Personal finance
GE Capital Purchasing MetLife Bank

Washington DC Might Divest from Bank of America, Wells Fargo

Miles By Discover Offers Relief to Noncommittal Travelers

Collection Agencies Resurrecting Old Debts Through Credit Card Offers

Treasury Doubles Purchase Limits on Electronic Savings Bonds

Cordray’s First Move as CFPB Head: Regulate Nonbanks

Weekly Wrap: Bank of America’s Worst Week Ever?

Dear U.S. Banks, Your Business Model Stinks

Shadow Banking Due for Some Time in the Spotlight

Weekly Wrap: Banking Slowly Dissolves?

Under the Roofs of Coffee Shops You’ll Find Your Online Bank

Brokerage Checking Still a Competitive Choice

Beware the Mirthful FOMC Meeting

Did ING Direct Customers Overreact to the Capital One Purchase?

No Balance Transfer Fee Offers Reappear But Hard to Exploit

Russell Simmons’ RushCard Lowers Fees, Is Still Bad

The Reason Why Freddie Mac Doesn’t Want to You to Refinance

New Bank Perks Cater to Tech-Savvy Customers

St. Louis Fed President: Raise Interest Rates

Whitney Warns: Banks to Banish Middle Class

Dime Savings Cites Regulations in Switch to State Charter

FDIC to Banks: Start Lending Again!

Weekly Wrap: Grey Days and a Sideshow

Weekly Wrap: Banking’s Spring Is Still Far, Far Away

American Express and Gen Y: BFF?

Whitney Warns: Banks to Banish Middle Class
Renowned banking analyst Meredith Whitney spoke with CNBC Wednesday, and she issued a warning about the trajectory of the American banking industry: it’s going to be forced to push out the middle class. Due to new regulations and tightened credit standards, banks are making their business model less attractive to the vast majority of the country.

“The unintended consequence is it’s really squeezing the middle end,” Whitney said. “You’re going to see more and more people living outside the system. When it happens, it becomes so much more difficult to operate…The pendulum swings to too much regulation and it squeezes out the system.”

Those people getting “unbanked,” as Whitney termed it, will turn more towards payday lenders and others at the periphery of the financial system to get access to money.

In her interview, Whitney pointed out that in the past home equity lending had provided an easy source of credit for middle-class Americans. But nowadays with billions in home equity having disappeared and credit tight besides, home-equity loans are simply not as readily available. Easy access to credit masked the stagnant wage growth the middle class has suffered in recent decades. With that credit now gone, the middle class is paying the price in lowered spending power.

So is this a cyclical problem, or a regulatory one? To that end, Whitney also specified that “regulation has been one of the biggest drivers [pushing people out of banking] over the last several years.” She estimated that one in three Americans is un- or underbanked, higher than the prevailing estimate of one in four.
Can she be right?

Whitney is certainly worth paying attention to. After all, she made her name by predicting trouble in the banking industry in 2007, recognizing lurking problems for Citibank long before other analysts or commentators. On the other hand, her other big call — that there would be 50 to 100 large municipal bond defaults in 2011 — has yet to materialize. She might be overly bearish.

How exactly our banking industry could survive without the participation of America’s middle class is something that Whitney failed to discuss. It doesn’t seem terribly likely that the industry would do well by pricing out such a large chunk of Americans.

Besides, with so many company’s using new technologies to disrupt traditional banking models, the future of banking looks pretty good for the middle class. Dwolla is developing new and cheap ways to move money around; Lending Club and Prosper are developing ways for people to lend money to one another; prepaid cards, for better or worse, are giving people access to electronic payment methods, obviating the need for other traditional banking products like checking accounts.

There is plenty of disruption in the industry, both top-down disruption due to federal regulation, and bottom-up disruption from start-ups. Banking will likely be less profitable in the future due to new laws like Dodd-Frank, but it’s hard to believe the industry might actually show the middle class — the backbone of the American economy! – the door.

Äë˙ ďĺ÷ŕňč

Weekly Wrap: Astrology is Bunk

Refinancing Your Mortgage Lines the Pockets of the Biggest Banks

Experian Unveils New Credit Score for the Underbanked

New Upromise Credit Card Gives 10% Cash Back at Major Online Retailers

The Best Experiences Your Credit Card Can Buy This Summer

Citi Offers New Way to Spend Rewards

Fed Study: CD Rates Are Less Attractive

Wells Fargo Raised Checking-Account Fee, Slashed Bill-Pay Fee

Weekly Wrap: Get Bullied, Get Rich

Taibbi: No Difference Between Banks and the Mafia

Why You Should Probably Raise Your Credit Limit, Especially When You Don’t Want the Money

Accounts Push Relationship Banking

Weekly Wrap: LIBOR Aside, You’re Still in Control

sftp for mac

Fed Report Shows Mobile Banking Empowers the Underbanked

Top Gas Credit Cards to ‘Refill’ Your Wallet

Prepaid Cards for Payroll Purposes: Fair to Workers?

Weekly Wrap: Mobile Banking’s Onward March

Banks Close Revenue Gap from Overdraft Fee Losses

Banks Lack Social Media Efforts… Oh Really?

SpringCoin: Out to Automate Credit Counseling

Could Student Loan Forgiveness Help the Economy?

Chase United MileagePlus Club Card Takes Flight

Caviar and Champagne With Your Checking Account?

Weekly Wrap: Cash Rules Everything Around You? Not For Long

SmarterBank’s Checking Account Helps Pay Off Student Loans

Chinese Furious Over Banking Fees

Banks Should Use Prepaid Cards to Hook ‘Em While They’re Young

Prepaid Travel Debit Card Provider Eyes U.S.

Sallie Mae Credit Card Helps Pay Back Student Loans

Post-CARD Act, Banks Shift to Prepaid on Campus

Weekly Wrap: Things Are Not as They Seem

Gen Y Eyes Retirement with Rose Tinted Glasses

Low Interest Rates: A Ticking Time Bomb?

Are Discover Partner Gift Cards Worth the Rewards Points?

Kony Solutions’ Branding Problem: Bank Software Firm Has Killer’s Name

Weekly Wrap: Fancy Gadgetry, No Money

Weekly Wrap: Millenials’ Big Day at the Races

UFB Direct Adds Money Market Account With 1.15% APY