Santiago Velez, co-founder & R&D division lead for Block Digital, joins Real Vision CEO Raoul Pal to discuss all aspects of XRP — the coin, its use cases and Ripple the company. Providing an in-depth breakdown of the XRP project, Velez covers common misconceptions and current real world use cases, explaining key differences between XRP and other top crypto projects such as Bitcoin and Ethereum. Filmed on November 19, 2020. Key Learnings: XRP has significant traction with various banking consortiums across the world, notably in Japan. XRP has its own specific use case and does not necessarily overlap with other blockchain assets’ use cases such as Bitcoin. Viewers of this video will leave understanding XRP’s specific use case and how this compares to other notable crypto projects.
Black customers risk being racially profiled on everyday visits to bank branches. Under federal laws, there is little recourse as long as the banks ultimately complete their transactions.
Clarice Middleton shook with fear as she stood on the sidewalk outside a Wells Fargo branch in Atlanta one December morning in 2018. Moments earlier, she had tried to cash a $200 check, only to be accused of fraud by three branch employees, who then called 911.
Ms. Middleton, who is black, remembers thinking: “I don’t want to die.”
For many black Americans, going to the bank can be a fraught experience. Something as simple as trying to cash a check or open a bank account can lead to suspicious employees summoning the police, causing anxiety and fear — and sometimes even physical danger — for the accused customers.
There is no data on how frequently the police are called on customers who are making legitimate everyday transactions. The phenomenon has its own social media hashtag: #BankingWhileBlack.
Most people who experience an episode of racial profiling don’t report it, lawyers say. Some find it easier to engage in private settlement negotiations. The few who sue — as Ms. Middleton did — are unlikely to win in court because of loopholes in the law. Now, the police killing of George Floyd in Minneapolis, which set off nationwide protests against systemic racism, is prompting more people to speak up.
Ms. Middleton had gone to the Wells Fargo branch in Druid Hills, a wealthy, mostly white neighborhood in Atlanta, to cash a refund for a security deposit from a real estate company that had an account with the bank. Three bank employees examined the check and her identification, but refused to look at the additional proof Ms. Middleton offered. They declared the check fraudulent, and one employee called the police, according to her lawsuit.
When an officer arrived, Ms. Middleton showed him her identification and the check stub. As a former bank teller, she knew that would be proof enough that her check was authentic. The officer left without taking action. The Wells Fargo employees asked Ms. Middleton whether she still wanted to cash the check.
“I said yes, because they had written all over the back of the check,” said Ms. Middleton, who sued Wells Fargo last year for racial discrimination and defamation and sought an unspecified amount of damages.
Mary Eshet, a Wells Fargo spokeswoman, said Ms. Middleton had begun yelling “abusive and profane language” at the employees when she saw her ID being scanned.
“Employees tried to address Ms. Middleton’s concerns by explaining our policies, but Ms. Middleton continued to yell profane language,” Ms Eshet said. “She was asked to leave the branch multiple times and refused, so our employees followed their processes to engage law enforcement.” She added that the bank “appreciates the sensitivities of engaging law enforcement and the importance of continually reviewing our training, policies and procedures.”
Ms. Middleton’s lawyer, Yechezkel Rodal, said her client had not used profanity. “Wells Fargo is in possession of the video surveillance showing exactly what happened in the branch that morning,” he said. “The video will not support Wells Fargo’s lies.”
Some incidents play out without the involvement of police or courts.
In March 2019, Jabari Bennett wanted to withdraw $6,400 in cash to buy a used Toyota Camry from a dealership in Wilmington, Del. He had just sold his house in Atlanta and moved to Wilmington to live with his mother. Having been a Wells Fargo customer for four years — he had around $70,000 in his account from the sale of his house — Mr. Bennett walked into a nearby branch expecting to be back at the dealership and in his Camry within minutes.
He came away empty-handed and reeling.
First, a teller refused to accept that he was the account holder, questioning his out-of-state driver’s license, he said — even though Mr. Bennett had informed the bank of his new address just two weeks earlier. Then, a branch manager told Mr. Bennett to leave. He left in disbelief, then returned to try to complete the transaction. This time, the manager threatened to call the police. Mr. Bennett left again.
The experience “made me feel like I was nothing,” Mr. Bennett said.
He abandoned the deal on the car. A week later, he moved all his money out of Wells Fargo and then hired Mr. Rodal, who had gained a reputation for representing black customers against the bank after the story of one of his clients went viral in 2018. Mr. Rodal sent Wells Fargo a letter, but negotiations stalled.
Mr. Bennett decided to share his story publicly in light of the recent protests: “I don’t want anybody else to go through what I went through.”
Ms. Eshet, the Wells Fargo spokeswoman, said that branch employees were trained to spot potential fraud, and that the bank had increased security protocols to thwart internet scams involving large transfers of money.
“In this instance, there were enough markers for our team to conduct extra diligence in order to protect the customer and the bank,” she said.
The protests also pushed Benndrick Watson into action.
Last spring, Mr. Watson was driven out of a Wells Fargo branch in Westchase, a wealthy neighborhood near Tampa, Fla., by what the branch manager described as a “slip of the tongue.”
Mr. Watson, who was already a bank customer with a personal checking account, went to the branch to open a business account for his law firm.
A banker did a corporate records search and found Mr. Watson’s other business, a record label. Mr. Watson tried to direct the employee to the records for his law firm instead.
Eventually, the branch manager got involved. He sat down across from Mr. Watson and watched him enter information, including his Social Security number, into a keypad.
Then, the man uttered the N-word.
”He just said it — clear as day, no mistake,” Mr. Watson said. “My jaw just dropped, I dropped the pen, there was silence, he kind of looked at me, I said: ‘Did you really just say that?’”
Mr. Watson said the man had immediately begun to protest, saying that he had not meant to use the word, and that he was deeply sorry. Mr. Watson did not buy it. He got up and left. The manager followed him to his car, apologizing profusely, and resigned from the bank shortly afterward.
“I felt like I had a knife in my gut,” Mr. Watson said. “It’s a sickening word.”
Mr. Watson turned to Mr. Rodal, who wrote to Wells Fargo seeking an apology. The bank’s regional president, Steve Schultz, responded. “It seems that the utterance of the offensive term was unintentional,” Mr. Schultz wrote, but said the bank had taken “corrective action” against the branch manager anyway, without providing details. Ms. Eshet of Wells Fargo said the manager was deemed ineligible for any job with the bank.
