Fintech Recap: Everyone Wants To Be A Bank

Alex Johnson: Foreign. Welcome back to Fintech Business Weekly's monthly Fintech recap. In this episode, Alex Johnson and I discuss why seemingly every fintech wants to be a bank all of a sudden and what it could mean for valuations, CFSB's consent order, President Trump's fintech and banking related executive orders. And as always, what we just can't let go of. Today's episode is brought to you by Limited Business Banking for founders and multinational businesses operating Global Open a US bank account, an EU IBAN and local accounts in Mexico, Brazil, Nigeria and the UAE. Then pay out in 80 plus currencies across more than 300 local rails. You also get corporate cards with real time spend controls, approval flows and global bill pay all in one platform. So moving money never slows you down. Again. Go to LimitedApp.com to learn more. That's LimitedApp.com to learn more. A reminder, if you're enjoying this show, please follow rate and review on your preferred podcast platform as it really helps others to find the show. And if you want to help support Fintech Business Weekly and independent journalism, upgrade to a paid subscription or reach more than 92,000 listeners by sponsoring an episode with that, here's the show.

Jason Mikula: Okay, Jason Mikula. How are you, sir?

Alex Johnson: Uh, I have survived a 90 degree Fahrenheit day in the Netherlands, which for

Jason Mikula: me is about 30 degrees above average.

Alex Johnson: And no, I don't have air conditioning. So if there's video of this and I look sweaty, that's why.

Jason Mikula: Uh, that's totally fair. That's totally fair. I, uh, have moved into a new office. So, um, you'll notice, uh, different, uh, decorations. Uh, I believe I have, uh.

Alex Johnson: Yeah. Where's my book?

Jason Mikula: It's right there. It's right there on the shelf. Banking as a Service by Jason Mikula. You can all see it right there. Um, you're right next to Kyla Scanlon. So, um, I know, pretty big deal. Uh, so very happy to be here. But I will say that similarly, the building I'm in, I'm on the third floor, the windows don't open and they're like, yeah, there's a chance the air conditioning doesn't work and it's like, oh, okay, great, fantastic. So, um, we've not quite gotten as hot as you're describing, but we will. And when that happens, I may be red face and sweating on some of these future podcasts.

Alex Johnson: What is like a peak summer temperature in normal times? Like, set aside the global warming, like crazy spikes, but like a normal Montana summer, like growing up what would be like a peak high?

Jason Mikula: Yeah, I mean it was, I guess what I would say is it was notable when it got into the 90s was how I experienced notable. So notable. So like in, in like August we would have like, it'd be in the 80s, you know, um, you'd get into the 90s occasionally but like into the hundreds was like very unusual and for the most part it still is. So I would say like our baseline is probably now closer to like upper 80s, lower 90s, uh, as the high during the summer, uh, but still nothing to complain about. My younger brother as a matter of fact just moved from Montana to Phoenix and so now I don't get to complain about hot weather because he's living in like a literal hellscape surrounded by scorpions and 120 degree weather. So um, it's a different, different sort of vibe.

Alex Johnson: Yeah, no thank you. I don't need anything that's triple digits I do not need in my life.

Jason Mikula: Well, you're a Chicago guy so like I imagine you grew up like more cold than hot, right?

Alex Johnson: It's pretty extreme in both directions to be honest. I mean the, you know, the just finished undergraduate living in your first adult apartment, but like you have no money so there uh, is no air conditioning because the building is like 100 years old. Oh yeah, like you, you regret that decision when Chicago summer rolls along because it, it's hot and then in the city it stays hot at night. I hate that you get extremes in both directions in Chicago.

Jason Mikula: Yeah, the, the thing I'll never trade now that I realize what I have is waking up when it is cold at night or it's cold in the morning, even if it's going to get hot during the day again like that is just a great way to reset my nervous system. I can't give that up now that I have it.

Alex Johnson: Speaking of resetting, resetting systems, should we uh, should we dive into the latest changes, drama, enforcement actions uh, of the fintech and banking world?

Jason Mikula: Oh my gosh, there's so much to cover. So allow um, me, if I can to go first. M. This is a story I know you've been paying attention to. I have been paying attention to, um, it's been happening for a while, but I think it's crescendoed in a way that's kind of interesting. Right now everyone wants to be a bank. And um, you know, in particular what we are seeing is uh, sort of another wave of what I would consider to be sort of your classic neo banks. That are uh, becoming banks or are on the path to becoming banks. Uh, reminding me I guess of like the what late 2000 and tens and early 2000 and twenties when we saw a wave of this happen in, in neo banking world. Um, so the latest news is that uh, Chime, uh, co founder and CEO Chris Britt did an interview, uh, where he teased the idea that uh, Chime will become a bank. And it's a question of when, not if, which. If you've paid attention to the history of Chime, you will know that that is very different than the way he used to talk about Chime, uh, when he would pitch it in the uh, halcyon days of 2020 and 2021 as a software company and not a bank. Uh my, how times change. So it uh, sounds like Chime will become a bank and we don't know exactly what the timing is, but that is something that they are planning for. And similarly, uh, Mercury, who we've talked about many times on this show, uh, has just received conditional approval on their national bank charter from the OCC and timed that with a new fundraise of $200 million at a $5.2 billion valuation, which is an up round relative to their last uh, fundraising. So Mikula, the question I have about this sort of trend is what is the thinking driving this? And in particular uh, how might a move to become a bank impact these companies valuations? And just to put a little bit of detail around that, um, I did a little bit of research on sort of neobank versus bank valuations. And if you look at Chime as one example, Chime went from having a 30x revenue multiple, so price per sales uh, in 2021 which is very high. Uh, that was when he was saying we're a software company not a bank, of course we're a software company, uh, to about a 7x revenue uh, multiple which when Chime went public last year to a 3x multiple today. So it's been compressed in a pretty significant way. Uh, Mercury similarly has had its ups and downs over time. Its most recent revenue multiple, uh, after this latest fundraising round is 8x. And you know, I think it's an interesting um, sort of progression if you will, because you go from being a privately held non bank banking service provider to at some point going through two different gates. One is going from a private company to a public company. Uh, obviously Chime did that last year. Mercury has not done that yet. And then the second gate that you go through is becoming a bank. Obviously Mercury has Gone through that gate. Now, uh, while still being a private company chime it sounds like will at some point go through that gate. And, and when you go through both of those gates, my observation is your valuation and the multiple that you get on your sort of uh, core revenue assets that gets compressed as you go through each one of these gates. And there are some lessons from the past that I think we can draw from. Right. We saw this with Sofi. Um, Sofi over the years has had a much, much higher revenue, uh, multiple. But when it went public and then when it became a bank, um, you saw those things start to compress. And today, uh, switching from like fintech valuation metrics to bank valuation metrics, banks uh, are valued by something called price per tangible book value, which is um, I guess the shorthand way of saying it is tangible book value. What are we worth if we just sell everything tomorrow that isn't nailed down? Like all of our liquid assets, our loan book, uh, our real estate that's easy to liquidate. Like if we just get rid of everything, what are we worth? And then your multiple is anything beyond one, uh, X that you're worth, uh, meaning anything beyond what you're uh, can be liquidated for. Sofi currently is trading at a 2.2x price, uh per tangible book. And that is uh, bad from a fintech lens, right? Like 2.2, not very good. That is like JP Morgan chase level, really good if you're a bank, which is kind of this strange sort of contradiction with Sofi. And then Lending Club is the other example, obviously another sort of NEO bank that uh, acquired a bank, became a bank, had a bank charter and has gone public. They um, are currently hovering around a 1.25, uh X P to TBV, uh multiple. And that is, I guess you'd say, good for a bank, but in no way exceptional. So I'm curious what your perspective on this is because it does seem as though the end journey of all of these companies is to become a bank and then to just sort of fight against gravity as much as you can to prevent your, uh, valuation from getting compressed by these very, uh, pessimistic bank analysts that just won't be chill about it.

