January 15, 2022 / VOLUME NO. 192

Please Calm Down

It’s time to slow down this party. It’s been fun, but the booze is making people wacky.

To close out last year, the musician Eminem spent $462,000 on a nonfungible token (NFT) of a cartoonish yawning primate from the Bored Ape Yacht Club. One benefit of such a purchase is hanging out with other people online who have paid significant sums for cartoons of apes. You can find Eminem’s ape online and copy it to your heart’s content, but the musician owns the “original” on the blockchain, which permanently records its ownership and sales history.

A recent Visa survey found that 36% of U.S. residents with control over their household finances own cryptocurrencies. As of Wednesday, the most popular of them, bitcoin, ranged in value from $28,800 to $68,990 during the prior 52 weeks, according to Coindesk. 

But in case you thought you escaped the wackiness by avoiding crypto and NFTs of apes, think again. Quarterly home prices grew the fastest since the Federal Housing Finance Agency began tracking them in 1992, with prices up nearly 20% through the third quarter of 2021 compared to a year ago. Nearly a third of buyers purchased their homes by offering more than the asking price, according to the National Association of Realtors. 

Imagine walking into a grocery store and offering to pay more than the sticker price for tomatoes. Or toilet paper. There’s no reason to think it will come to that. But consumers are happily purchasing goods even as prices rise. The U.S. Bureau of Labor Statistics reported this week that the consumer price index rose 7% in December year over year, the highest level since 1982. 

Federal Reserve Chairman Jerome Powell told Congress this week that if the pace of price increases doesn’t come down, the central bank will get more aggressive in raising short-term borrowing costs, leading to higher interest rates. The market expects six rate hikes by the end of 2023, according to a research note by Piper Sandler & Co. 

I hope the Federal Reserve will get serious about reigning in overexuberant inflation without destroying economic growth. Rising interest rates generally benefit banks — but only if the economy doesn’t collapse. If that happens, the apes will have more to worry about than boredom. 

• Naomi Snyder, editor-in-chief at Bank Director 

What the Heck is Web3?

Increased attention on Web3 should have leadership teams questioning what this latest technology trend means for their bank.

“There’s a tremendous amount of talent and effort and capital that’s going into this. Frankly, I don’t think it’s a fad.”

— Ryan Zacharia, Jacobs Asset Management

• Emily McCormick, vice president of research for Bank Director

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How Open Banking Will Revolutionize Business Lending

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FinXTech’s Need to Know: Augmented Intelligence

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Reconsidering Pay Strategy in the Wake of Inflation

Banks should think about how well pay strategy addresses four needs.