Mr. Watson sued Wells Fargo in federal court in Florida on June 4.
In a statement, Ms. Eshet said: “We deeply apologize to Mr. Watson. There’s no excuse for it, and while we took action to address the matter, it cannot undo what happened and how he felt. We are very sorry.”
The problem is hardly confined to Wells Fargo. Last June, Robyn Murphy, a public relations consultant in Maryland, took her 18-year-old son, Jason, to a Bank of America branch in Owings Mills, Md., to open a joint savings account. Ms. Murphy, a 20-year customer of the bank, said she was shocked when an employee refused to proceed after a computer program flagged her son’s Social Security number as fraudulent.
Ms. Murphy protested: Her son had his own checking account at the bank. His Social Security number had already been used there without issue. The Murphys are black. Mr. Murphy, his mother said, is 6-foot-9.
“For all I know, it’s fraud,” the employee told them. Ms. Murphy said he had asked them to come back with Mr. Murphy’s Social Security card. When Mr. Murphy stood up, the employee yelled: “Don’t get up!”
After Ms. Murphy contacted a senior vice president she knew at the bank, other officials apologized and offered to open the branch whenever it was convenient for the Murphys to return and complete the transaction — which they did.
“It weighed on us very heavily for a long time,” Ms. Murphy said.
“We understand the client did not feel she and her son were treated properly in this interaction with our team, and we regret that,” Bill Halldin, a Bank of America spokesman, said in an emailed statement. “These alerts are designed to protect our clients from fraud and misuse of their personal information.” He declined to comment on what, if any, action the bank had taken against the employee.
Banks say they reject racism of any sort. The country’s four largest banks by asset size, JPMorgan Chase, Wells Fargo, Bank of America and Citigroup, all require branch employees to complete annual diversity training, according to the banks’ representatives.
Still, banks have not managed to weed out discrimination. The New York Times reported in December that a JPMorgan Chase employee had described a customer as being “from Section 8” and therefore undeserving of service. The bank has since said it would seek to increase its sensitivity to issues surrounding race.
But little is mandated by law. The Civil Rights Act of 1964 lists specific businesses that may not treat black customers differently: movie theaters, hotels, restaurants, and performance and sports venues. Federal courts have held that because the law identifies the kinds of businesses to which it applies, those not on the list, such as banks, cannot be held to it. That loophole makes it hard for victims of racial profiling to win in court.
There is an additional limitation. In 1866, Congress created new laws to establish rights for black Americans, including one giving them the right to enter into agreements to buy goods or services and have those contracts enforced. Courts have since ruled that the law requires only that service be granted eventually.
In 2012, for instance, a federal appeals court ruled that a Hispanic man who had been turned away by a white cashier at a Target store in Florida did not have a case against Target because he was able to complete his purchases with a different cashier.
That could stymie Ms. Middleton’s case. Wells Fargo is arguing that because she was eventually able to cash her check, a judge should dismiss it.
Jim Cramer explains why bank stocks can’t be bought amid virus crisis
Financial stocks look cheap and have big yields, but this group got shelled in Wednesday’s session for a reason, the “Mad Money” host said.
Steve Eisman: Quantitative Easing was a failure: it didn’t get corporations to borrow and invest. Rather, they borrowed and bought up their own stock.
Steve Eisman: Inequality was cause of Financial Crisis (10:17)
Steve Eisman: They made money because of their leverage (debt ratio) and they mistook their leverage for genius (12:19)
Steve Eisman was one of the few who predicted the 2008 financial crisis, and he made his name by foreseeing the collapse of subprime mortgage market.
Michael Lewis portrays him as one of the heroes in the bestselling book The Big Short and Steve Carrell plays an outspoken version of him in the Oscar-winning movie of the same name.
EFN:s Katrine Marçal meets Steve Eisman at Claridges hotel in London.
they’re all getting screwed you know you
know if they care about they care about
the ballgame or they care about what
actresses went into rehab I think you
should try medication no no we agreed if
it interferes with work you hate Wall
Street maybe it’s time to quit I love my
job you hate your job I love my job
you’re miserable I love my job I love my
mark Steve Iseman welcome to the offense
I’m glad to be here so you’ve been
portrayed in a book and in a film what
did you prefer I would say they were
both fairly accurate as the way I was
back then and let’s just leave it at
that okay okay so I’ve heard that some
Brad Pitt’s almost caladium in the film
it’s not true I got a phone call from
Adam McKay who was the author director
of the movie in November of 2015 to say
that he was writing the movie and that
there was a possibility that Brad Pitt
would play me to which I responded that
the only thing Brad Pitt and I have in
common is that we both have really good
so being one a few people who sold the
financial crash coming how did it feel
to have see this big disaster unfold and
not being able to do anything about it
the analogy I use it’s a little bit like
Noah in the ark yeah so you know Noah’s
on the ark he’s okay and that he saved
his family but he’s not exactly happy
hearing everybody screaming outside
that’s was sort of my experience all
right did you think the financial market
potential market from the financial
sector would get back get back to
business and get back to some kind of
normal as quickly as it did no I didn’t
expect it would it would happen that
quickly you know a lot of that was the
fact that the government backstop the
system and once the become a backstop
the system it was what the financial
markets did come back but the banking
system has been changed so in the book
and the film it becomes very clear that
you’re you betting against the subprime
mortgage market is not
just a trade but it’s kind of a moral
crusade are you still on this moral
crusade I’m not because a lot has
you know dodd-frank I think really fixed
a lot of things leverage has come down
enormous ly the Consumer Financial
Protection Board has been put in place
to protect consumers I the world’s very
different from what it was pre-crisis
hmm but now many of these things are
threatening I mean Donald Trump has
promised to repeal vast parts of the
dodd-frank act for example it’s not
something I’m in favor of I think that
will be a big fight you know it’s
possible the industry is going to get
deregulated to a degree we’re not going
to go back to what we where it was so
for example you know Citigroup used to
be levered 35 to 1 today its levered 10
to 1 I feel if we go into some type of
deregulation maybe you get 2 to 3 turns
more leverage it’s not something that
I’m personally in favor of but I don’t
think it’s a calamity hmm so do you
think with Donald Trump be president
today if more than one banker had gone
to jail for the financial crisis it’s an
excellent question and the answer is I
don’t know you know I don’t know
I’m cold about it I’ve thought about it
I think there’s a definite very strong
sentiment that it was wrong that nobody
