Banking is ripe for disruption but the powerful banks have built a huge moat to solidify their power. The actions of Goldman, JP Morgan, Morgan Stanley etc directly led to the mortgage crisis but the leaders of those banks convinced the government their continued existence was vital to the economic health of the world.
The regulations that the government implemented in response, Dodd Frank and before that Sarbanes Oxley, have actually just made it harder for startups to challenge the status quo. Starting a new bank is so regulated that most financial startups would rather buy an existing one than create a new bank.
The big banks pretend like the regulations are curtailing their behavior while pushing for them behind the scenes because they have teams of compliance people that can understand how to make money no matter what the regulations are. They would be dead and gone if the free market had been allowed to run its course.
JP Morgan and Goldman were completely solvent during the entire financial crisis, they were forced to take bailout money by the government (to disguise which banks were actually insolvent).
Where do all these nonsense memes about the 2008 crash come from?
They were, they made a lot of money betting against the housing market while simultaneously selling the products they were shorting. But many banks were insolvent and would have toppled after Lehman if the government hadn’t stepped in, and operating in an environment where their partners were gone would’ve made things much more difficult for Goldman and JP Morgan. It’s not nonsense.
> If AIG fell it would have quickly led to both JPMC and GS collapse too
Neither had enough exposure to fail due to AIG failing. Rita payouts to Goldman were less than $5bn, much of that being passed on to funds. I don’t recall numbers for JPM, but worst case they wouldn’t have been able to acquire like half of the banks they bought.
How? Any disruptive service would have to interface with the legacy, non-disrputive players. Visa + Mastercard have a monopoly on credit transactions. First Data + company have a monopoly on debit transactions. The banking of America is still backed by COBOL + mainframes and it hasn't changed yet for a culmination of a bunch of reasons. I just don't know when it ever will...
Ripe because the current system is inefficient and stacked toward the power players. Robinhood has a lot of users because retail investors are desperate to invest money for a profit. The banks underwriting the deals scoop up all the best opportunities before it ever filters down to normal people. With the oppressive regulations on new banks that won’t change any time soon.
The regulations that the government implemented in response, Dodd Frank and before that Sarbanes Oxley, have actually just made it harder for startups to challenge the status quo. Starting a new bank is so regulated that most financial startups would rather buy an existing one than create a new bank.
The big banks pretend like the regulations are curtailing their behavior while pushing for them behind the scenes because they have teams of compliance people that can understand how to make money no matter what the regulations are. They would be dead and gone if the free market had been allowed to run its course.