in the public mind of the name "Goldman Sachs" with porno (other than for the obscene amounts of money it makes), but because of this "throw down" by the stubborn Dutchman:

Muller said in a phone interview on Thursday from his Netherlands home in Albian that he had never heard of the world's largest investment bank until recently.

Oooooooo! A definite "dissing" of GS. On the other hand, we suspect that Mr. Muller was very familiar with Morgan Stanley.

Well, this is bound to get nasty. Muller's hired a lawyer. Nothing good can come of that except blood, sweat, tears and brand new Mercedes for the lawyer's wife.

HUD Promises More RESPA "Transparency"

In remarks made last month to the National Settlement Services Summit, HUD General Counsel Keith Gottfried proposed that HUD establish a "no-action" letter process similar to that used by the SEC, so that businesses that propose to take a course of action that might violate RESPA would have some comfort that HUD will not take action against them if they proceed. The pertinent portion of his remarks are as follows:

We also need better processes to institutionalize and publicize our guidance through timely and active disclosure. We need better processes for consultation with our private sector partners. We need better processes to promote predictability and reduce compliance friction.

In one of my past lives, I was a securities lawyer and practiced extensively before the Securities and Exchange Commission. During that time, if I had a client that wanted to proceed with a transaction, but it was unclear whether such a transaction was in compliance with the securities law because the law was ambiguous, I had the option as a securities lawyer of preparing a request for a no-action letter to the SEC. The no-action letter would explain to the SEC what my client was seeking to do, what the applicable law provided, what the SEC had said in previous no-action letters and why I thought the proposed transaction was in compliance with applicable law and regulations. The letter would seek the SEC’s concurrence and their commitment not to recommend enforcement action against the client if the client proceeded with the transaction as described in the letter. It may also be the case that, during the course of preparing such a letter, I would discover that there were so many no-action letters almost exactly on point that I felt comfortable advising my client to proceed with the transaction without the need for a no-action letter. I ask you, why can’t we have a similar process for RESPA reform? Certainly, if we had such a process, we would increase predictability, reduce compliance friction, and encourage more creativity to be applied to the home buying process.

The National Association of Realtors reported that "the announcement was greeted with near-universal approval." I can imagine.

"Near-universal"? I wonder who was the dissenter who made the approval less-than-unanimous? Certainly, he or she was not a lawyer. I mean think about it, seriously.

Your client who is a mortgage broker or banker, a title company, a realtor, a bank, a homebuilder or a potential "referral source" comes to you and proposes yet another cock-eyed scheme for circumventing ("of course, in a completely legal fashion") the anti-kickback and anti-referral provisions of RESPA. In the spirit of "no stone left unturned -- especially when billing by the hour," you now can not only bill him for the research and "noodling," you can bill additional time in preparation of, submission, conferring about, following up, and securing a "No-Action Letter" from HUD. If obtained, you can then proceed to implement the arrangement without the nervous butterflies fluttering in the pit of your stomach because -- let's be honest -- you suspect that if there's a way to deviate from the straight and narrow, your client will "find a way."

If HUD makes no action letters available publicly, which would be expected given the SEC model that Gottfried proposes to use, you'll be able to gain guidance as to the parameters of transactions that have worked for others. That very "transparency" of the process might (perversely) deter the occasional client who believes that he has constructed the "better mousetrap" and doesn't wish to share his "brilliant innovation" with potential competitors. However, if there's any doubt, prudence will dictate that you obtain a No-Action Letter.

What's not to like? There's nothing more squirrely creative than a mortgage banker on the scent of commissions. I predict much fun will be had by all, especially attorneys at HUD, who, I assure you, will be presented with brain twisters that will try their patience and expand their personal definition of the term "surreal."

Gentlemen, start your engines. Let the race begin!

Massing The Artillery

In May, I wrote about concerns expressed by some bank trade associations that, buried in H.R. 3505, was the power for banking regulators to force directors of financial institutions to "pony up" cold, hard cash if the institution became under-capitalized. You know, a "capital maintenance agreement," but without the "agreement."

In response to that concern, the ICBA, ACB and ABA sent a letter to the bank regulatory agencies on June 2, 2006 that requested clarification. According to the American Banker's July 14, 2006 edition (paid subscription required), on July 6, 2006, the regulators sent such clarification. According to the American Banker, the clarification letter stated that a regulatory agency could require the directors to contribute personal assets only if they had previously signed a written agreement to do so. "We have no intent to deter qualified individuals from service as directors and officials of insured institutions," the regulators' letter said.