Alex Johnson: So I think the first question is why are these companies pursuing a charter? Or perhaps more specifically, why are they doing it now? Uh, and I think the reasonably obvious answer to that question is because they can do it now. We went through, uh, basically since the financial crisis of very, very few de novo charters, a uh, bit more activity on the MA Side, so, know you mentioned Lending Club, which acquired Radius. Of course, we've had some other SoFi, acquired, I think it was Golden Pacific column, uh, acquired. Chico State bank or something like that, I think was the name of the bank they acquired. So there was some more activity on the M and A side. The mentality, as I read it, seems to be now's the time when we can do it, and if we think we might want it, we should do it now. Um, I do think that it is worth pausing to ask the question, might some of these companies regret that decision? Now, I haven't actually had the opportunity to speak with anyone in senior management at Vero because I understand that they don't like me very much. I wonder why. Uh, I do wonder why.

Jason Mikula: It's been fair. It's been fair coverage, to be fair.

Alex Johnson: Uh, facts are facts. Even in 2026. Uh, I do wonder if that is an example where I was like, hey, we really thought, we legitimately and sincerely thought as we went through that process that getting this charter would, to use Goldman speak, be, uh, accretive to the business model. And for various reasons, whether that was, uh, choice of technology stack, whether it was difficulty executing, uh, whether it was overly optimistic projections. I would argue, based on the data that we have, that having the charter has not particularly been accretive to their business model. Now, Chime is a different company, larger, positive, uh, net income per most recent quarterly earnings. So just in a very, very different position, can Chime leverage a bank charter successfully to enhance its business in a way that Varo didn't? I entirely think that is a possibility. Again, it does involve actually being able to execute, which I think Chime has a significantly better track record than using Vero as a comp. Um, but that said, we are seeing a flood of traditional or full service charters, deposit taking charters, as well as all the National Trust bank charters, which we should probably set aside for this conversation because I'm assuming the math on valuing that is substantially different than the price to book ratio that you mentioned or that we're discussing.

Jason Mikula: I would be surprised if Coinbase ends up getting valued based on price to tangible book value.

Alex Johnson: Um, yeah, it's like, okay, the window's open. If I think I might want a charter, even if I don't really want it today, maybe I think I'm ready for it in four or five years. I don't know who's going to be president or who's going to be comptroller or who's going to be the F.D.I.C. you know, the year is 2030. It's President AOC. Uh, I know Rohit Chopra is the comptroller of the currency. So it's kind of like, okay, now if you want it, if you think

Jason Mikula: you want it, now's the time to do it.

Alex Johnson: And that's what we're seeing. So I think the next question is like, what is the narrative that you can plausibly sell to Wall Street? Um, and I think you mentioned this when you're talking about SoFi, it is worth distinguishing between those cranky analysts who are churning out the research reports and the retail investors, or in the SoFi case, the SoFi Bros on Twitter.

Jason Mikula: SoFi went, uh, public via SPAC. We have to remember that they SPAC, man. And they carry over that SPAC in enthusiasm even to this day. If you say mean things on Twitter and use the, uh, tag for sofi, they will find you and they will make your life unpleasant.

Alex Johnson: Um, it's like you look at, and I don't mean to pick on these companies specifically, it's just the examples that come to mind, you know, Figure publicly traded. How does Figure's business? Fundamentally, it's primarily a HELOC lender, but it's not really valued the way that a traditional HELOC lender is valued. And Figure has done a good job, like props to their comms and PR and investor relations and marketing team of, uh, basically saying, like, we're a blockchain company, we're a technology company. We're probably now saying we're a tokenization company because that's like the cool, you know, the cool word to use. Um, similarly, upstart. What is upstart? Upstart is a non bank lender. Uh, but they've done a very good job of constructing a narrative that. No, no, no, we're actually an AI company. And so even though they are both publicly traded, uh, neither of them are banks. But the point I'm making is they have done a good job of intentionally constructing a narrative to separate themselves from what are arguably very fair market comps and so have been able to sustain valuations and valuation multiples that if they were compared like for, like with a HELOC company or with a nbfi, like a non bank lender, like say one main financial or something for ox, you know, that those multiples, frankly are probably not super defensible. Um, and so I guess my TLDR here is okay, if you think you want the charter, get it now. Some of these companies will regret it. And then as far as the valuation story, I always caveat, neither of us are equity analysts. Uh, I am just routinely surprised, and I guess I shouldn't be anymore, at how powerful storytelling is in what is ostensibly a ruthlessly competitive, efficient market, like the stock market, um, with a wildcard being, I guess, if you can attract a dedicated base of retail fanboys and fangirls, um, that can support a valuation that is untethered to reality. And not to go too far, uh, afield, but Tesla is a classic extreme example of that where it's like, hey, like the fundamentals of this business are like, pardon my language, they're kind of shitty. But the stock price and the valuation are just untethered from the reality of what the business is. Because you have a very powerful storyteller in the form of Elon Musk, who has attracted a following that can sort of sustain that price.

