Last Friday, a combination of imprudent decision-making and panicked customers led to the collapse of Silicon Valley Bank (SVB), a 40-year-old financial institution based in Santa Clara, California. The Federal Deposit Insurance Corporation (FDIC) stepped in to prevent further fallout, putting nearly $175 billion in customer deposits under the regulator’s control. SVB’s meltdown represents the second largest bank failure in U.S. history, and the largest one since the 2008 financial crisis. As a result of this chaotic situation, stock prices Continue reading
Few financial sectors are as volatile as cryptocurrency, with the price of bitcoin down by more than 60 percent since the start of the year. The coin’s recent drop can be directly attributed to the downfall of FTX, a crypto exchange once valued at more than $32 billion. Founded by Samuel Bankman-Fried, FTX attracted the interest of top venture capital firms who invested hundreds of millions in the seemingly promising project. The company purchased mainstream legitimacy with their immense capital, Continue reading
In theory, overdraft fees charged by banks are meant to be a “convenience” for customers so that their purchases are not declined when they are unknowingly low on funds. In practice, however, these fees have become a major revenue generator for banks that charge an average of $33.58 for each overdraft. That means consumers can be hit with multiple fees if they accidentally make numerous purchases while past the limits of their account. Studies show that this practice particularly harms Continue reading
In the past year we’ve featured a few stories about the Consumer Financial Protection Bureau and how it aims to keep consumers safe from predatory business practices. From collecting consumer complaints to limiting the power of payday lenders, the CFPB was formed to put regular people on somewhat equal footing with big companies. Still, not everyone sees the relatively new government agency this way. Opponents claim the CFPB has too much power to regulate businesses, thus harming both companies Continue reading
Last year we took a close look at how Wells Fargo fostered a culture of fraud that encouraged employees to open unauthorized credit and debit card accounts for customers. Investigators at the time estimated the bank had created more than 1.5 million fraudulent accounts, leading Wells Fargo to fire thousands of employees. Further inquiries from Congress also caused the company to replace managers and roll back executive pay as part of an overhaul of its retail division. The scandal Continue reading
The 2010 Dodd-Frank financial reform act stands as one of the most complicated pieces of legislation ever devised. The law includes more than 22,000 pages of rules, which is equivalent to about 15 copies of Tolstoy’s epic novel War and Peace. These guidelines tell banks how much money they must set aside, how they can advertise, what sort of investments they can make, and many other stipulations and requirements.
As you can imagine, keeping track of all those regulations Continue reading
For the past few weeks the business world has been buzzing with outrage over the Wells Fargo banking scandal. Executives at the company likely hoped the worst was over after getting hit with a $185 million fine for allowing such widespread fraud to occur. But as Senator Elizabeth Warren showed last week, regulators and commentators are far from finished with the company. During a hearing with Wells Fargo CEO John Stumpf in front of the Senate Banking Committee, Senator Continue reading