To no one’s surprise, President Obama’s State of the Union speech this week had plenty of red meat on the financial services industry. We heard about the “deficit of trust between Main Street and Wall Street.” There was a clarion call prohibiting big banks and other financial institutions from making “risky bets with your customers’ deposits. Mortgage lenders, credit card companies and others in the business shouldn’t be “signing people up for products they can’t afford with confusing forms and deceptive practices.”
Perhaps most interestingly, there’s word of a Financial Crimes Unit that will crack down on large-scale fraud, with harsher penalties for repeat offenders. This is to benefit not just consumers but also “the vast majority of bankers and financial service professionals who do the right thing.”
No one seems quite sure what effect this will have, tangential or otherwise, in the other legal aspect of this equation. As we all know, state and federal in investigators are continue to negotiate a settlement with some of the nation’s largest banks that could reach as much as $25 billion and significantly revamp foreclosure and mortgage servicing practices nationwide. While specifics of the deal are being held closely to the vest, there’s been outspoken opposition from, among others, California Attorney General Kamala D. Harris and her New York counterpart, Eric Schneiderman. Coincidentally, Mr. Schneiderman is also set to lead the Financial Crimes unit at the state level.
The reaction to the speech has played out along predictable lines. While specific banking segments have been a political piñata for a while now, some observers saw the speech as expanding the bull’s-eye already painted on the industry’s back. Others, meanwhile, saw it as a welcome move toward accountability in a market segment that’s run amok.
The truth is, of course, that most institutions and individuals in the financial services industry played no role, pro or con, in any of the activities that drew all this attention. But the spotlight isn’t going away anytime soon.
The way out of this will be what it has been for every industry caught in the glare of negative publicity: new products, great customer service, relationship building and innovative delivery mechanisms. The tools and technologies now available to every company and every consumer offer a unique opportunity to make a break from the past and do things very differently.
Customers don’t come in like they used to—they’re online, they’re mobile, they’re virtual. They expect instant access with high quality, and if they don’t get it, they know they can go somewhere else easily. They demand a high level of transparency, along with a high level of security.
There’s more competition, more accountability, more options and more potential than ever before. These are all good things, and the best institutions will benefit from them—and next year’s State of the Union speech should reflect that.