Jason Mikula: Yeah, I mean, I think that's right. You like use Sofi as an example, right? So they have the SPAC energy that carries them forward to this day. And it is funny because you look at SoFi and it's like the core business is pretty strong, right? Like it's a fairly big bank. They've done a pretty good job of uh, you know, getting a large base of um, you know, obviously lending customers, converting them into kind of full bank customers, uh, trying to like increase the attach rate for additional products. Like it's a fairly strong consumer banking business. But they also own Galileo and Technesis. And I don't know if you saw they recently bought Peach, which is uh, like a loan servicing platform. And you know, it's funny because I just looking at the business, I would say, hey, maybe we should just like cut bait on all of this stuff kind of going back to Goldman Sachs. Like, maybe this Marcus idea is just a bad idea and let's just like cut bait on all of this. Like, it's not going very well. Galileo, uh, lost its biggest customer when Chime switched off of, uh, Galileo to using its own proprietary platform that it built itself. Um, you know, like, I don't think the business really justifies making an acquisition and buying Peach and like rounding out those capabilities. But I do think there is an element of retail storytelling built into that where, like, part of the reason, uh, SPAC bros are very still excited about Sofi is this AWS of fintech story that they sort of spun up around Galileo and Technesis and what they were doing there. And to a degree you have to kind of feed that part of your investor base, even if the fundamentals of the business don't justify it. I also think SoFi just uh, sort of released their own stablecoin that now all SoFi users can uh, buy and sell and hold. And it was funny because I read the press release and at no part of the press release was I like reading an explanation for why a SoFi member would want the SoFi stablecoin. But they're like, we have it. And you're like okay, great. But what that really just suggests to me is they need the retail component of their investor base to be like. SoFi takes stablecoin seriously. They're not going to get disrupted by crypto. They're the first bank to issue their own stablecoin, blah, blah, blah, blah blah. And so I do think there are a number of things that SoFi does that aren't really in the best interest of the business, but are. And you know, I think Anthony Noto, who's the CEO, does a wonderful job sort of staying in touch with how retail investors are feeling about SoFi and kind of throwing them a bone consistently so that they stay engaged. And I think that's a large part of why they are valued, uh, where they are relative to, you know, I always, I always find the comparison between SoFi and Lending Club pretty fascinating because very similar businesses. Lending Club is a little smaller than sofi's, but very, very similar in a lot of respects. And I think in some ways you could make the argument that Lending Club is a better run business. I'm not wild about the new branding for Happen bank, but that's like a separate issue. Um, but like it's interesting because as an example, for a very long time Lending uh, Club has reported their uh, numbers using uh, sort of reserve accounting, right? Because that's what's required under Cecil and that's what all banks do. And that's what bank analysts expect. And SoFi by contrast does not. They use fair value accounting where they mark to market their loans over time and they don't have to realize all the losses up front. And it's, it's utterly perplexing to bank analysts, right? They look at SoFi and they're like, oh, uh, this seems weird. How do we know how to value this company? But SoFi just does it and they've done it for so long and have gotten away with it for so long that Lending Club actually recently changed from reserve accounting to fair value accounting. And so they are moving towards SoFi. And what that tells me is they're just Tired of getting punished as a bank stock when their business, I think from their perspective is the same as SoFi's, but they're not getting that same premium. So there is this sort of inherent irrational component to how all of this works. And I will say to end this, um, I worry about Chime having their valuation multiple compressed even further because obviously they went from 30 down to 7 now down to 3. Um, it's funny because, like, there's no reason why being a bank, having a bank charter should make it go down any further. Like it really shouldn't go down any further.

Alex Johnson: Right.

Jason Mikula: Like having a bank charter at this point for someone like Chime just improves their unit economics. It just makes them more profitable. Like there's, it's nothing but good for Chime. And yet I think the reason that, you know, Chris Britt is saying, yeah, at some point we'll become a bank, but we haven't done it yet. But, hey, man, like, the window's kind of closing. You never know, like, when charters aren't going to be available anymore. I think the reason they're kind of delaying a little bit is they know those bank analysts are annoying. And unless you have some SOFI superpower to keep your multiple high, you're going to get compressed even more, even though it doesn't really make sense.

Alex Johnson: My last comment on that is, uh, there's also just a fundamentally, or there should be a fundamentally different lens, uh, that you view risk through when you're a bank versus a non bank. Right. So part of what justifies those high multiples for tech companies is not just that, you know, oh, it's tech. It tends to be that they are extremely fast growing. And that's why investors are willing to essentially pay more, because they believe it is going to grow and return in the future. When you're a bank, as you and I and Kia and Henriks and a bunch of other people have discussed ad nauseam, really rapid growth, at least in my opinion, is inherently a sign of risk, whether it's both on the deposit side and on the asset side, particularly if the asset side is doing your own lending, as opposed to deploying, um, those deposits into other assets, buying securities, parking them at the Fed, whatever. And so you can see a world where it's like, okay, if the pressure is reward shareholders by trying to maintain a higher multiple, I need to keep growing really fast. Uh, oh, but now I'm a bank, but how am I going to do that? Take on a bunch of accounts and deposits that maybe otherwise I wouldn't really want to and, or deploy funds, uh, more quickly, uh, or into assets with higher yield that maybe otherwise you wouldn't. And not that, to be clear, not that Chime is svb, but it's like that is the kind of decision making where it's like, okay, we're reaching for yield. And all of the incentive structure, whether it was the executives, somehow I've hijacked this and turned it into svb.

Jason Mikula: I apologize.

Alex Johnson: Whether it's the executive's bonus or the share price incentivized them to do that. And the end result was it blew up the bank and wiped out all equity holders. So I do think, like, banks are a very special kind of business. Um, and it's not irrational to look at them and value them potentially using different metrics or different kind of multiples. And it will be interesting to see how some of these companies and Chime explicitly, explicitly described itself as a tech company. How they try to navigate or thread that needle of, well, we want the charter, but we don't want to be treated, we don't want to be valued like a bank. Like, it will be interesting to watch how they try to do that.

Jason Mikula: Yeah, I think that's exactly right. And, uh, you know, it's just a timing in your life thing too, right? Like, this is my high growth phase. I probably shouldn't be a bank because it's not really compatible with the way that they think. This is my middle age, slowing down a little bit phase. Maybe a bank charter is a better thing. But again, the challenge is the window for getting a bank charter is not always open. And so you have to time. When is it right for me with when will the regulators allow me to have this thing? And those two things don't always match up, as we've seen. Um, Jason, I am delighted to get to say this. Delighted. I'm so thrilled. Can we go back to Bass Island?

Alex Johnson: Uh, I can't tell if you're being sincere or sarcastic, so I'm just gonna.

Jason Mikula: I am, I am being sincere only because I know that this will actually be a three hour tour and we won't get marooned on Bass island and have to make a coconut phone.

Alex Johnson: So, uh, please take us back for a brief, brief tour. Brief tour. So Synapse and Evolve Trash Fire still smoldering. This segment is not about that, thankfully.

