Monday Links
TD Bank, Shadow Fed Chair, Elon Musk, payment apps, the Anxious Generation, and Latter-day Saints' General Conference
Here is what I am reading and thinking about this week.
TD Bank Pleads Guilty and Pays $3 Billion to Settle Money-Laundering Case, Cowley/Goldstein/Copeland, New York Times, Oct 10. The largest anti-money laundering penalty ever imposed by the Office of the Comptroller of the Currency (or other regulators). TD Bank did not merely turn a blind eye to massive AML compliance problems. In one striking example, employees accepted $57,000 in gift cards in return for laundering almost a half billion dollars. A few half billion here, a few half billion there, and
suddenly we’re talking about real money.no, no, no— that is some legitimately bad banking behavior, and that is a lot of laundered money. TD Bank also has an asset cap with an OCC-imposed reduction schedule of 7% per year. This is as serious a penalty as the OCC imposes since charter revocation isn’t as popular as it was in World War I.Inside the Plan for Trump to Sideline the Powell Fed, Matt Peterson, Barron’s. Peterson spoke with Scott Bessent, a hedge fund investor cum Trump whisperer who is on the shortlist for Trump Treasury Secretary. Bessent floats the idea, in Peterson’s words, “for Trump to nominate and seek Senate confirmation of Powell’s replacement well over a year before Powell’s term ends in May 2026.” I have read and written about many efforts of presidents to exercise more control over the Fed. The problem Bessent and Trump are responding to is a real one. The basic architecture of Fed policy is that politicians have no veto over policy decisions, but those policy decisions are necessarily freighted with political import. Plenty of people - left and right - admit the “democracy deficit” that such a structure creates. Various efforts to draw the Fed closer to accountability mechanisms have succeeded over the years. This plan strikes me as destined to fail, for reasons that I will elaborate on in Wednesday’s post.
Inside the debate over The Anxious Generation, by Zoe Schiffer, Platformer. Great dive into the controversy around Jonathan Haidt’s book about how, he claims, social media has caused a myriad of evils for the online generations of young Millennials and Gen Z. As a young Gen X/elder Millennial father of Gen Z and Gen Alpha kids, I have read the book and followed these debates closely. Nikki and I don’t let our children join social media of any kind and don’t post their names online and mostly avoid posting pics or videos of them (although we haven’t been completely consistent on this latter point). Ideologically, then, I am committed to the private behavior view that Haidt and his co-authors articulate. But as Schiffer’s post explores, the social science is simply not as strong as Haidt makes it out to be. The debate has me pondering the dangers of scholar-activism, a topic I think about an awful lot. The obvious danger is that scholar-activists exaggerate the truth claims they understand as a function of their expertise in the name of changing public policy, where uncertainty reigns supreme. On the other hand, scholars who write about policy rightly want their expertise to be included in public discourse. It is a very challenging problem. I both admire Haidt for his desire to mix it up in the arena and am completely unpersuaded by his claims of certainty given the error bars in his analysis. Here’s a great podcast episode between him and Tyler Cowen that will help navigate the debates.
Character Limit: How Elon Musk Destroyed Twitter, by Kate Conger and Ryan Mac. I am such a sucker for the New York Times business books. I have read all of them in the last five years, and this one is not disappointing. The opening anecdote about a sober-minded Twitter data scientist insulting Musk’s intelligence for falling so quickly and easily for conspiracy theories during the data scientist’s exit interview post acquisition is <chef’s kiss>. The rest of the book does not disappoint. It helps answer in a way that Walter Isaacson’s great biography did not the central puzzle of Elon Musk: how is someone who has successfully revolutionized so much tech also displayed such uncommonly poor analytical abilities in comprehending the difference between low- and high-quality information? It’s an important problem worth thinking through. We all have people in our lives who display sharp cognitive skills in one domain but poor ones in others. We are even those very people ourselves. Elon Musk is an example of this all-too-human conundrum.
Payment apps are soaring in popularity. Here’s what you need to know, by Hannah Ziegler, Washington Post. The basic business model of some - but not most - fintech apps appears to be roughly this: (1) develop a shiny interface that provides a service already provided by banks, (2) market that service aggressively, (3) monetize the fact that your service does not include the costs of bank compliance, and (4) leave others to pick up the pieces in the event of failure. Banks hate this model, for the obvious reason that they get all the benefits but none of the costs of banking. But this ecosystem is evolving, raising questions about what is called “banking as a service” (BaaS), regulatory arbitrage, the value of a bank charter, and whether regulators and supervisors have adequate tools in place to monitor the risks taken by bank counterparties and not just the banks themselves. It’s a hard and fascinating problem.
General Conference, Church of Jesus Christ of Latter-day Saints. The Latter-day Saints gather every six months for a global conference that features speakers from Salt Lake City headquarters who serve as leaders of the global church (in contrast to the weekly services presided over by local leadership, each of whom serves as a volunteer). This conference was particularly inspiring, in my view, with one central theme: the charge to be kinder, gentler, humbler, and more patient with people with whom you have ideological differences. The political angle on this exhortation was drawn explicitly, albeit without an accusation that either Republicans or Democrats commit the error of mutual incrimination and incivility more than the other. This charge won’t surprise some people who already view Latter-day Saints as model neighbors, but it might surprise others: Americans polled by Pew regarded Latter-day Saints as having the lowest favorability of any religious group in the country. Readers’ guess is as good as mine when it comes to the political implications of the October conference, except that I will note that Arizona’s Latter-day Saints will likely swing the state - and with the state, the election?