went to jail I’m not going to say if
that sentiment is right or not but
there’s definitely a very strong
sentiment in the country that that’s the
case and I think people are very angry
that nobody did go to jail again I’m not
going to say whether that’s right or
wrong and if people had gone to jail I
think that would have soothed some of
the hangar that was seen in the election
so it’s possible that impact of the
election but it’s impossible it’s
impossible to say right so now taxes are
going to be can’t and Finance regulators
because the populace to campaign against
Wall Street 1 correct correct okay so
what do you do with investment then I
hear you you are investing quite a lot
in bank stocks well I mean there’s
there’s two issues there’s what I think
about finance the financial system and
what I think about financial stocks and
the two don’t necessarily
correlate so with respect to the
financial system I think that what’s
been done has been a good thing but it’s
been very intense bank the dodd-frank
act and the Fed forcing people to
de-lever to de-risk etc so from a
financial system I’m very happy I could
say very strongly the United States
financial system has never been held
this healthy in my lifetime but it’s
been very painful for financial stocks
because as you de-lever and do risk you
make less money and therefore it hurts
your stock price so the last six years
or so have been extremely painful for
financial stocks especially banks as
they’ve de-levered and dearest well if
we’re going to go into world where we’re
going to deregulate and leverage is
going to go up at least some just
reverse the story
so therefore financial stocks should do
well right okay
like I said financial system financial
stocks but you are not necessarily the
same an interest rates in America are
going up yes that’s very good for banks
so America is kind of moving from a
monetary stimulus to a fiscal stimulus
with something but it’s like that’s
something I’m in favor of yes I think
it’s a good thing the infrastructure
investment yeah that’s right until not
believe that quantitative easing is a
successful strategy why not there are
too many negative impacts for from it to
I mean look it was a noble experiment
there was no fiscal expansion there was
no other game in town so I don’t blame
the Fed for doing it the idea was that
lowering rates would cause people to go
up or out on the risk curve and vest in
the economy and really the other thing
happened was they went out on the risk
curve by buying back their own stock
they didn’t really invest in the economy
and with lower rates that hurts consumer
because they makes us money we pay the
money in the bank so I haven’t you know
when we started the monetary policy of
us growth was one-and-a-half to two
percent and after we did it it’s one and
a half to two percent so in my view
quantitative easing is a failure
alright so in November you said to the
Guardian in Europe but Europe is screwed
you guys are still screwed referring to
their non-performing loans in the
Italian depends of the country yes
are we in Europe still screwed well my
wife wish I hadn’t said that
yes so okay oh we in big trouble not big
it depends on the country you know Italy
has a very large non-performing loan
problem I don’t see the Italian
government doing anything to really
solve that problem if they like before
Christmas that was a nasty suppose that
was just monte de Paz yeah and you never
like to say monte de Partie because it’s
such a great name and the world’s oldest
bank as the world’s oldest bank correct
and I don’t you know you could try and
Simmel to deposit ten times fast it’s
very hard but it’s not really solving
the problem I mean this is something
called a Texas ratio which is a ratio
that bank analyst Achon myself compute
which is non-performing loans divided by
tangible book value plus reserves
basically the numerators all the bad
stuff divided by the money you have to
pay for the bad stuff and one of the
great lessons about bank analysis is
that one in Texas ratio gets over a
hundred percent the bank is done and in
Italy the two largest banks are in paisa
and you credit and their Texas ratios
are at ninety percent and every other
Bank in Italy is over 100 percent so I
don’t envy Italy the problem ok famous
ahma is the country there’s the bigger
than I think it won’t come and I think
the problem with the banks generally in
Europe is that they are still under
capitalized and they they are they do
not make enough money per dollar
employed basically European banks don’t
charge enough for this
services they never have and they’ve
tried to make up the difference with
leverage and in a world where you have
to use less leverage that model doesn’t
what about Deutsche Bank quite the same
well don’t you make sort of the poster
child for that let’s think about this
this way so today if a bank has a 1%
return on asset and is loved or ten to
one the return on equity is 10% that’s
the simple formula so you know Citigroup
for example doesn’t even have a 1% ROA
but they’re not that far off but
Deutsche Bank today has a 30 basis point
ROA they need to improve their
profitability by more than three times
there’s no way Georgia Bank on its own
can improve its profitability three
times the entire European banking system
has to be price you know how that’s
going to ever happen I don’t know but
until it does your paint banks it could
be a problem
they’re going to be a problem so you’ve
been in here in London for a few hours
now and you must have realized already
that the only thing people talk about
here with breakfast yes
so what financial risks do you see
coming from brexit big question is a big
okay what will happen in March I have no
idea you have no I really have no idea
honestly I don’t think and more
importantly anybody else has any idea
that it’s going to be an adventure a not
so it’s going to be a fun adventure but
it’s going to be an adventure so you
said that we’re very bad at dealing with
crises that develop very slowly and you
put the blame on the big financial
crisis of 2007-2008 on income
distribution really do you see that
changing at all I mean let me explain
that yes because it’s not intuitively
obvious how the two are connected so you
know my thesis is that one of the
underlying causes of the financial
crisis it was bad income distribution so
you know when I say that people’s eyes
generally clays are like you know what
are you talking about
but I think that there’s a
cause-and-effect relationship in that
you know starting in the 90s when income
distribution started to get really poor
in the United States rather than focus
on that and what the solutions worth of
that problem let credit get democratized
that was the euphemism for will will
make loans to people that we didn’t make
loans to before so rather than get
people’s incomes up they let them lever
themselves [take out more debt] and one of the ways people
lever themselves was by taking out loans
on their homes and loving themselves
that way and so I think one of the
causes of the subprime mortgage crisis
is that you know post dodd-frank hard to
get a mortgage loan yeah you know
incomes have only started to start
growing again we’ll have to see what it
does the new administration can do
so it don’t Frank it’s harder to get a
loan but well it’s hard to get a
mortgage why although I don’t think that
I caused a defect of dodd-frank I think
it’s more of an effect of all the fines
that were imposed on the banks for the
mortgage crisis and so the banks I think
not unjustifiably are kind of worried