Jason Mikula: Thank God.

Alex Johnson: I really thought we had left Bass island behind us. But as, uh, our friend and industry colleague Kia Haslet recently discussed in Fintech Takes Banking newsletter, we've seen a pretty Significant slowdown in enforcement actions from m, the federal bank regulators. And that really shouldn't come as a surprise.

Jason Mikula: Right.

Alex Johnson: It was expected that whoever Trump appointed uh, to the relevant regulators, so Comptroller Gould at occ, uh, Travis Hill at FDIC and more recently Kevin Warsh at the Fed. Although the Fed is a little bit of an outlier for, uh, reasons that should be obvious to listeners. Um, it was clear that the priority was going to be a deregulatory one and we've certainly seen that on the rulemaking side. We've also seen it on the enforcement side. So a lot of what we've seen, uh, I'm signed up for the OCC press release emails and there were far, far, far more terminations of consent orders than there were, you know, new enforcement actions. New orders. So I'll admit I was a bit surprised when uh, I saw the monthly OCC enforcement action press release in my inbox and it included a consent order with Community Federal Savings bank, uh, more commonly known as cfsb, um, for those that are not familiar, uh, with sort of like the actual business of the bank, uh, I find this kind of hilarious because I actually know where this is. CFSB is a branch bank located underneath the elevated train tracks. So it feels, you can't call it a subway because it's above ground in New York. So it's like the elevated train tracks, uh, across from a beauty salon and a liquor store in the Woodhaven neighborhood of Queens in uh, New York.

Jason Mikula: That is um, highly specific. Michaela. Hey, you're a storyteller. You're a storyteller.

Alex Johnson: You got to nothing. I'm nothing if not detail oriented. Um, uh, but in addition to its, I guess like legacy business or historic business of being what's essentially, I mean literally the word community is in the name of the bank. It also has become a very significant player in the partner banking space including quite a number of what I would consider higher risk programs like those that are focused on cross border, uh, and those that serve consumers and businesses outside of the United States. So I mean there's you know, more than a dozen programs but some of the higher profile ones include Airwallex, uh, WISE, formerly known as TransferWise, Payoneer, uh, Chipper Cash, which is a, uh, African sort of neobank slash, um, P2P type service. Nomad, which dedicated listeners will remember was on Synapse at one point, a, uh, Brazilian banking startup. Those programs powered a very rapid growth in CFSB's deposits and assets. So at the end of 2017 the bank had less than 140 million in assets. Uh, and that grew to 900 million or about 900 million at the end of 2024. Uh, although the bank's assets did shrink slightly in 2025, which I'm guessing was a sign that there was enforcement activity brewing behind the scenes. Um, I actually flagged these risks in a story I published almost two years ago. Uh, so maybe I'm doing some programming, uh, notes for the occ. Um, but this is all to say basically the risks seem to have finally caught up with cfsb given that the consent order focuses squarely though narrowly on BSAAML issues. Uh, so very quickly, uh, for folks who want to read all the details, I would recommend either my newsletter on this topic or just go read the actual consent order on the OCC's website. Um, but the TLDR is basically, CFSB grew its payment processing business line far faster than its BSA and AML controls for this business line. Uh, to quote the consent order, this resulted in systemic internal controls breakdowns, weak independent testing and weak BSA staffing. Some of the deficiencies that were spelled out in the consent order, I can tell I'm a real nerd because I've read enough of these that it's like oh wow, that's weird. Um, some of the deficiencies included a transaction monitoring system with flawed data, logic and methodology that resulted in a very high percentage uh, of transaction monitoring alerts that were just automatically closed with no investigation, which seems like a problem. Also, CFSB failed to determine whether it had correspondent accounts for foreign financial institutions. Like that is technical speak for CFSB did not know if some of the accounts it had were for foreign banks.

Jason Mikula: That is alarming.

Alex Johnson: Yeah, those uh, are much higher risk because those accounts can be used to facilitate wire transfers and international payments for that foreign bank's customers. So if you're engaged in correspondent banking like you kind of want to know

Jason Mikula: what you are engaged in it that

Alex Johnson: you are engaged in that business so that you can monitor those accounts for signs of suspicious activity. Um, the consent order basically calls for a comprehensive end to end review assessment of BSAAML program and basically remediate these problems. I do think it's notable what is not in this consent order specifically anything else other than these BSAAML topics. So during our wave of BAS enforcement actions in 2022 to say 2025, um, BSAAML was a very common theme. But uh, it was far from the only topic area covered in the approximately 20 ish consent orders that uh, were entered into during that time you often saw adjacent areas, specifically board governance and my personal favorite, TPRM third party Risk Management cited alongside those BSAAML concerns. And a fair number of those consent orders also included business restrictions. Uh, so for example, if you want to onboard a new program, you need to get supervisory. Non. Objection before you do so. This consent order had none of that. It was just BSA AML M stuff. So Alex, my question to you, and I'll admit this calls for speculation. Uh, why do we think the. Oh, why do we think the OCC felt the need to act in this case despite the general change in regulatory and enforcement posture?

Jason Mikula: Well, I think the obvious answer, which you already kind of uh, hinted at is that um, CFSB is a tire fire and they couldn't ignore it. I mean, seems like the most reasonable answer, right?

Alex Johnson: I didn't even mention the various um, uh, pig butchering schemes linked to a couple of these companies or payoneers. Uh, I think it was like a huge ofac issue that they had.

