subbing your blog now- great set of posts on the homepage.

sean

http://www.valuecruncher.com/companies/514

We are also doing interactive valuation analysis.

Investment banks as gatekeepers? Please spin that tale to kindergarten kids. During the '70s to '80s, H&Q was the handmaiden of ruin for a lot of investors by IPOing crap. During the dotcom era, it was Robinson Stephens, Montgomery, Goldman, Lehman and a few others. Investment banks aren't gatekeepers any more than Moodys is a gatekeeper. They are stock shills, no more, no less.

Whether you're a fan or not of wallstreet, investment banks serve a necessary function in the capital markets. The United States securities regulatory regime assign investment banks the role of “gatekeepers”; as such they are charged with reviewing the merits of a securities offering during the pre-filing days.

This has been hardwired into the 1933 Securities Act and 1934 Exchange Act. Congress enacted a regulatory regime that presumes that mandatory disclosure by corporations will prompt truth telling. Gatekeepers ensure that issuers are acting in compliance with this assumption, since they review review issuers disclosure statements and “cleanse” this information.

As you can see, our regulatory system is premised on the existence of these intermediaries, and to a large degree the functioning of a efficient market is also dependent upon the existence of “gatekeepers.”(the idea is that investment banks are mechanisms of market efficiency).

PayPal is licensed as a money transmitter on a state by state basis. Currently PayPal has 43 state licenses (not all states require a license). Although PayPal is not a bank (we don't offer loans or take deposits), PayPal is still subject to and adheres to all of the rules and regulations governing the financial industry including:
the Bank Secrecy Act and the USA Patriot Act anti-money laundering requirements
Regulation E consumer protections
Office of Foreign Asset Control
the Fair Credit Reporting Act
Gramm-Leach-Biley privacy requirements
Credit Card Association Guidelines
Also, although the Know Your Customer requirements for money transmitters are different than banks, we do have the same requirement as banks to maintain an effective Anti Money Laundering program. Some merchant processors do escape these regulations, but not PayPal. Compliance with these regulations is a top priority for PayPal and eBay and is handled by a large, dedicated team within the company.

We routinely see small investment banking / advisory emerge to offer clients lower fees and higher quality service (at least that is the pitch) compared to the big Wall Street firms. But as those boutique firms grow, they tend to look and behave like their larger peers. That's a long preamble to two questions:

1. It seems to me like the regulatory burden is very high for someone who wants to strike at the core of financial services products marketed directly consumers (savings, credit cards, retail banking products, mortgages, etc). As you and other remark, things like Mint are a nice UI and presentation layer on top of other people's data. Do you think there are investors out there who would fund early-stage people attacking the regulated core parts of consumer finance?

2. I think we've already seen lots of innovation within the core of wall street – things like Island, high frequency trading, etc. Problem is that they don't create value for traditional consumers – they create value for the people who own and use them. Who are the customers who should benefit from this Wall Street reform? Institutions? End customers?

The Internet brought significant economies of scale in terms of cheaply on-boarding and processing loans and credit cards, as well as developing and executing sophisticated institutional trading schemes.

Even if there were open source suites of financial software for running a small regional banks, they would still have difficulty competing on price. Big international banks are be able to offer lower borrowing rates due to their larger asset pools and diversified risk.

At the end of the day, people want the best deal. Thank consumers for international conglomerates like WalMart, Amazon, and Bank of America. We only have ourselves to blame.

Gee, thanks SEC! You let the banks over lend in subprime, let Moodys run wild and ignored Madoff's warnings. But hey, you “caught” Prosper.

Success for us will mean that we (Meet the Street) will shrink our own market in a big way (in dollar terms) but as a result will capture a very big slice of this newly redefined and more efficient market. The byproduct of that success is that more trading volume will accrue to the established market players that we are about to align ourselves with. This volume will replace higher commission volume which is currently being traded elsewhere. The resulting fee reduction will be realized by institutional investor counter parties and ultimately passed on to investors (mom & pop) in the form of higher realized returns.

My point is that this can not happen in a vacuum and that our partners (established market participants) will be instrumental in making all of this happen. Success is not a zero sum game and our partners will also benefit from a large shift in market share….and I am fine with that.

Leo @ ForexAndLife.com

There's a trade-off here. The fees charged by credit card companies offset their losses among customers who do not pay back the loans they take (which is what a credit card purchase is). Regardless of our opinion of the size of those fees and how they are assessed, they are necessary- in some form- if so many customers are to have access to credit and this very convenient payment system.