about making mortgage loans that they
might they might not should or should
not make so the financial crisis what he
said the main problem was the products
the tools available or the culture ah I
would say is one of the unsung aspects
of the financial crisis that people have
definitely not written that up about
which is psychology yes and what I mean
by psychology is you have an entire
generation of Wall Street executives who
grew up in the 90s in the early aughts
who really only had one experience which
is they made more money every single
year now what they didn’t really notice
was that as they were making more money
every single year the leverage of their
various institutions was increasing
every single year
now they thought they were making more
money because it was them but really
what was happening as they were making
more money because their institution was
becoming more levered and really what
happened was they mistook leverage for
I wrote that sentence by the way I read
that I do it’s a good son it’s a good
sentence I don’t write a lot of good
sentences but that’s definitely one of
them tweetable yes it’s very good right
if I tweeted I would tweet listen I am
so let’s imagine you went to a Wall
Street executive in circa 2006 and you
said to the CEO of you know pick the
name of your institution and you’d say
dude listen the entire paradigm of your
career is wrong you have to de-lever so
did you ever have a conversation like
that I did I’ve never told this story
before there’s like AI now it can be
told story okay um so the day is
February 2008 and I have a meeting with
the head of Risk Management and one of
the big Wall Street firms we won’t name
them anyone else today but it wouldn’t
matter because I would have had the same
it would have been the same conversation
with any of them
given what was discussion one so I sit
down with a head of risk management of
one of the big farms it’s one month
before Bear Stearns almost to the day
and I say to him you have got to de-lever
and you’ve got to de-lever now because
Armageddon is coming the point of it is
the direct that’s almost a direct quote
I used the word Armageddon and he looks
at me and he says you know I hear what
you’re saying but you know we at X we
can be much more levered to the bank now
back then there was a bank based in
Detroit called net city it was a
medium-sized regional bank and it had a
lot of subprime mortgages so it was a
bit of the topic of the day and so I
said to him you know do you know what
happens if knacks City goes down and he
says no what happens I said nothing the
regulator’s come in they seize the bank
they pay off the depositors they fix the
bank they sell the bank the government
takes something of a loss end of story
do you know what happens if your firm
goes down planet earth burns who should
be more levered and he looked at me like
I was speaking ancient Greek like he
just it was so outside his paradigm it’s
like he didn’t know I was talking about
and I realized it was over that there
was no way these guys were going to do
what needed to be done before the world
blew up but I think we’re going to see
someone to go to jail right
I mean you can have to break up the bank
partido I don’t know I don’t know I have
a feeling in a few years people are
going to be doing what they always do in
the economy tanks they would be blaming
immigrants and poor people it’s not X
equate from you is that Hollywood’s a
great quote it’s a great mark it’s not
yellow it was written by Adam McKay with
the author and director and but did you
think in those terms back then oh I
always think in those times always
thinks in terms of disaster yes why is
that just I have a very strange DNA do
you see this paradigm changing at all
this culture I was told check it steady
change they’ve been beaten to a pulp
you know the dodd-frank gave much more
power to the Fed to regulate the banks
that power was put in the hand of
Governor Daniel Tarullo and I think he’s
done a tremendous job of de-levering the
banks in the United States you know I
would say the CEOs of the bank’s fought
him kicking and screaming but I’d say in
the last year or two they gave up and I
know you said before that Europe’s done
not as good of a job with that that’s
correct why well it’s what your starting
point so you know just pre-crisis
Citigroup is levered thirty five to one
deutsche bank is lowered over 50 to one
so today’s Citigroup is levered ten to
one and deutsche bank depending on how
you calculate is probably levered twenty
five to one so everybody’s leverage is
lower European banks have always been
much more levered than US banks so
they’re still more levered they just
left levered than they were right not
they’re not de-levered enough to my taste
but that again we gets back to the Paula
Mills they’re not profitable enough per
dollar employed so the regulator’s in
Europe let them be more levered I think
it’s a mistake but that’s the way the
systems it works okay and everyone’s
asking you what the next one of the
crisis is going to be so I don’t have a
dick I know I’m not going to ask you
money I will ask you that question I say
you know everybody’s trying to pick the
next big short and I’ve done that
already I’m in no rush
okay thanks a lot Steve Eisman thank you
Add together some of the biggest challenges U.S. banks weathered in the dozen years since the financial crisis, and you get an idea of how bad the coronavirus epidemic could be for them.
A decade ago, banks persevered through a recession and widespread loan defaults. Until 2015, they endured years of ultralow interest rates and slow loan growth that pressured their profitability. In 2015 and 2018, banks survived selloffs in the stock market. In 2016, the industry came through a collapse in energy prices with a few bruises, but no big busts.
Now, banks face all those threats simultaneously. Many of their businesses mirror economic activity, so falling growth and rising unemployment can dent their profits. Sharp drops in asset prices can sap their investment-banking and trading revenues as deal activity and investors pause.
Banks entered the year better capitalized and less reliant on flighty, short-term funding than they were on the eve of the financial crisis. But their earnings likely will suffer.
Fears of the impact of the coronavirus have erased all of the “Trump Bump” gains that the KBW Nasdaq Bank Index and four of the six largest U.S. banks had notched since the 2016 presidential election. The KBW index fell more than 10% Thursday morning as investors bet that new travel restrictions and the possibility of more rate cuts from the Federal Reserve will continue to hammer the financial sector.
Here is a look at how banks could fare in a coronavirus-related slowdown:
Lower Lending Revenue
Around two-thirds of banks’ revenue last year came from interest earned on loans and securities, according to data from the Federal Deposit Insurance Corp. The rates banks charge on some large categories of loans, including commercial and industrial lending and credit-card balances, are tied to benchmarks that have fallen in recent weeks. That threatens to crimp banks’ net interest income.
For instance, a reduction of 1 percentage point in both short- and long-term interest rates translates to $6.54 billion in lost interest income in 2020 for Bank of America Corp., BAC -9.53% or roughly 7% of its annual revenue, according to estimates from Credit Suisse Group AG. Bank of America is an outlier, but the average big U.S. bank will face a 2% hit to revenue from a drop in interest rates of that magnitude, according to Credit Suisse.