Jason Mikula: Yeah, M. So I mean it does seem like tiny little bank courted a very high risk category of customers, uh, in an attempt to grow very, very fast and to generate profit, which it, it did. Which is, you know, good for them. Um, but I mean like the, the, the colorful example you gave from the consent order about um, like they didn't know that they were doing correspondent banking, but they were like that's, that's the kind of thing where you're like, oh, you don't even know the scope of the risks that are like in your way or that you're facing. Like it's not even you're even aware of how much danger you're in. Um, I think that level of mismanagement would be probably what required uh, the OCC to act. I will also say in my experience, watching kind of regulation and deregulation kind of cycle back and forth, there's always like countercyclical examples that are sort of chosen to illustrate. Like we're also pro. Like if you're, if you're highly regulated and giving all these consent orders, you also want to give a signal that like, no, we're open innovation, we're not the bad guys. And if you are deregulating everything, you send the opposite message, which is mostly we deregulate. But look, we're still, you know, uh, doing our job and making sure that we flag these things. You see that uh, right now actually in prediction market land, with the CFTC making a big deal about like the four insider trading Cases that they've busted. Like, look, we're cracking down on this. It's like, okay, probably not, but you want to send that message and make that clear. So I think it, it serves that uh, goal as well. I think the thing I'm most surprised by is the thing you were saying about the, the narrowness of the order. Right. And I'll just pick on uh, restrictions on programs. You have a super deficient BSA AML program. You don't even know if you're in correspondent banking. Clearly your transaction monitoring system does not work, but you are not in any way restricted from bringing on new programs. Like, that's weird, right? That's strange. Um, it makes sense to me even if you don't want to flag other areas like board governance or tprm. And I'm not terribly surprised that those areas weren't included in this because I do get the sense from the current regulatory leadership that they felt prior versions of the agencies were too expansive in the way that they would like whack banks like Reputation Risk, tprm, like all these other areas. And so I think they are trying to be much more tailored in their um, enforcement and supervision. Uh, and this I think is an example of that. But, but in this particular case it feels too narrow because a, like you do have a TPRM M problem if you have all these counterparties that you're working with and you don't even really know what they're doing. That is in addition to bsaaml, that is a third party risk management problem. And also, uh, like no restrictions on bringing on additional programs. You don't have to get a non objection. Like that's kind of crazy. And so I feel like this is probably a little bit more performative picking on a really egregiously bad example than it is an indicator of. No, we're still trying to hold a line here and stop this from happening. This ties into our next story, which we'll get to in a second. But I do just generally get the sense that uh, the direction from the top right now is hey, we want banks to take risks, we want them to innovate, we want them to partner with fintech companies. So this is designed to not get in the way of any of those larger goals.

Alex Johnson: That is a great point that I will admit did not occur to me as I was uh, writing the newsletter or preparing our notes for today that oh, this is a nice piece of window dressing, that if somebody gets hauled before the Senate Banking Committee and asked questions, they can say no, no, no, look, we're still doing financial crimes compliance, enforcement.

Jason Mikula: Look at this example, Senator Warren, I don't know what you're talking about, because we do. Blah, blah, blah. Right, yeah, yeah.

Alex Johnson: The bank with, uh, the hand sanitizer, money laundering problem, uh, we got a

Jason Mikula: consent order for them. Right, Right.

Alex Johnson: Um, no, that is a good point. I'm at least somewhat sympathetic to the positions expressed by the regulators of like, hey, maybe the pendulum swung too far.

Jason Mikula: Totally.

Alex Johnson: And we should refocus on material financial risks and not process risks. Did you check all the check boxes?

Jason Mikula: Well, and you remember the. You remember the blue, uh, ridge one? That was the famous one for me where it was, like, two consent orders within, like, whatever. Uh, it was 18 months.

Alex Johnson: It was within 18 months, for sure.

Jason Mikula: Yeah. And like, that was. I mean, even, like, I tend to be fairly sympathetic to, like, we should be careful in banking as a service, obviously, for reasons that we've discussed, uh, ad nauseam on this show. But even that, I was like, whoa, boy, that is excessive. So I get where you're coming from. Yeah.

Alex Johnson: But then it's also a matter of, like, okay, that's what you're saying. What are you doing or not doing behind the scenes as far as the supervisory practice, and what signal is that sending to the banks that you regulate? And what I get worried about, and this will not be a surprise to anyone who knows me or follows my work, is like, are we flashing a green light for crime? Because sometimes it really does feel that way. And, uh, my unsolicited advice to anyone in the space would be like, remember, regulation is backward booking. And there will be other people at OCC, at the FDIC, at FinCEN in the future, looking back at what is happening now. And there are still, you know, state regulators, um, and state AGs, depending on exactly what the situation is. And so I do understand the impulse that it's like, hey, the current climate is all systems go risk on. Uh, but we've seen this story before, right? And it was not a happy ending for at least some of the banks that decided to go risk on in that sort of first wave of BAS stuff in 2020, plus or minus. So should we get off Bass Island? Should we go somewhere else?

Jason Mikula: That was three hours. Let's get the hell out of here. Uh, turn the ship around. Okay. Um, I will, uh, take us by a different, uh, island that is maybe somewhat related, uh, which is, um, deregulation focused. Um, there were two interesting executive orders, uh, from President Trump that were signed recently that I wanted to run through because I think they speak to exactly that point about the kind of regulatory environment that we're in right now. So I will give you the highlights of each. Uh, I will give you the full actual real names of the orders, which are always like, so, like fluffily named. That doesn't really tell you anything. But the first one is, uh, integrating financial technology innovation into regulatory frameworks. This executive order does a couple of things. First, uh, it gives federal financial regulators, so the ones we've been talking about 90 days, to review existing guidelines, guidance and application processes to eliminate overly fragmented or burdensome rules that shield incumbent megabanks. Interesting. Uh, two, it directs those same agencies to lower friction and establish smoother pathways for collaboration between traditional banks and independent fintech platforms. So make bas great again, Jason. Um, and then finally, uh, it requests, and the word request is very important because the uh, administration, despite its desires, can't tell the Federal Reserve what to do. Requests the Federal Reserve Board evaluate granting fintech and digital asset firms access to uh, central reserve bank payment services and master accounts. Uh, and it specifically uh, goes out of its way to ask the board if there's anything they can do to rein in the actions of the independent reserve banks individually who've been making a wild number of interesting decisions as it relates to master accounts and access to payments infrastructure. So that is the first, uh, executive order. Let's pause on that one before getting to the second one. Um, Jason, I know you read this one. Obviously it relates to areas that are very core to what you cover. What were your takeaways from? Again, to be clear, an executive order that doesn't necessarily have a tremendous amount of teeth certainly isn't a law, but is directing agencies, uh, and asking for things, uh, in this sort of fintech innovation realm.

Alex Johnson: So I do not actually want to go down this route, but I will point out that this executive order potentially has a direct impact on companies that Trump and his family control, which just

Jason Mikula: feels we would be remiss if we didn't mention.

Alex Johnson: Yeah, it feels a little conflict of interest. Yeah. To me, to the extent that that's still a thing. Um, as you alluded to in the nature of the eo, the agencies that would fall, um, under this executive order. So the cfpb, the sec, uh, the ncua, so the credit, uh, union administrator, the cftc, FDIC and OCC and Fed are all at least theoretically independent agencies. Um, I also think it's worth pointing out the NCUA and I have to give credit to Matt Janica because I read this in his post over at Modern Treasury. Uh, I will put that in my show notes. Um, the NCUA doesn't even have enough directors to pass rulemaking.

Jason Mikula: They don't have a quorum.

