The Banker Next Door

The sunk cost fallacy is a mindset of continuing onward with an investment or project based on past information even though logic dictates that the outcome will not be favorable. Even when we are faced with flawed reasoning, human nature will not allow us to change course because of aversion to waste and the need to be right. The sunk cost fallacy can occur in both business and government. The sunk cost fallacy emanates from a sunk cost expense, which is a lost amount of time, money, or effect, that cannot be regained. Behavioral economics tells us that the foundation of sunk cost fallacy is psychological and tied to several biases which include loss aversion, commitment bias, and endowment effect. This episode reviewed articles from Investopedia and The Epoch Times (subscription required).

The Banker Next Door (BND) weekly live stream show. Strategy Room provides financial news, commentary, top stories in the business world, economic indicators, and all things banking for the week.

Foreign banks are seeking to gain access to the U.S. banking market. This is nothing new, but what is new is the type of bank. The new competition tends to be fintechs and neobanks with a digital-first approach. Some examples include OakNorth Bank, Revolut, and Nubank. These banks tend to be built around a customer-friendly digital interface. Younger customers are seeking a digital first approach. However, while the U.S. market can offer immense opportunities, it also presents difficult hurdles to overcome. Not all foreign banks have found success entering the U.S. market. Monzo, a U.K. based fintech, recently decided to give up on its push into U.S. banking. Monzo decided to shift their focus bank to Europe where it gained a banking license in December. This episode reviewed articles from Bank Director and Banking Dive. The article from Bank Director is titled “Foreign banks set sights on U.S. expansion.” The Banking Dive article is titled “Monzo to close US operations, accounts.” Links to both articles are included below. Link: Foreign Banks Set Sights on U.S. Expansion | Bank Director Link: https://www.bankingdive.com/news/monzo-close-us-accounts-june-operations-50-layoffs-europe-license-anil-layfield-uk-ipo/816357/

Banks can experience buyer’s remorse when they purchase costly software to upgrade their technology stack. This experience can be extremely painful as most community banks have small technology budgets to work with. Spending the bank’s budget on new technology that does not work out will most likely end up as money that cannot be recovered. This episode considers reasons why organizations regret tech purchases and offers strategies to use when purchasing new technology. This episode reviewed a blog post from PCBB titled “Avoiding tech buyer’s remove at your CFI.” A link to the blog post is included below. Link: Avoiding Tech Buyer’s Remorse at Your CFI

Two recent reports from the U.S. Government Accountability Office (GAO) and the Federal Deposit Insurance Corporation Office of Inspector General (OIG) highlights the workforce reductions at the SEC and FDIC. The GAO report states that since January 2025 the SEC had an 18% reduction in their workforce of approximately 871 employee departures. The SEC has made efforts to manage and assess the effects of this workforce reduction. The OIG report states that since January 2025 the FDIC had a 20% reduction in workforce of approximately 1,300 employee departures. The OIG report also highlights eight areas that require close attention. Both reports outline the potential long-term consequences of these employee reductions including loss of institutional knowledge. Links to both reports are included below. Link: Securities And Exchange Commission: Recent Workforce Reductions and Other Personnel Management Changes | U.S. GAO Link: TMPCFinalMarch 2026.pdf

This episode reviews the OCC’s quarterly report on Bank Trading and Derivatives Activities for the 4th quarter of 2025. Trading revenue for the 4Q of 2025 was $14.9 billion, down 16% from the 3Q of 2025 and 4.4% year over year. The four largest banks continue to hold the vast majority of total banking industry’s notional amount of derivatives at 85.1%. Derivative notional amounts decreased in the 4Q of 2025 by $23.8 trillion (10%) to $208.1 trillion. Derivative contracts remain concentrated in interest rate products, which total 65.3% of total derivative notional amounts. A link to the report is included below. Link: Quarterly Report on Bank Trading and Derivatives Activities | OCC

This episode reviews ICBA Advocacy in Action for the 2nd quarter of 2026. This is a two-page PDF that provides a short summary of all the major regulatory issues in the banking industry. The topics include digital assets regulatory frameworks, house advances community bank regulatory relief bills, farm bill and aid, executive order to create mortgage rule relief, challenges to 1071 rule and statute, deposit insurance reform, 1033 rule (open banking), master account access and OCC trust charter, and GSEs. A link to the PDF is included below. Link: top-issues-2

This video is a clip from BND: Strategy Room Live Stream on April 4, 2026. The conversation around Private Credit continues as redemption's exploded in the last few weeks. The problem has turned extreme at Blue Owl, where they have two funds under pressure. This clip also looks at is another crisis on the horizon, bank’s overall exposure to Private Credit, how loans to Private Credit have been the #1 loan category for bank’s over the last five years, Private Credit’s retreat from commercial real estate loans, Private Credit’s exposure to the software industry, Fitch downgrades nonbank direct lenders (BDCs), Cliffwater is under extreme pressure, wealthy investors are heading for the exit, and Banks stand to lose a major stream of income if Private Credit Market dries up. Private Credit is really throwing off 2008 vibes. Finally, labor department proposes 401(k) alternative asset rule. Is that really a good idea right now? This clip examined multiple articles from The Epoch Times, The Wall Street Journal, and CNBC.

