You Can Unclench Your Fists — The Big Banks Aren’t Bulletproof

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Have you been clenching your fists because our large banks got bailed out and are getting away scot-free with being shamelessly greedy? Are you gnashing your teeth because they appear to be going right back to their old ways? And are you starting to think they have so much control they can get away with total customer-insensitivity?

You can relax. They got a reprieve, but it’s only temporary.

Round two of their troubles is, as they say in the movies, “coming soon.”

· Thanks in part to consumer (voter) pressure, the Consumer Financial Protection Act looks likely not just good to pass?but withe sharp teeth.

· Thanks again to consumer pressure, regulation of derivatives and the other “exotic” instruments is also on the way.

· Even compensation regulation for banks not holding TARP money is a possibility.

· All the large banks have loan portfolios overstuffed with bad commercial loans, which will start hammering them in 2010.

· “Too big to fail” legislation to prevent future bailouts without exposing our financial system to major disruption from major failure is also on track.

· Reinstatement of the separation of investment banks from commercial banks is getting support from none other than Goldman Sachs (which would love less investment banking competition).

· The shame the large banks are bringing on themselves has cut into the percentage of graduate students prepping for Wall Street. A whole lotta young people don’t want to be associated with these bad actors. Would you like to go to a party and respond to the “what do you do?” question by saying, “I’m in investment banking?”

As good as things look right now for major banks, the combined factors above will give many consumers (and small businesses) the pound of flesh they’re after. And through a combination of raw, consumer political power and legislative guilt for letting banks trash our economy, the balance of power is swinging in the other direction. That will be hard to reverse.

Best of all, consumers are rearing up in other markets as well, including influencing the health care debate. Customer empowerment is real and long-term. Companies that go Outside-In and adopt the credo of, “Adding new value to customers is the only sustainable manner of adding new value to the company,” will thrive in all this. So many companies continuing to resist customer empowerment will help them thrive.

And I also boldly predict that at least one large bank, perhaps from the second tier, will get customer religion and go Outside-In. They’ll be welcomed by customers with open arms.

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