Alex Johnson: The EO is essentially a sternly worded letter. And it's a sternly worded letter saying, hey, regulatory agencies. Like this is the direction I want you to go. And then it's up to this Alphabet soup of financial regulators to then promulgate, potentially promulgate rules to try to implement or further that agenda. As you pointed out, the Fed is still ostensibly really is independent. Um, the rest of those Alphabet soup agencies are directly or indirectly controlled by Trump appointees, um, that generally have been amenable to advancing the policy goals of the administration. I will say that I'm interested to see both the speed and there's no other way to put this, the competence with which these agencies pursue any action based on what's in this executive order. So, for example, at least in my mind, and please feel free to push back or if you think differently, I'd love to hear. Um, in my mind, the OCC and Comptroller Gould have been sort of the most forceful, invisible in pushing both the sort of deep, like the deregulatory pro innovation agenda. Ah. Um, and that's shown up in, you know, his public remarks, in, you know, hanging out and doing photo ops with the founders of Erebor. Yeah. Vote at cfpb. At least based on.

Jason Mikula: He's got his own project he's working on.

Alex Johnson: He definitely has his own agenda. It's not necessarily clear to me that his agenda is like innovation so much as taking. I m. Don't think he cares about

Jason Mikula: innovation to be told Innovations. Yeah.

Alex Johnson: So much as taking a weed whacker to the entire government.

Jason Mikula: Right, right.

Alex Johnson: Which I guess like by extension a deregulatory agenda, I suppose, could foster innovation. But that doesn't seem to be what. What his. That's not why he wakes up in the morning. You know, it's not. It's not what gets up. As I recall from some of the remarks he made, what gets him up in the morning is trying to make government employees, like, cry and be terrorized or I'm paraphrasing for the record.

Jason Mikula: No, no, I think that's not that far off. Yeah. Destroying all woke ideology, I think is what motivates him. Yeah.

Alex Johnson: Travis Hill, chairman at fdic, seems to have maintained a relatively lower profile and he was a board member at FDIC under the prior administration, so he may be More of like an uh, institutionalist and, or has enough long term thinking to wonder what is my career after this administration and how do I sort of navigate the current climate so that I'm still employable potentially in government, whoever comes next. Uh, and then the Fed Warsh, uh, has been sworn in as chair now. Uh, but as you mentioned, we have 12 independent, quasi independent regional Fed banks, which I'd actually love to hear you unpack the timeline you laid out in your newsletter a little bit more because some of that was news to me as far as some of these decisions about master accounts actually happening. They're happening at the regional Fed level and so you could have a very different read at whatever. The Richmond Fed versus the Chicago or Atlanta or the Minneapolis Fed, which does seem kind of problematic to me. It feels like you would want that to be consistent regardless of which regional Fed is processing an application.

Jason Mikula: Yeah, well let me, let me run through the timeline because it is kind of wild. So I, I did a little research into sort of history of master account access and obviously it goes back even further than this, but the modern history, uh, you could start in 2017 and that was when the Kansas City Fed, who will feature prominently in this timeline, uh, denied a master account application from Reserve Trust, which was a Colorado chartered non depository trust company. Um, then in 2018, uh, the Kansas, uh, City Fed reverses course, grants Reserve Trust a master account. 2020 uh, Custodia bank, who's come up a time or two on this podcast, a Wyoming special ah, purpose depository institution, uh, files for a master account application again with the Kansas City Fed. Kansas City just gets all the fun stuff. Um, in 2022 it is reported, it is alleged that former Fed governor Sarah Bloom Raskin helped Reserve Trust get its master account while serving on the company's board. This is actually something of a pattern with people who used to work at the Fed lobbying the Fed for master accounts for companies they're on the board of. Uh, shortly thereafter, the Kansas City Fed revoked Reserve Trust master account after determining that the company is quote, no longer eligible, uh, for reasons that are a little unclear. Also in 2022 the Federal Reserve Board, in an attempt to try to get a little bit of control over this process, adopted guidelines for reviewing master account applications which defined three different tiers for applicants depending on whether they are federally regulated, whether they are state regulated, if they are uh, uninsured or insured. And essentially the types of applications we're talking about coming from these like Wyoming or Colorado state chartered non depository Institutions, Those are Tier 3, meaning the highest risk and the ones that require the most evaluation. Uh, 2023, the Kansas City Fed denies officially Custodia's master account application. After just letting it linger for many, many years. Custodia sues over the decision and loses. And loses on appeal. And loses on appeal again. Uh, and the losses for those appeals basically stem from the fact that the courts recognized, according to the law, the Fed can do whatever it wants here. It doesn't have to answer to anybody else or even have a very transparent or understandable process. Fast forward to 2025. Fed Governor Waller, uh, who's one of those sort of innovation forward public, uh, officials publicly floats the idea of a skinny master account, which would give more limited uh, powers, uh, for non high risk depository institutions. So, you know, um, the types that we're talking about who fit into that tier three category. December of 2025, the Fed Reserve Board publishes an RFI to ask for feedback from the industry on this skinny master account idea. March of this year, the Kansas City Fed grants Kraken, which is a different Wyoming special purpose depository institution, obviously a crypto oriented company, a master account. The account is described as being limited or restricted in several ways that are functionally similar to this proposed skinny master account idea. Later, Vice, uh, Chair for Supervision Michelle Bowman clarifies that the approval is a one year pilot. Uh, and Representative Maxine Waters asks the Kansas City Fed to explain what it's doing granting a skinny charter or a skinny, uh, master account. Excuse me, before the Fed Reserve Board had actually figured out what a skinny master account actually is. Uh, which brings us to the current month in which uh, President Trump obviously signs this executive order, among other things, kind of asking the Fed to figure its shit out. And uh, the Federal Reserve Board publishing a formal proposal for a skinny master account. And in that same proposal encouraging the individual Reserve Banks to pause evaluating all Tier 3 applications until they can finalize this proposed new account type. Uh, and you'll notice throughout many, many, many of those descriptions of that timeline, uh, the words request, the words, uh, you know, lawsuit denied, appeal, uh, denied. Basically what that tells us is uh, the Reserve Banks can do whatever they want here. Not even the Federal Reserve Board, which ostensibly is sort of the body in charge of regulating the Federal Reserve System, can stop the Reserve Banks. And uh, that has led to the mess that we find ourselves in.