Apparently, not all of the trade associations are satisfied with the response.

Wayne Abernathy, the ABA's executive director for regulatory affairs, said that trade groups initially were concerned that the provision would give regulators "license to put your hands in my pockets for things I never agreed to."

The fact that regulators could hold directors financially responsible for their banks only if a written agreement were in place "should provide some reassurance to bank directors who might be concerned about what they might be getting into."

Karen Thomas, the ICBA's director of government relations, agreed with that assessment but said she was somewhat concerned that the letter "did not directly answer the circumstances in which they might use this."

David Baris, the executive director of the bank directors group, said he was unsatisfied with the regulators' response. He remains concerned that regulators could make their approval of a charter application conditional upon a written agreement with bank organizers requiring directors to guarantee they would use their own assets to recapitalize the bank if the capital fell below a certain level.

"There may be circumstances where the directors may feel forced to sign it," Mr. Baris said.

He also questions why the regulators feel they need to change the regulation in the first place, especially at a time when the industry is so healthy. It has been more than two years since the last bank failure.

"They haven't expressed why they need the change other than referencing a very general concept of protecting the Deposit Insurance Fund," Mr. Baris said.

In the past, net worth maintenance agreements have been required of controlling shareholders and holding companies in connection with the acquisition of control of existing financial institutions and the formation of de novo institutions (where higher capital levels are required to be maintained for the first several years). On the other hand, no such agreements have traditionally been required of directors of the institutions in their capacity as directors.

In the aftermath of FIRREA and FDICIA, the regulators are provided with some fairly awesome regulatory weapons to fire at directors in order to explode out of their frail bodies fountains of cash, should an institution start on the downhill slide to failure. Of course, the effectiveness of those weapons might be hindered by a minimal requirement of due process and the problem that a regulator might actually have to make a minimal showing (notwithstanding the fact that their administrative determinations will be given great weight by the federal courts that might review them) that a director actually violated one of his or her fiduciary duties and/or a law or regulation. Requiring that the director sign an agreement that basically provides that he or she will pay if the bank becomes under-capitalized, regardless of the cause, removes even these "inconveniences."

The fact that the regulators announce that they "have no intent to deter qualified individuals from service as directors and officials of insured institutions," is nice, but irrelevant. The road to hell is paved with good intentions. Even if not required at the outset, I can envisison scenarios where a bank falls on hard times for whatever reason, and, as part its "discussions" with the board of directors, the regulator uses veiled (or not-so-veiled) threats of "lowering the boom" to extract such an agreement out of each board member. Being an independent director of a financial institution with no "skin in the game" is today sufficiently risky to give any rational human being pause prior to deciding to serve. This is one more reason to run away from service.

If you've already got enough intercontinental ballistic missiles to destroy the world's population several times over, why fight for one more neutron bomb? So a few buildings will be left standing when all the human beings have vanished? Overkill, pure and simple. Pushed by folks who haven't seen much action from the other side of the gun barrel, and, apparently, don't seem to care.

At the risk of repeating myself, I'll do just that:

While Ms. Williams may assert that such a power will enhance the safety and soundness of banks, I disagree. Even talking about the possibility of imposing such a condition or requiring such an agreement is going to have a "chilling effect" on the willingness of good people to serve on the board of directors of a bank. The smarter and better advised potential directors will wisely pass on the opportunity to serve. The banks (and, eventually, the regulators) will be left with the inept, the insane, the ignorant, the stupid and the venal. Just the kind of people that you don't want to serve as outside directors of an insured depository institution.

Where Is Justice?

Now, I resent this rank injustice.

A woman ordered to stay away from actor John Cusack denied Wednesday that she was stalking him.

Cusack, 40, won a temporary restraining order Tuesday against Emily Leatherman, claiming that she has been stalking him for more than 18 months.

In court papers, he said she has thrown "long letters of interest over my fence in bags with rocks and screwdrivers inside," made unannounced visits to offices of people he works with, and listed his address as her own during a recent arrest. She "threatens to commit acts of violence against herself if I do not help her," the papers stated.

I suppose "the truth" will be revealed at the preliminary injunction hearing. Then, we'll likely see that Cusak is merely a hothouse flower wilting under what a calm, rational, unbiased observer would consider merely a whimsical attempt to communicate on an "alien-to-human" basis, with the human taking it in the wrong way. As always! A simple misunderstanding. Why can't you humans try to understand?