Falling Loan Growth
Banks might also struggle to make up on loan volume what they are giving up in terms of loan yields. Throughout 2019, businesses and consumers showed a willingness to borrow, and loan balances at all U.S. banks at the end of the year were up 3.6% from their levels at the end of 2018, according to FDIC data.
More recently, fears of the coronavirus weighed on businesses’ decisions to invest and expand, especially in sectors such as travel and hospitality and in industries that depend on global supply chains. Commercial and industrial loans increased by less than 1.5% each week in February compared with the same period last year, according to data from the Fed. In February 2019, commercial and industrial growth exceeded 10% each week.
Consumers have borrowed from banks at a higher pace than corporations have since the start of the year, but have started to flag in recent weeks. Since late January, banks’ consumer-loan growth has plateaued at just under 6%, according to Fed data.
The prospect of scores of consumers missing work and forfeiting paychecks also bodes poorly for many of the loans banks already have on their books. Delinquencies and defaults on mortgages, auto loans, credit cards and other forms of consumer borrowing tend to rise and fall with the unemployment rate, and any prolonged period of joblessness likely will mean that borrowers fall behind on their loan payments.
Banks have been more conservative in extending credit to consumers since the financial crisis, and the industrywide loan-loss rate is well below its long-term averages and just 0.18 percentage point above its record low in 2006, according to analysts at Barclays BCS -14.82% PLC. But things can worsen quickly: Banks have been reducing the reserves they have set aside to cover potential defaults in recent quarters, even as defaults on certain loan categories have been rising, according to FDIC data.
Even if consumers keep paying back their loans, their spending on luxuries such as dining out and vacations is likely to fall, decreasing revenue that banks earn on those kinds of credit- and debit-card transactions.
Not Out of Energy
Many of banks’ corporate borrowers will also face difficulties making loan payments in a worsening economy, especially those in the energy sector. A steep decline in oil prices this week means oil and natural-gas companies will have less money coming in to meet existing debt payments and a less valuable asset in the form of energy reserves that they will be able to borrow against.
If energy prices stay at this level, loan losses in banks’ energy portfolios would notch a “notable uptick,” analysts at KBW wrote in a note on Monday. The four largest U.S. banks have $65.5 billion in exposure to U.S. oil-and-gas companies, and loans to such companies account for more than 10% of overall portfolios at several regional U.S. banks, according to KBW.
Revenue from Wall Street businesses such as investment banking and trading account for one of banks’ biggest sources of fee income, and both are sensitive to the impact of the coronavirus. Since the start of the year, reluctance from corporate chiefs to pursue deals has driven global mergers-and-acquisitions volume down 28% from this point in 2019, according to data from Dealogic. Citigroup Inc. C -14.83% is expecting investment-banking fees to fall in the first quarter, finance chief Mark Mason said at an investor conference Wednesday.
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Volatile markets and big swings in stocks, bonds and commodities kept banks’ trading desks busy during the first quarter, but fees from that business likely won’t be enough to offset weakness elsewhere. Banks employ fewer traders today than they did during the financial crisis, and with more trading moving to electronic venues, some fees have come down. Mr. Mason said Citigroup’s trading revenue was expected to increase “in the mid-single-digit range” in the first quarter, even though trading volumes rose by much more.
- Vanguard Group is testing a blockchain-powered platform that would allow asset managers to trade currencies without using major banks as intermediaries, Bloomberg reported Thursday.
- The currency market handles $6 trillion each day, and is currently dominated by firms like JPMorgan Chase and Citi.
- Vanguard’s platform would skirt the banks’ fees through peer-to-peer trading, and has already handled a few trades, a source told Bloomberg.
- Visit the Markets Insider homepage for more stories.
Vanguard Group is testing a blockchain-powered platform for asset managers to trade currencies, Bloomberg reported Thursday.
An entry into the sector from Vanguard could bring long-sought change to the bank-dominated currency market. The investing giant already disrupted the finance world by introducing low-cost index funds to the masses.
Asset managers currently rely on banks as intermediaries for currency trades, even after buy-side companies began matching trades on electronic services in the 2000s. The system being tested by Vanguard would sidestep the traditional players and their fees, Bloomberg reported.
The investing giant’s service has been working for two months and has already handled some trades, a source told Bloomberg. The platform uses the same blockchain technology behind bitcoin to match trades, and could cut trade expenses if enough users join the service.
“In theory, it sounds great because you can reduce your costs if you can match directly with someone else who has a countervailing interest,” Campbell Adams, a former Deutsche Bank senior currency trader and the founder of ParFX, told Bloomberg. However, such a platform “will require a critical mass of users” if it wants to bring a discount advantage to the massive sector, he added.
The investment advisor has previously hinted at efforts to compete in peer-to-peer trading. Andy Maack, Vanguard’s global head of foreign exchange trading, told The Trade there’s a “tremendous amount of interest in the potential for disintermediation.”
Peer-to-peer trade matching “is pretty intriguing, especially for the foreign exchange markets which only really started to seriously explore this topic in recent months,” he added in the September interview.
The company didn’t comment further on plans for the platform, but noted its interest in currency hedging and lowering “the cost of investing for all investors.”
“Vanguard is currently piloting a project focused on improving the efficiency and reducing risk of FX hedging,” Vanguard spokesperson Carolyn Wegemann said in a statement to Business Insider. “Given the project is still in the pilot stage, we can’t comment further.”
Vanguard has more than $5 trillion in worldwide assets and is the world’s largest provider of mutual funds. It also provides exchange-traded funds that track major stock indexes.
It’s not what the Religious Right thinks it is.
Claims of moral decline are a perennial feature of conservative rhetoric. But in recent years, pro-Trump Christians have emphasized a new reason to be afraid. The United States, they say, is devolving into such wanton “paganism” that the country may not survive. The true America awaits rescue by the Christian faithful, and in such an existential struggle, nearly any means are justified—even reelecting a morally abhorrent president.