Alex Johnson: So I know that this is not the specific topic that we're talking about, but it's adjacent. So indulge me the lack of Accountability from the Fed here, like accountability to the public, the political process, as well as the entities that are applying for these master accounts, I actually find, like, really quite troubling. And I'll admit, like, this is not something I spent frankly any time thinking about until, yes, uh, my FOIA lawsuit related to synapse, uh, and then this master account topic. And it's like, okay, I fully understand and 100% agree that monetary policy should and needs to be independent and insulated from political pressure. There are plenty of historical examples, Turkey under Erdogan, Argentina under forever, of what happens when you do not have independent, uh, monetary policy making. That said, there's a bunch of other stuff the Fed does that apparently there's just like, no accountability for. And I just. That seems. This is cliche and probably, like, controversial, uh, at this point, but, like, that just seems un American. It's like you have this, like an entity that I do understand. The regional Federal Reserve banks are technically owned by their members. And so it is a very strange, like, kind of government, but also kind of not government structure.

Jason Mikula: They're like private, public, quasi, hybrid, weird companies. But, yeah, they're very strange in the way they're organized.

Alex Johnson: But if I were custodia and you look at that, and I should really go and read all the lawsuit filings the next time I'm on vacation for fun, uh, or, sorry, the next time I'm on a long flight, I'll print those out and bring them along. But if I were one of those entities that was applying for a master account and either being denied or being denied without, or just being sort of strung along without explanation, it's like, okay, well, who are the member banks that own the Fed? Oh, like incumbent banks. Are they keeping me out because they think this is a bona fide risk to the financial system, or are they keeping me out because they want to preserve the privilege of being inside this regulatory barrier? And I don't want to go like, too tinfoil hat world, because if you spend time on Twitter in this topic area, there's a lot of tinfoil hat world. Um, but I do think that's a fair question. I think it's a fair question to ask. And with the nature of the current structure, the Fed and the 12 Fed regional banks have been largely insulated from having to explain or provide any accountability. And I do find that troubling.

Jason Mikula: Yeah, I feel the same. I think that what it ultimately comes down to is a lot of times, for reasons that are just pure sort of historical accidents, we end up with these institutions that are not really optimally designed, Right. And I think the Fed is a good example where it's like dual state federal banking.

Alex Johnson: Oh God, yeah. I mean CSBS is going to come after us.

Jason Mikula: I know, I know. Yeah, they're not going to be happy. I mean, uh, yeah, like the, the dual banking system is stupid and badly designed. The Federal Reserve, I think we can pretty confidently say is stupid and badly designed. Like it has three different jobs that it does in combination, right? One is it operates a payment system, uh, which is really important. And every sort of country with like a modern financial system has some public infrastructure that's used to like facilitate payments because it's important for economic activity. And you and I have talked to folks who work in part of the Fed and like they just think about how do I run a good payments business, right? Like my job is to just make sure all the rails work and make sure the, the transactions all clear, including physical cash in physical cash checks. Like, you know, we, we had uh, Mark Gould from the Federal Reserve on the podcast a while back and he was like, our job is to be there when the last check gets written and it needs to get like processed. Like we will be doing that until the heat death of the universe. Um, and so I think that like that's one really important job. Second job, which I'm not really sure why the Fed has this job, to be totally honest, is as a uh, like prudential regulator.

Alex Johnson: They should not be a regulator.

Jason Mikula: It doesn't make sense, right? Like, like the OCC can do it for Nationals, the FDIC can do it for state ones that are uh, insured. Like we don't need this. So I don't really understand why the Fed does that. You have tried to get information from that part of the Fed about why they do what they do relating to evolve or other ones that fall under their jurisdiction and you don't get clear answers. So like they probably just shouldn't have that job. And then there's the monetary policy part which is like really important. Desperately need independence from the executive branch. So like to me, we should be splitting up these jobs and like have different agencies doing them. It's kind of absurd. And I will also, going back to an earlier thing you mentioned about the agencies all being kind of independent but led by political appointees. Um, I think the other thing you're going to see, you didn't mention um, Jonathan McKernan at Treasury, but I think that he might be the one who actually really tries to implement Whatever comes out of this executive, uh, order as it relates to what the OCC and the FDIC and others do, I've noticed, and I think you've probably noticed the same. Treasury's played a much more active role in sort of trying to steer what all the different agencies are doing. Much more so I think than previous uh, administrations. And so in some ways I kind of read this as a coordinating document for what treasury is going to do and it's going to sort of roll down to a degree to get to uh, the occ, the FDIC and CUA and others. So, so we'll see what happens. Briefly, I will just mention the other uh, executive order that got signed at the same time is one called Restoring Integrity to America's Financial System. Whatever we mean when we say that um, this was sort of the uh, watered down version of a thing that had been reported on earlier about potentially the administration making a change to require banks to collect citizenship information from their customers. Um, this executive order is the watered down version of it, seemingly in response to heavy lobbying from the banking industry saying like, you cannot require us to collect verified citizenship information from every customer. Like, we can't. That's insane. Um, I mean, a, again using the word un American, like probably not really American, but also, um, like just operationally like the is insane. We can't do this. Um, instead it instructs banks to evaluate whether an account holder has legal residency status when calculating that customer's financial credit and AML risk profile. Um, it specifically orders agencies to reassess and flag risks associated with customers using foreign consular ID cards or non work authorized profiles to open up accounts and secure credit. And it requires the uh, Department of Treasury to release updated red flag guidance within 60 days, propose adjustments to BSA within 90 days, and introduce a joint overhaul to the customer identification program within 180 days. So we may still see some changes, uh, come out in rulemaking and in guidance. But it seems like they are stopping short of what they had initially been proposing, which, uh, the entire banking, uh, lobby, I think, quietly threw their body in front of.

Alex Johnson: Yeah, I did also read this executive order. Uh, I interpreted it basically exactly as. You are right. Regardless of the partisan politics of the specific topic, just logistically implementing this would be a nightmare not just for, uh, immigrants documented or undocumented, but for everybody.

Jason Mikula: Totally.

Alex Johnson: I will trot out my favorite alarming stat, which is only 50% of Americans have a passport. That is a record high. I mean that's much higher than it was even 10 or 20 years ago. And so it's like what, you're going to ask every random person to bring in their birth certificate and then build. I mean, hey, I got a great fintech infrastructure, Play Verify, like processing birth certificates to verify citizenship.

Jason Mikula: Um, there probably were some IDV vendors who were licking their chops at this, but not going to happen.

Alex Johnson: Somebody's cooking up a pitch deck. Uh, I mean, just utterly. I think anyone who works in the space and has any knowledge of how account opening processes or IDV identity verification works saw this and was like, yeah, this is entirely unworkable with the infrastructure that exists in the United States today. I don't want to know what sort of creepy dystopian palantir future we're headed for. But to require an FI to verify citizenship status at onboarding, the US is not equipped to require banks or other FIs to do that.

Jason Mikula: Yeah, I think that's right. And I think that ultimately, uh, that sort of operational reality won out, which, um. Hey, man, if you're looking for little wins, things you can be optimistic about, I guess there's one for you. Um, speaking of which, Jason, anything you can't let go of before I let you go?

