Weekly Wrap: The Internet Strikes Back!

Willy Staley

By Willy Staley
Updated on Mon Jul 21, 2014

This week was the beginning of the first post-Dodd-Frank Act annual earnings season, and the results were certainly mixed. The traditional branch megabanking model continues to show profitability problems, in spots, as online banking offers better products.

Also, Wikipedia, Reddit, and other high-traffic websites went on strike, protesting SOPA and PIPA, two pieces of legislation that, if passed, might lead to government censorship of the web. The protests worked, it seems, as legislators have backed off the bill.

The Internet seems to be a thorn in everyone’s shoe, doesn’t it? If by “everyone”, you mean massive and faceless corporations. As we close the book on this week, consider the transformative and destructive power of the Internet.


Earnings season led the headlines this week, as any similar display of incredible accounting gymnastics ought to. Wells Fargo and Citibank started off the earnings week on Monday with very different results.

Citibank’s accounting trickery was the most brazen this year. They posted profits, but some noted that their gains would be all but wiped out had they not released $1.5 billion in loan loss reserves.

Meanwhile, Wells Fargo made out like bandits in 2011, posting record annual profits for the year and record fourth quarter profits. The bank benefitted from its low exposure to market volatility.

Bank of America beat analysts expectations this earnings season, but they followed the Citibank accounting trickery model of posting profits, not Wells Fargo’s; asset sales and reserve releases made up a large portion of their gains.

Bank of America plans to continue shrinking under CEO Brian Moynihan’s New BAC program. It does not appear that the Durbin amendment has damaged Bank of America’s profitability as much as they claimed it might.

What’s Killing Community Banks?

Speaking of specious banker claims, we have long been suspicious of the claim — repeated time and again — that Dodd-Frank is killing community banks. Republican candidate for president and known libertine, Newt Gingrich, has made the claim, as have others. We took the time this week to speak with the Independent Community Bankers of America to hear their side of the story. It turns out Dodd-Frank isn’t much of a burden, but overextension in real estate and access to capital had an impact.

While we’re talking bank profitability, we might as well mention that we examined the pros and cons of doing all your banking with one institution. While big banks are encouraging customers to make this move by offering perks for customers who deepen their relationships with them, they can’t offer the interest rates and low fees that online banks are able to.

As Always, the Internet

And in the biggest Internet news of the week, SOPA/PIPA protests took the web by storm – causing popular websites to black out, a statement of how such rules would destroy the Internet as we know it. And, we offered a little insight into how a censored web might affect your finances. It would not be pretty!


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