The Banker Next Door (BND) weekly live stream show. Strategy Room provides financial news, commentary, top stories in the business world, economic indicators, and all things banking for the week.

This special report examines the difficult nomination of Kevin Warsh to Chairman of the Federal Reserve and the awkward transition facing him as Jerome Powell may stay around beyond the end of his term in May. Kevin Warsh’s time at the Fed could be transformational. He would like to do away with Forward Guidance, projections, change the Fed’s main targets, get away from data drift and dependence, and most importantly reduce the Fed balance sheet. All of this is very concerning to Wall Street and Capital Hill as they are perfectly happy to leave the Fed as it is. The reality for Mr. Warsh is far more difficult. Can the Fed reduce its balance sheet without creating other problems? Reducing bank reserves, taking too much liquidity out of the REPO market, and taking the punchbowl away from Wall Steet, just to name a few. Furthermore, should Mr. Warsh focus on revamping the Fed’s personnel, spending, and data? The Fed currently has 24,000 employees, the spending at the Board level has been increasing for decades, and the data points have not been updated and/or reevaluated in a long time. These are all areas that require major attention. Beyond all of this, the Fed has a major trust issue with main street. The Fed is truly at a crossroads. Mr. Warsh, should he be nominated, has a monumental task in front of him. This episode reviewed multiple articles from The Epoch Times, The Wall Street Journal, and CNBC.

This is part 38 of the crypto series. In this episode we provide an update on the stalemate with crypto legislation and how that is affecting the price of Bitcoin and other cryptocurrencies. We also look at Fannie Mae agreeing to accept crypto-backed mortgages in conjunction with Better Home & Finance and Coinbase. Nasdaq is partnering with Kraken to develop a plan for 24/7 tokenized stock trading. The hottest crypto trade right now is 24/7 oil futures, which is being offered by cryptocurrency exchange Hyperliquid. Strategy is now offering preferred issues called ‘stretch’. This new product operates like a hybrid security that has part stock and bond features. This new product does not come without risks. The world’s largest crypto event, Token2049 in Dubai was cancelled due to the conflict between the U.S. and Iran. The Justice Department continues to probe Binance and their role in moving money for potential Iranian terror groups. Finally, JPMorgan is sued over a potential $328 million crypto ‘Ponzi’ scheme involving a Florida-based company named Goliath Ventures. This episode reviewed multiple articles from Investopedia, Banking Dive, and The Wall Street Journal.

Two monumental cases were brought against social media companies including Meta, Google, TikTok, and Snapchat. TikTok and Snapchat were only involved in the Los Angeles case; they decided to settle out of court before that trial began. The trial in New Mexico accused Meta of tailoring its platforms to prioritize user engagement, promoting and profiting from illegal content that allowed for the exploitation of children and teens. The Trial in Los Angles, CA alleged that Instagram (Meta) and YouTube (Google) have intentionally designed their platforms to addict and harm minors. These trials are important because they are attacking these social media companies from different angles. Instead of going after free speech or content, they are going after child protections and system designs. After much testimony in both trials from Mark Zuckerburg, medical experts, technical experts, internal documents, emails, and message chains, both juries found the defendants guilty. The New Mexico trial ended with the jury ruling that Meta had violated the states consumer protection law and imposing a $375 million dollar fine. The Los Angeles trial ended with the jury finding Meta and Google liable for $6 million in damages. While the New Mexico trial had the larger punitive damages, the Los Angeles trial will probably prove far more significant over time. After these trials, there is now a ‘flood’ of litigation lining up against the social media giants. This could prove to be the beginning of significant changes in social media. This episode examined multiple articles from The Epoch Times, The Wall Street Journal, and CNBC. P.S. Please check out the documentary on Netflix called The Social Dilemma (released in 2020).

This video is a clip from BND: Strategy Room Live Stream on March 28, 2026. The zero loss-fallacy has evaporated for the Private Credit Market. Now major players such as Apollo, KKR, UBS, and BlackRock are locking down their funds and halting redemption requests. The Private Credit Market is experiencing a decrease in inflowing funds, an increase in redemptions, and an increase in delinquency. This analysis explores investors’ skepticism about Blue Owl’s loan sale, possible sale for Jefferies, how banks are playing both sides of the Private Credit Market, how the state of Iowa has a life insurance problem, how banks could end up lending more to this market depending on what happens with capital reform, Moody’s downgrades KKR fund to junk, and finally we look at what is happen in Europe.