Alex Johnson: Uh, yeah. So I was debating what I wanted to talk about. Um, actually I have a question, Alex. Are you excited for the SpaceX IPO?

Jason Mikula: Uh, yeah. I feel as if I have not gotten access to the wealth building opportunities that I need by being excluded from private markets in this way, so I could not be more excited.

Alex Johnson: Okay, but so you would voluntarily choose to buy SpaceX stock once it begins trading and you're able to.

Jason Mikula: Yeah, I mean, I don't know anything about it, but Elon is doing it and he tells me we're going to build like an interplanetary species, but there's also like, data centers orbiting the Earth and space. I'm not totally clear on it. I don't know, I don't know what the details are, but I trust in Elon.

Alex Johnson: Yeah, well, even if you didn't want to buy it, you're probably going to end up with it. Oh, good. I don't know if you've caught any of this, uh, uh, sort of controversy. I mean, very, very specific, but I actually find it very interesting that because of a change in, uh, listing and indexing requirements, uh, specifically the NASDAQ 100 index methodology, uh, SpaceX could become part of that index within 15 trading days of going public. Why does that matter? You might ask. Many Americans, probably most Americans actually, uh, who hold stocks, do so through ETFs. ETFs, the popular ETFs often, uh, are designed to track an index. So S&P 500 or NASDAQ 100, what have you. Um, the end result being retail investors are, ah, likely to end up holding SpaceX stock through ETFs without, essentially, without any say in the matter.

Jason Mikula: Right.

Alex Johnson: If and when SpaceX is added to various indices, uh, so not just NASDAQ, but if it joins the S&P 500 index, have you. It's going to be in your portfolio? It's going to be in my portfolio. It's going to be in everybody's portfolio who holds ETFs that track those benchmark indices. Um, uh, there's a longer discussion about, hey, there are some pretty crazy governance problems in that I think Elon Musk holds 86% of the voting stock. And so is it really appropriate to be essentially forcing this investment on people when the governance of the company potentially, ah, is very bad? Um, I think the cynical take that is floating, uh, around Twitter, which frankly I don't disagree with, is that this is basically retail as exit liquidity. So you have a bunch of early investors in SpaceX that they want to cash out at that, whatever, 2 trillion, 1.5 trillion valuation. But in order for them.

Jason Mikula: That's a nutty number, by the way. It's just like a nutty number.

Alex Johnson: If you look at analysts who've done a discount cash flow analysis, they put a reasonable valuation at 150 billion, not 1.5 trillion. Yeah, um, but if you're a early investor that wants to cash out at that luxurious 1.5 trillion valuation, you need somebody to buy those shares. And at the end of the day, like this gambit with the NASDAQ index, what it's facilitating is, you know, your ETF, my, my ETF. Uh, whoever has 401k, uh, invested in ETFs as exit liquidity for investors in SpaceX. And I don't know, I guess I'm channeling my inner Susan Collins because I just call everything troublesome and like, I'm worried about everything. But it's like, what, are you going

Jason Mikula: to vote against it? Jason?

Alex Johnson: God damn it, I don't get a vote. Apparently corporations get to vote in Delaware. Now that's a topic for a different day. Um, so, yes, that is what I cannot let go of. SpaceX, uh, dumping on retail investors as exit liquidity for their VCs.

Jason Mikula: Well, when I saw your notes on that, I assumed you meant people buying it, like, explicitly, which would be bad enough. But like, yeah, if it's built into my ETFs, like, that's a whole other level of problem. It does also remind me of like the just general alarm or concern that so much of like the stock market's value hinges on like three companies and like two people or whatever. Like it's, it is another example of just how enmeshed with a very small number of companies and people the global, you know, economy is, which is, is concerning on a whole other level. Um, my can't let it go is one that I think we've at least texted about, if not talked about, uh, which is PayPal's settlement with the Department of Justice over a. Let me see if I can get this right. A fair lending investigation regarding an investment program. So this was a, uh, program to invest in black and minority owned businesses that PayPal announced and launched, uh, in 2020, kind of right in the wake of the George, George Floyd uh, protests. And the program, just to be uh, totally clear, was not in any way connected to loans. There were no loans. No one was loaning any money. PayPal didn't make any loans. And yet the Department of Justice investigated them for violating fair lending laws. And as a part of the settlement that PayPal has agreed to, not only are they going to be giving away, uh, sort of discounted payment processing for different categories of business, which, while not explicitly coded to any one demographic group, are overwhelmingly going to go to white men. But in addition to that, PayPal has also agreed to stand up an internal program where, among other things, they will train their employees m on fair lending laws so that they don't violate them in the future, even though they didn't violate them in the past. This is one of those ones, Jason, where like, I'm just never going to let this go. Like, it is going to haunt me forever that PayPal agreed to say, settle an investigation into violating fair lending laws when they didn't lend loan any money. Uh, I'm just going to lose my shit about this forever.

Alex Johnson: Yeah, I think we both wrote about that in our respective newsletters. And I remember seeing the headline and then actually reading the DOJ press release and then googling back to the original PayPal announcement of the program. And I think it was 2021. And then being like, am I stupid? Uh, I don't see any loans here. And I'm pretty sure that ECOA Reg. B apply to credit because credit is in the name Equal Credit Opportunity Opt. What? Fair. What?

Jason Mikula: How? Why? What? This is bizarre. I mean, I know we don't live in this world. I know we don't. But I wish that the new CEO of PayPal, who had nothing to do with this program, and the program had already ended, so it's not even happening now, and again, has nothing to do with lending. I wish the CEO had just gone to the Department of Justice and went, you know what? This wasn't against the law then, it's not against the law now. It's certainly not against the Equal Credit Opportunity act, which, again, regulates the granting of credit. Go fuck yourself. That would have been lovely if they had done that. Uh, and maybe in an alternate universe somewhere, that's what happened. But it didn't happen in this universe. And, man, that's disappointing.

Alex Johnson: Yeah, uh, that was a pretty disheartening one to read.

Jason Mikula: Yeah, I wasn't wild about that. So I'll probably talk about this forever on the podcast from now on. So, just as a heads up, I'll just be constantly referencing this because I'll

Alex Johnson: never be able to let it go.

Jason Mikula: Uh, Jason, thank you for letting me get that off my chest. That was very therapeutic. Uh, as always, a delight, sir. Enjoy the summer. Enjoy. I will, I'm sure. Very cool temperatures and you won't need air conditioning. You'll be fine.

Alex Johnson: It is going to be a great summer.

Jason Mikula: Okay. I love it. I'll talk to you soon.