Examples of this rhetoric are not in short supply, among pundits and even in more scholarly work. In an essay praising Donald Trump’s “animal instinct” for “order” and “social cohesion,” Sohrab Ahmari opposed an America of “traditional Christianity” to one of “libertine ways and paganized ideology.” These are our only choices, he insisted. Between such incompatible enemies, there can be only “war and enmity,” so true believers should be ready to sacrifice civility in the battles ahead to reconquer the public square. Rod Dreher has speculated that Trump, while unpalatable, could be a divine emissary holding back the horrors of Christian persecution, like the biblical figure of He Who Delays the Antichrist, an implicit nod to old pagan enemies. “If Christians like me vote for Trump in 2020,” Dreher warns, “it is only because of his role as katechon in restraining what is far worse.” Though in a calmer tone, Ross Douthat entertained similar ideas in his column “The Return of Paganism,” wondering if the pantheist tendencies in American civil religion could morph into a neo-paganism hostile to Christian faith.
Douthat cites a recent book by law professor Steven D. Smith, Pagans & Christians in the City: Culture Wars from the Tiber to the Potomac. According to Smith, what we know as “secularism” is actually ancient paganism in modern guise. Since paganism is inherently anti-Christian, this means Christians should oppose both secular politics and secular universities at any cost. They are not fighting against a neutral arbiter, but against the wiles of pagan Rome redivivus, a strain of this-worldly sexualized spirituality nearly eradicated by Christianity, but now mutated and all the more lethal.
Smith is only the most recent Christian author to invoke the specter of paganism. R. R. Reno, the editor of First Things, wrote Resurrecting the Idea of a Christian Society on the eve of the 2016 election, apparently anticipating a Clinton victory. The book’s title alludes to T. S. Eliot’s 1938 essay on “The Idea of a Christian Society,” in which Eliot condemns the rise of “modern paganism.” Reno told his readers to view 2016 in light of 1938. “Would the West seek a Christian future or a pagan one?” he asked. “We face a similar decision today. Will we seek to live in accord with the idea of a Christian society, or will we accept the tutelage of a pagan society?” Yuval Levin called Reno’s book a “call to arms against a postmodern paganism.”
This charge of looming paganism exerts a twofold political function. First, it
- rationalizes Trumpism, casting our situation as a state of emergency that threatens the survival of U.S. Christians.
- Second, the sacrilege of pagan religion prevents Trump’s supporters from indulging in political moderation by making that seem like a form of apostasy. It’s probably not a coincidence that “paganism” is on the rise just as Christian conservatives decide whether to support the current administration in an election year. It is challenging to explain how Trump’s policies are Christian. It is far easier to label his opponents as pagans, and thus align the president with Christianity by default. But there are fundamental problems with the conservative narrative of a resurgent paganism.
In the first place, the term “paganism” only works in this maneuver because it is vague and perspectival. It always has been, ever since Christians invented it. Ancient Christians stuck the name on those who continued the traditional rites of Greco-Roman religion rather than adopt the true faith. Indeed the largely urban Christians meant it as a mild pejorative for the rural country bumpkins, the pagani, who lived far from imperial centers and persisted in their benighted worship of the old gods. In our terms, the first “pagans” lived in flyover country and clung to their traditional religion.
Since “pagan” has come to mean “un-Christian,” every invocation of “pagan” brings with it an implicit understanding of “Christian.” The meaning of the former is parasitic on the latter. Misunderstanding the essence of paganism, therefore, also means misunderstanding the demands of Christianity, and vice versa.
More left-leaning Christians might well agree with Smith and Reno in one sense: there is indeed an ascendant paganism afoot in our country today. It threatens the social and moral fabric of American public life and contends directly against the voice of Christian truth. One can brook no compromise in resisting it. The difference comes in how that paganism is defined. The debate is not whether paganism is real, but where it lives, how it appears, and what it does. If conservatives have mistaken its location, they might be training their weapons in the wrong direction.
Much hangs, then, on accurately discerning the meaning of “modern paganism.” Let us consider three proposals: Steven Smith’s recent version, T. S. Eliot’s original version, and another timely version from First Things.Christians were the most conspicuous defenders of divine immanence in the ancient world. It was pagans who derided Christians for violating the self-evident truths of divine transcendence.
Steven Smith suggests that secularism is not a neutral space, but conceals its own religious identity, which is essentially pagan. It venerates the sacred within the natural world, knows only the cycle of birth and death, and thus celebrates a libertine sexuality. As opposed to Abrahamic religions that affirm the “transcendent sacred,” paganisms old and new prefer the “immanent sacred.” Smith delves into the emergence of Christians in the Roman Empire and vividly evokes the oddity of Christianity in the ancient world, heeding the scholarship of Peter Brown, Jan Assmann, and Kyle Harper (but Edward Gibbon most of all). Smith then applies his ancient model to American constitutional law and finds it confirms conservative positions on religious freedom, public symbols, and sexual norms.
But there are serious problems with Smith’s argument. Since the 1970s, scholars of religion have largely retired the vague categories formerly used to organize speculation about comparative religions—sacred and secular, immanent and transcendent, holy and profane, this-worldly and other-worldly. Major religious traditions are massive and multifarious in the ways they sustain rituals, ethics, and beliefs. Their communities cut across languages, continents, empires, and epochs, teeming with exceptions and discontinuities. The blunt tools applied by Smith are simply not up to the task of uncovering the essence of one religion, let alone two or three, and they are certainly not able to trace the notoriously complicated history of the “secular.”
For the sake of argument, though, let us grant Smith his chosen terms, and even focus on his central claim, that Christianity can lead the way in challenging modern secularity, since it insists on the “transcendent sacred” in a way that secular paganism does not. Smith’s proposal rests upon a fundamental analogy: paganism is to Christianity as immanence is to transcendence. Christians pray to the God beyond the world; pagans encounter divinity inside the weft of nature.
Even a cursory knowledge of Christianity is enough to refute this analogy. It is true that Judaism teaches the absolute transcendence of the one God, as do Islamic theologians today, and as did Neoplatonist pagan philosophers in antiquity who sought a divine One beyond every thought, word, and image. By contrast, orthodox Christians claim that God arrived and now eternally resides within the fabric of nature, as the Creator enters into creation in the body of Jesus Christ. To cite Smith’s definition of “paganism,” it is Christianity, in fact, that “refers to a religious orientation that locates the sacred within this world.” The Christian belief in the Incarnation is nothing if not a belief in the “immanent sacred.”