In this episode we examine the challenges of starting a De Novo Bank, the surge in bank charters and what type of companies are applying for them, and should a bank consider changing its charter to fit its future strategy. A De Novo Bank must raise a significant amount of money to get started. They must also consider market fit, capital and investor base, strategic differentiation, and execution capacity. What type of companies are applying for bank charters? Large corporations / auto companies (Ford & GM), fintech and payment platforms (PayPal & Revolut), digital assets and crypto firms (World Liberty Financial & Kraken), and niche digital banks (Erebor). With this changing landscape should your bank consider changing its existing charter? What if you plan to grow significantly through M&A or expansion into new markets? What if you want to change regulators? This episode examined two blog posts from PCBB and an article from Bank Director. Links to the two blog posts and the article are included below. Link: Nonbank Charter Applications Are Surging — What You Need To Know Link: New Community Banks: When De Novo Formation Makes Sense Link: Does Your Bank's Charter Align With Its Strategy? | Bank Director

Rich Carty is a bank consultant with Remedy Consulting. Rich seeks to educate potential clients on the strategic and financial impact that Remedy creates. Remedy consulting specializes in technology contract negotiation, system assessment, strategic planning, and M&A support. Rich and I discuss Remedy consulting, the technology that community banks should be focusing on and the strategies that community banks should be thinking about in 2026. We discuss Rich’s 20 years in financial services. Finally, we discuss Remedy’s podcast, which is called BankTalk podcast. Links to websites for both Remedy Consulting and BankTalk podcast are included below. Link: https://www.remedyconsult.net/ Link: https://banktalkpodcast.com/

This video is a clip from BND: Strategy Room Live Stream on March 28, 2026. SpaceX is preparing for the largest IPO in the history of Wall Street! The IPO is scheduled to take place in June of this year. The expectation is that the IPO will raise over $1 trillion dollars. However, before that happens, Elon is completing the process of rolling X into xAI, then xAI into SpaceX. Why would Elon roll up X and xAI into SpaceX? What is the strategy there? Does he want to diversify the revenue stream of SpaceX? Why would that be important? In addition to the IPO news, Tesla and SpaceX announced they are going to build a semiconductor fabrication facility in Austin Texas. Construction of this facility will begin soon. All of this is happening while Elon is transforming Tesla from an electric vehicle company into a robotics and AI company. To say all of this is a ‘herculean’ task would be an understatement.

The Banker Next Door (BND) weekly live stream show. Strategy Room provides financial news, commentary, top stories in the business world, economic indicators, and all things banking for the week.

Why should you study economics? Some things to consider, where does wealth come from? How does it grow? Why do economies go up and down? Is inflation really ‘transitory’? Why have tariffs not caused inflation? If the unemployment rate is under 5%, is that good or bad? Economics drives are understanding of the world around us. For business people and bankers, many of the decisions they make daily are derived based on what economic data is telling them. Having even a rudimentary understanding of economics can change the way you look at and interpret the world. If you want to begin studying economics, where is a good place to start? Reviewing economic indicators monthly, watching CNBC, and reading The Wall Street Journal is a great way to get started. This episode reviews an article from The Epoch Times (subscription required) titled “What’s the point of economics as a discipline?”

What is the difference between a tokenized deposit and stablecoin? Tokenized deposits are issued by a bank, denominated in fiat, backed 1:1 by funds on the bank’s balance sheet, and accessible only to customers who have completed standard KYC onboarding. Tokenized deposits operate on a permissioned network where participation is controlled and restricted to known parties. Stablecoin are digital tokens pegged to a currency and issued by a non-bank entity. Stablecoins like USDC or USDT are backed by reserves such as Treasury bills or cash equivalents. These reserves do not sit on the bank’s balance sheet. They are not treated as insured deposits. Stablecoins operate on a public blockchain network accessible to anyone with a digital wallet. What are major differences for bankers to understand? Two instruments, two different structures, each functions differently in practice, and each has regulatory differences. This episode reviews a blog post from PCBB titled “Tokenized Deposits Vs. Stablecoins: Know the difference.” A link to the blog post is included below. Link: Tokenized Deposits Vs. Stablecoins: Know the Difference

How are banks currently being affected by regulatory changes that have taken hold in the last few years? We focus on three specific items 1) SBA lending, 2) CFPB 1071 rule, and 3) FinCen beneficial ownership information (BOI). The SBA has made multiple changes returning to a more pre-pandemic and pre-Biden administration stance. The 1071 rule requirements being enacted by the CFPB will kick in for big banks in July 2026 and in 2027 for smaller banks. 1071 will add a higher regulatory burden on small business lending and will add further complexities to the lending process. Banks continue to comply with FinCen on BOI collection. This is something banks have been dealing with for years now. Due to these regulatory changes, the burden on banks continues to increase. The complexity and cost for small business borrowers will continue to increase. This episode reviewed an article from Bank Director titled “The regulatory changes shaping small business lending right now.” A link to the article is included below. Link: The Regulatory Changes Shaping Small Business Lending Right Now | Bank Director