I tried to argue the same thing when New York State Banking Superintendent Diana Taylor failed to understand that the 12 dozen red, long-stemmed roses (a "dozen dozen," get it? ) I sent her each day, the dead brown squirrels in brown paper sacks delivered to the doorstep of her personal residence each Sunday morning, and the airplane that circled Albany for three days last August trailing a banner proclaiming "I WANT TO BE LIKE MIKE," were nothing more than a mirthful way of saying : "Diana, I want to bear your children." Who could misconstrue all that? More startlingly, who would even be the teeniest, tiniest, wee, little bit frightened by all that? Well, Ms. Taylor and the judicial system of the State of New York, apparently.

What really sets my tin foil hat spinning, though, is that she gets a permanent injunction preventing me from coming within 1000 MILES of her (and when she comes to Texas, I have leave the state and relocate to SALT LAKE CITY! The only benefit to that condition of my parole is that I get to use those great Mormon genealogy records to continue tracing my family history back to Middle Earth). Yet, Cusak's alleged stalker gets to come within 500 FEET of the alleged object of her alleged obsession. I understand that she's been injecting anabolic steroids and human growth hormone, as well as hiring the San Francisco Giants' batting instructor, in order to be able to launch home run baseball shots of Barry Bondsian proportions at John-Boy (with love notes scrawled on them, naturally). 500 Feet? They might as well have told her she could ride him like a little horsey, but couldn't sit on his lap. And they have the GALL to call that a restraining order!

I ask you: where is justice? I tell you where: squatting in the middle of the highway, staring stupidly up at a blinding sun, a little drool running down its chin, with the flies buzzing all around its head, and crawling into its mouth and nostrils and ears. Those FLIES! THE FLIES! GET THEM OFF ME!!

When people tell me "The wheels of justice grind exceedingly slow, yet exceeding fine," I ignore them. The same way I ignore them when they tell me I need to take my Thorazine.

Back Through The Looking Glass

Finally, sanity prevails inside the VA, and what ensues outside of it? More selfish whining and moaning by both the cynical and the ignorant.

Veterans Affairs Secretary Jim Nicholson on Thursday defended the government's decision to withdraw free credit monitoring for millions of veterans, saying there was little risk their sensitive data would be compromised.

Testifying to a Senate panel, Nicholson acknowledged there were no 100 percent guarantees that names, birthdates and Social Security numbers stored on a VA employee's stolen laptop and external drive were not accessed or copied. But he said the low risk did not justify a year of personalized monitoring at a taxpayer cost of $160.5 million.

"Facts have changed, the situation has changed," Nicholson said, noting that the stolen equipment has been recovered and that the FBI determined with a "high degree of confidence" that the data was not compromised.

This action is exactly what I called for last month. I guess that makes me a heartless SOB, just like Jimbo.

Nicholson said the VA was in the process of hiring a company to provide data breach analysis to detect potential patterns of misuse of data. In addition, the department planned to send letters to veterans informing them of free services already available to all citizens, including free monitoring for 90 days and credit reports three times a year.

Well, that's just not good enough for some people. What kind of people, you ask? Guess.

"I know the FBI says it has a high level of certainty that the data was not accessed, but frankly I wouldn't bet my credit on it," said Sen. Patty Murray, D-Wash. "And more importantly, the VA still has an inadequate data security system. Until that's fixed, I think the VA should keep its commitment."

Sen. Richard Burr, R-N.C., saying that many veterans still don't feel reassured, added: "As long as 100 percent are comfortable, I'm comfortable. But unless we reach that consensus, we still have some work to do."

"100%"? Are you kidding me? You know there's one guy in every veterans gathering with the propeller cap on his head, wearing the green field jacket with the peace sign on the back and "Mouse, M" over the left breast pocket. The guy who screams "INCOMING" and hits the deck every time an illegal alien undocumented guest worker fires up a lawn mower. That guy's NEVER going to feel safe.

Besides, stirring the pot gives veterans support groups something to do, and this issue is too good to simply shut up about.

"To say the least, we're outraged that the administration would renege on their offer," said Robert E. Wallace, executive director of the Veterans of Foreign Wars. "The letter from OMB says the FBI has a 'high degree of confidence' -- that's not 100 percent. The government made a mistake. The government owes it to veterans to make them whole."