The new Christian movement distinguished itself from Greek philosophy, Roman cults, and Jewish faith alike by affirming an extensive and peculiar list of divine incursions into immanence: the Incarnation of God in the body of Jesus; Anne’s immaculate conception of Mary; Mary’s virginal conception and vaginal birth of the Son of God, making her Theotokos; the real flesh of Jesus suffering on the cross, against the Gnostics (Tertullian); the real presence of Jesus in the Eucharistic bread and wine, also against the Gnostics; the Resurrection of the body after death; the bodily assumption of Mary; the martyrdom of the body as bloody birth into heaven (Perpetua) or as the grinding of flesh into bread (Ignatius of Antioch); the church birthed through the bleeding side wound of a dying Jesus; the church as maternal breast suckling the Christian with milk; the union of Christ and Christians as the exemplar of which sexual union is the image (Ephesians 5, Origen of Alexandria). Above all, the scandalous immanence that might have sounded pagan to Jesus’s disciples: “Unless you eat the flesh of the Son of Man and drink his blood, you do not have life within you” (John 6). The enemy of these traditional Christian teachings is not sacred immanence, but rather a gnosticism that dematerializes and disembodies the real presence of God within creation.
The radically immanent sacred of Christians scandalized the Romans. As Ramsay MacMullen observes, Christians worshipping a new transcendent deity would have passed unremarked. But the Christian belief that Jesus was neither prophet nor sage but a fleshly God would have been mocked by pagan intellectuals as a risible error. The late New Testament scholar Larry Hurtado writes: “In the philosophical traditions, an ultimate and radically transcendent deity was often postulated, but you did not typically engage that transcendent deity directly.… But there was a still more unusual and, in the eyes of pagan sophisticates, outlandish Christian notion: the one, true, august God who transcended all things and had no need of anything, nevertheless, had deigned to create this world and, a still more remarkable notion, also now actively sought the redemption and reconciliation of individuals.” For pagan intellectuals, Hurtado concludes, “all this was, quite simply, preposterous.”
For instance, in his work On the True Doctrine (178 CE), the pagan philosopher Celsus is ready to accept that God exists, creates all things, and transcends nature. But in shades of Sam Harris or Richard Dawkins, Celsus laughs away the claim that God was incarnated in Jesus, or that the body could be resurrected. “I mean, what sort of body is it that could return to its original nature or become the same as it was before it rotted away?” he mocks. “And of course they have no reply for this one, and as in most cases where there is no reply they take cover by saying ‘Nothing is impossible with God.’ A brilliant answer indeed! But the fact is, God cannot do what is contrary to nature.”
Christian philosophers saw the divide similarly. Tertullian admits that pagan philosophers might even discern that God exists by their own lights. But they always miss that God descended into a virgin and was made flesh in her womb. Augustine reports that he learned from the pagan philosopher Plotinus that the Logos was transcendent—but only Christians taught him how the Logos embraced the human body in all of its weakness and vulnerability, and its awful exposure to the whims of imperial violence.
To put it bluntly: paganism cannot simply mean divine immanence. On the contrary, Christians were the most conspicuous defenders of that principle in the ancient world. It was pagans who derided Christians for violating the self-evident truths of divine transcendence.The resemblances between the modern paganism feared by T.S. Eliot in 1938 and conservative politics in 2020 are uncanny.
A better starting point for defining “paganism” is T. S. Eliot’s essay “The Idea of a Christian Society,” written in the dark days of 1938, where he proposes that the greatest enemy of modern Christianity is “modern paganism.” Reno and Smith alike summon Eliot as a sober authority in perilous times, but neither presents Eliot’s own account of the term in question. So how did Eliot define paganism? It’s important to stay as close as possible to his own words.
First, Eliot says paganism embraces an authoritarian politics that confuses religion and nationhood. The “distinguishing mark” of a Christian society, Eliot writes, is its productive “tension” between church and state, but pagan society seeks to “fuse” them. Pagan culture “de-Christianises” individuals gradually and unwittingly, as authoritarianism creeps in. Soon, he warns, one’s hymns are no longer to God alone, but also to the dear leader.
Second, Eliot says that modern paganism incites ecological destruction. The Christian lives in harmony with nature; the pagan destroys public resources for private profit. “Unregulated industrialism” and “the exhaustion of natural resources,” writes Eliot, lead to “the exploitation of the earth, on a vast scale.” In a formulation that strikingly anticipates Laudato si’, he puts it succinctly: “A wrong attitude towards nature implies, somewhere, a wrong attitude towards God.”
Third, modern paganism imposes a puritanical public morality. It promotes, in Eliot’s words, “regimentation and conformity, without respect for the needs of the individual soul” and “the puritanism of a hygienic morality in the interest of efficiency.” According to Eliot, in fact, modern paganism will even attempt to elevate the status of Christian identity in society. But paganism embraces Christianity not because it’s true, but because it consolidates the nation and discourages dissent. He notes that authoritarians have always celebrated public morality. They want, in a way, more morality, even if their priorities are haphazardly formulated. Eliot warns that such a moralistic Christianity is not only a perversion of the faith: “It is not enthusiasm, but dogma, that differentiates a Christian from a pagan society.” Such versions of Christianity might even “engender nothing better than a disguised and peculiarly sanctimonious nationalism, accelerating our progress toward the paganism which we say we abhor.”
The resemblances between the modern paganism feared by Eliot in 1938 and conservative politics in 2020 are uncanny. The “paganism” that future Christians will need to identify and resist, he warned, will appear as
- unrestrained capitalist greed; as
- authoritarianism seeking to weaken democratic norms; as
- callous environmental degradation; as a
- superficial Christian moralism seeking to fuse church and state; and as a
- petty “sanctimonious nationalism.”