While we may dicker over who should pay those fees, and under what circumstances, the overall level of fees must remain constant if the same number of consumers are to enjoy the benefit of credit cards. Bank profit margins are not as thick as Congress would like to believe. Re-arrangement of such fees is possible, but if their total amount decreases, some consumers will lose access to this service.

PayPal does not magically make this reality go away.

I don't have answers but I do believe that we need the Volker's of this world to re-instate the Glass-Steagal structure, to begin to change regulation of the financial system in the populations favor, to encourage people-owned co-operative styles of financial organizations.

Unfortunately, this requires massive and regular protests on Wall Street by people of all political persuasions until change happens.

Not sure what you mean about Texas?

I’d also be wary of allocating money to Treasuries when yields are near historic lows.

investor and traders get nailed because of themselves.

greed and fear. get rich quick.

you want to disrupt wall street. make money off them. educate yourself.

this is america. you have freedom of choice.

you have the right to lose money.

you have the choice of where you can deposit your money.

spend it. save it. it is up to you.

you can use credit cards or not. what is the problem?

your own stupidity/ignorance.

people get fat. no discipline. whose fault is that. the person's.

people lost or losing their houses. why? because of them.

you have to look out for number one. YOU.

the only one that can look for you is YOU.

you are where you are because of YOU.

“i would argue the best way to try to disrupt wall street is to look at how it currently makes money and attack it there. “

wall street is not the problem. ignorant people are.

SUCKERS.

are you a sucker.

retail banks. use them or not.

credit cards. use them or not.

proprietary trading. who cares.

high frequency trading, dark pools. who cares.

if you trade with a complete trading plan you will continuously make more money than you loses.

i do.

if one makes money trading despite all that you cite. what does it matter.

why are or were people's trading account down 30, 40, 50% or more.

no complete trading plan.

outsourced their investments.

if you do not know how to trade/invest, do not put your money in the market. pretty simple.

a retail trader can continuously make more money than one loses with a complete trading plan.

my trading buddy. a retail trader. from a bedroom trading from went from $50,000 to $6,000,000.

investment banking. who cares?

research. who cares. financial tv shows, financial talking heads/touts. who cares.

research. phony baloney. believe them or not. your choice.

mutual funds. use them or not. your choice.

“this is by no means an exhaustive list and i have no idea how to solve most of these problems. “

you are correct. you “have no idea” you are clueless.

EDUCATE YOURSELF. DO NOT BE A SUCKER.

you have the right to loses money. please do not abuses that right.

want to learn how to trade and make money.

open source stock trading.

admission: a trading account.

everything else is free on the internet or from the library.

twittering as stocktradr

Unless there is resolve about how to manage credit risk in the face of the public to the fact that there is an abyss once you hit the wall and the item is “risky” (it becomes infinitely more of illiquid liability as you get further away from the center), it will be extremely hard to answer to give the public a full on view of what a prop desk does and what a hedge fund does. Probably something that could start is explaining to people how credit and money works (or in fact doesn't).

You have a great point re regulated v. non-regulated. Unfortunately most of finance is highly regulated and is skewed to favor incumbents. For example, if you become a fund manager, you have some pretty heavy regulations to check off that supposedly “protect” widows and orphans but mostly they protect places like Goldman Sachs. Funny how Congress works! Actually not so funny. As one poster suggested, why not a rating agency a la Moodys? Great idea except you need the blessing of the SEC. In addition, a lot of the problems in the financial industry aren't necessarily unsophisticated individual investors but the blindingly stupid institutional investors like most pension funds who are controlled by their equally intelligent consultants. It's how many boxes you check off and it's also what's in vogue as institutional investors chase returns.

We have launched a start up that will help redefine how consumers use credit. Kutro helps consumers learn how to “Monetize Their credit”.

The “Move Your Money” concept and movement is a viable idea, however it is only one side of the coin and the other is credit.
We have the only grassroot effort to help consumers learn how to leverage their credit for maximum benefit.

The service is absolutely free for all consumers. If you are really serious about shaking things up on wall street. Spend some time on our site educating yourself on the new concept “Monetizing Your Credit” and you will be amazed of the possibilities.

2) You could do jujistu on the offerings on wall street. If we move to microcredit and online currency, you will need to back the money away from the underneath companies to secure against the same agency problems. You could just make the bond structure so unappealing because it is so small that is untradable except through some sort of ETF like structure or through holding the bond No one will do it in this type of environment though. Too hostile.

All this being said- you'll never full get rid of agency problems/ The internet in some ways make it worse, not better. It isn't clear how to get quality information, so you are very likely to be stuck in an Akerlof type of World.