The trouble is, Bob, you can't make someone "whole" UNTIL THEY'VE SUFFERED A LOSS! There has been NO LOSS suffered by any veteran as a result of the theft of the laptop, and it is highly unlikely that any loss will be suffered. Jim Nicholson has already pointed out the FREE CREDIT MONITORING SERVICES ALREADY AVAILABLE TO VETERANS. Spending tens or millions of dollars of our tax dollars more on unnecessary credit monitoring services is not justified, period.

The government made the right call. Now, we'll see if they've got the wherewithal to stick by it.

As a guy who turned 18 in 1967, I'm struck by the number of men my age today who claim to have either served on a Swift Boat right behind John Kerry's when he did/did not "off" an armed/unarmed Vietnamese man running toward/away from him and/or when he did/did not visit Cambodia/Laos/Las Vegas one Christmas night in 1967/1968/Star Date 2024, or to have accompanied a young Army captain who looked a lot like Martin Sheen when he sailed into the Heart of Darkness to kill a renegade colonel/beached albino sperm whale who mumbled like "A Man Called Brando," or to have ridden a crazed water buffalo across a rice paddy while firing an M79 grenade launcher in one hand and a double magazine clipped M-16 in the other, in every single case while also toking the biggest Thai Stick in Southeast Asia. I'm not saying that there are a lot of these guys. What I am asking is how can we be expected to believe that so many veterans of our armed forces, many of whom faced physical danger (and not only from John Kerry), need a change of underwear because they live in mortal fear that there's an infinitesimally remote possibility that someone peeked at their personal information? I simply don't buy it.

This entire dust-up is pure politics at every level, except for the average ignorant American, who's being snowed.

Until we start talking sensibly about the risks involved in these incidents and the costs of the remedies proposed, we're going to waste tons of money and even more time. Banks can look to this incident as the worst-case example of potential reputational risk and out-of-pocket costs that can arise from data security breaches and realize that perception, not cold, hard facts, will drive the aftermath of these incidents. Logic will have little to do with it.

In-Depth Research

This is my favorite report from my server logs, ever.

Someone at a major New York City-based law firm that represents large commercial banks arrived at Bank Lawyer's Blog recently via a Google search using the following sentence: "What do the words "na" in a bank's name mean?"

Now, I do believe that there's no such thing as a dumb question, only a dumb answer. In fact, I'm a strong believer in dumb questions and try to ask at least one myself every day. I always exceed my threshold. Nevertheless, in this case, I fervently pray that (1) the searcher was a summer associate and (2) time spent on the search will not be billed to a client.

Incidentally, "na" in a bank's name means "not applicable."

Or is it "not admissible"?

"No aardvarks"?

One of those.

That will be $500 please.

End of the Great Debate

The debate over "net neutrality" (an issue that could have a profound effect on financial institutions) has reached the highest levels of eggheadom. On Monday, two men who have both been referred to (on different occasions, in order to avoid a cat fight) as "the grandfather of the Inetrnet," debated the pros and cons of federal regulation of the issue at a confab sponsored by a "think tank." For geeks, does it get any better than this? That question was rhetorical, actually.

Two Internet pioneers dueled on Monday over whether proposed Net neutrality regulations supported by companies like Google and Amazon.com are the best way to prevent "abusive" behavior by broadband providers.

A debate here hosted by the Center for American Progress, a nonpartisan research institute that brags of challenging "conservative thinking," pitted Google Chief Internet Evangelist Vint Cerf, who co-developed the Internet's backbone protocols and has emerged as a leading proponent of congressional antidiscrimination mandates for network operators, against Dave Farber, a Carnegie Mellon University computer scientist widely considered to be a "grandfather" of the Internet.

Shockingly, the men disagreed. One was for federal legislation to enforce "net neutrality" and the other was against it. I can't recall who took what side, but you can read the article for yourself. Both gentlemen agreed that the debate has become muddled, but then, we're talking about the U.S. Congress, so what did they expect?

Amidst all the "blah-blah-blah" and the  "obladi, oblada, life goes on, brahhh," was buried the crux of the real cause for righteous anger. I mean who ARE these guys to presume that either one can refer to himself as the "grandfather of the Internet"? I've said this before, and I'll say it again, but this time I really, really mean it:

Cerf? Farber? Don't MAKE me come over there! There is only ONE man alive today who can rightfully claim to be the parent (or grandparent, or third cousin twice removed) of the Internet. You KNOW who I'm talkin' 'bout! Oh YEAH, BABY!