In the poignant final paragraph of his essay, Eliot confesses that the churning political surprises of the 1930s had left him shaken, not only because of the events themselves, but in the revelation of his own country’s moral poverty. In the face of Britain’s failure to mount an adequate response to modern pagan violence, Eliot felt a justified “humiliation” that demanded of him “personal contrition” along with “repentance, and amendment.” He felt “deeply implicated and responsible” and began to question his country’s frequent claims to moral authority. When Eliot enjoins his readers to fight against modern paganism, it is specifically because its brew of authoritarianism and capitalism were already beginning to charm Christian intellectuals who should know better. Eliot’s final sentences prick the conscience today:
We could not match conviction with conviction, we had no ideas with which we could either meet or oppose the ideas opposed to us. Was our society, which had always been so assured of its superiority and rectitude, so confident of its unexamined premises, assembled round anything more permanent than a congeries of banks, insurance companies and industries, and had it any beliefs more essential than a belief in compound interest and the maintenance of dividends? Such thoughts as these formed the starting point, and must remain the excuse, for saying what I have to say.The paganism we should fear is not secularism, sacred immanence, or pantheist naturalism. It is power celebrating its violence, perceiving the world empty of everything save the contest of will.
But there was at least one other account of paganism in the pages of First Things as Trump campaigned for the presidency—this time from Matthew Schmitz, an editor at the magazine. Over the summer of 2016, Schmitz displayed an admirable prescience while Christian conservatives were still hesitating to endorse the eventual Republican nominee. The “faith taught by Christ,” he wrote, “is a religion of losers. To the weak and humble, it offers a stripped and humiliated Lord.… In Trump, it [Christian faith] has curdled into pagan disdain.”
At a campaign event in Iowa, Trump shocked the audience by saying that he had never asked God for forgiveness. All his other disturbing statements—his attacks on every vulnerable group—are made intelligible by this one…. Human frailty, dependency, and sinfulness cannot be acknowledged; they must be overcome. This opens up the possibility of great cruelty toward those who cannot wish themselves into being winners. A man who need not ask forgiveness need never forgive others. He does not realize his own weakness, and so he mocks and reviles every sign of weakness in his fellow men.
And here’s another:
In his contempt for losers, he [Trump] embodies one of the most unchristian ideals ever advanced in American politics. With a unique consistency and vehemence, he expresses his hatred of weakness. He ridicules the disabled, attacks women, and defends abortionists. This is the opposite of Christianity, which puts the weak first and exalts every loser…. Liberalism, much as I hate it, has preserved this Christian inheritance. The GOP before Trump, despite all its contempt for the 47 percent, was leavened by the influence of sincere Christians and so was never so sneering. Trump is an altogether more pagan figure.
By 2019, however, in the wake of the midterm battles over immigration and the mythic “caravan” of refugees at the southern border, Schmitz joined others to cheer on the “new nationalism” that Trump promoted at his rallies. Within a few months, Schmitz had decided that Christianity and liberalism could never be reconciled, since modern society—wait for it—had become paganized. “The Church,” he now saw, “is at odds with an increasingly pagan culture.”
If there was an ancient paganism of sacred immanence, it was soon outstripped by the more radical immanence of Christians in their claims of an Incarnation, a Resurrection, and above all the enduring food of the Eucharist. In every Mass the priest washes his hands in imitation of the pagan Pilate, but now as an act of humility and celebration. The Catholic repeats as her own the words of the pagan centurion—Lord, I am not worthy—but now as an intimate prayer on the threshold of Communion. That version of paganism was overtaken and dissolved from within by the Christian sacralization of the body.
But there is another paganism that has survived into the present, and has emerged so vividly in contemporary politics that even First Things in 2016 could not miss it. This is not the paganism of immanence, but the paganism of cruelty and violence. It mocks the vulnerable, reviles the weak, and gains strength through hatred. We don’t have to look too far to discover the “postmodern paganism” threatening American Christianity today.
Last summer the Trump administration argued in court that more than two thousand migrant and refugee children should be separated from their parents, concentrated in crude detention camps with minimal supervision, and locked in chilled rooms with the lights left on all night. The administration has yet to condemn the petty cruelty of some camp guards and instead has mused that such violence might be politically useful. Hundreds of children as young as two are deliberately denied diapers, soap, and toothbrushes for months at a time to punish their parents. Community donations of the same are turned away. Young women are denied tampons. Young children are denied inexpensive flu vaccines, and if they contract a terminal cancer, they are deported without medical care. Chickenpox and shingles are common. Federal contractors win upwards of $700 per day for each imprisoned child. Seven children have died in custody to date, and many more have been hospitalized. Doctors worry they cannot serve in the camps without violating the Hippocratic oath. The camps themselves were continued from the Obama administration, but the withdrawal of basic necessities is Trump’s innovation. What is this if not the very paganism conservatives decry?
This modern paganism ultimately means the nihilistic exercise of power for its own sake, especially power over weak and vulnerable bodies. In its purest form, it is expressed as conspicuous cruelty, both to render one’s power maximally visible and to increase that power by engendering fear. The cruelty is the point. This is the joyful paganism that Nietzsche sought to revive as the Wille zur Macht, retrieving from ancient Rome the glorious pleasure in cruelty that rewards the strong who exercise their strength. This is the reason Italian fascist Julius Evola hated Christianity for its compassion for the poor and weak.
We find this paganism exposed in the ancient world as well, in the Athenian mockery and massacre of the Melians in Thucydides’s History of the Peloponnesian War, in Thrasymachus’s authoritarian attacks on Socrates in Plato’s Republic, or in Augustine’s shrewd deconstruction of imperial power in The City of God against the Pagans. John Milbank calls this Nietzschean worldview an ontology of eternal violence opposed to an Augustinian counter-ontology of eternal peace. As Schmitz himself suggests, the perfect example of pagan disdain for vulnerability and conspicuous cruelty is the Roman practice of public crucifixion. Pagan is to Christian not as immanent is to transcendent, but as Rome is to the Crucified—a cruel empire to its tortured victims.
But modern paganism can also assume subtler forms, whenever the common good is reduced to ruthless economic competition, confirming Eliot’s fears that we have no values more essential than our “belief in compound interest and the maintenance of dividends.” The paganism we should fear is not secularism, sacred immanence, or pantheist naturalism. It is power celebrating its violence, perceiving the world empty of everything save the contest of wills, a nihilism ruled by the libido dominandi.
This paganism views moral responsibility as a fool’s errand for the weak, since all that matters is to dominate or be dominated. It sacralizes the emperor as an agent of God, scorns truth, despises the weak, and tortures the vulnerable. And it cloaks its nihilism, to cite Eliot once again, in “a disguised and peculiarly sanctimonious nationalism, accelerating our progress toward the paganism which we say we abhor.”