Archive for the ‘Banks’ Tag

Second Life Bleeding Into CNN’s Real Life

It’s absolutely wild and weird.

For some reason, my traffic has been spiking lately, and a lot of it is due to two articles I’ve written:  one on the custom Droxine gown I commissioned from Hanalyn Ferrer — understandable if people are looking for photos of the original — and one commenting on the Grid banks closure last year.

The big one right now is the bank article.  I had 32 looks at it yesterday, and 56 to this point today (noon SLT).  And I wondered where the burp in traffic was coming from, since we have mostly weathered the financial storm in world as far as I know.  WordPress keeps good statistics, so I poked through my blog stats, and found a link from CNN Search.  The rest of the items on the search page tied in to bank closures — Real World bank closures.

Folks, I’d suggest you don’t come to me for RL financial advice.  I can barely keep my own RL finances in trim at times.

The good thing:  it’s driving my traffic closer to 10,000 (grin).

Deadline Passes for SL Banks; No Word on Current Situation

Tuesday was the deadline for Second Life banks to stop offering interest or close down — and it seems to have passed without any more notice from the general Resident population. Well, at least other than the constant hits I get on my previous articles. One or the other of the articles gets at least a few hits a day. As for the feared runs on assets, those were quickly stifled by the bank owners themselves, who slapped limits on their ATMs until they could supposedly liquidate assets and cover withdrawals.

What has happened, from the looks, is the essential collapse of the Grid-bank industry. Several banks have either sold their assets to purchasers, or have simply closed up shop. At least a few are trying to work around the ban on interest payments with what amounts to a renaming of “interest” — or they plan to move to new metaverses such as Central Grid. The ones hanging on still promise that all deposits will be covered for those willing to offer them the time to gather or convert their capital. Whether this will work out in the long run, knows God.

One thing is probably certain: someone else will devise a plan to offer a return on investment to Residents, and there will be a rush to join the industry — until RL lawyers get nervous, justifiably, about liability issues. And that will be the end of that. I would rather have a no-bank world, though, then take a chance on leaving my lindens with a scammer. That cash has value both in- and out-world, and I want control of it for myself.

Posted January 25, 2008 by Harper Ganesvoort in Business

Tagged with , , , , ,

More Comment On the Bank Closures

Dusan Writer has put up a fresh piece on the Grid-bank situation. It’s a touch opaque at times unless you give it a careful read, but it’s quite worthwhile. In summary, though, he reiterates the primary objections to the existence of unregulated “financial institutions” on the Grid, or in any other metaverse, unless you wish to open the door to government intrusion of activities.

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Banking ban (UPDATED)

(First paragraph revised for clarity, to include needed information. Also see updated Other Posts listing at bottom.)

Linden Lab today announced via the Big Blog that they were ordering a shutdown of all banks offering interest or any other form of return on investment to depositors, unless they can show that they are appropriately on record with a RL banking regulatory body. This follows the series of Grid banks that have failed in recent months before I arrived in world, including Ginko Financial in August.

Truthfully, this is not a surprise, and should have been expected by the Resident community at large, even those individuals and businesses that have invested in the banks. The Lindens, after all, are not a government, but a private corporation. Despite my blithe contention a month ago that they are, in effect, the despots and tyrants (in the old-fashioned senses of those words) of Second Life, they are not running SL for the sake of running a virtual world that we get to play around in. They’re trying to make a profit themselves. But they’re also responsible to the RL government for obeying laws; and part of those laws pertain to the running of financial institutions. If Residents started losing tonnes of money on wobbly banks and Ponzi schemes in world, and then complained to the SEC, the Federal Reserve, and any other national or state institutions — and those are just the ones in the United States! — what choice would LL have but to either force closed all Grid banks, or pay hefty fines to the governments? In addition, this covers LL’s rear from being sued in civil court as indirect parties to fraud cases.

To those who are complaining about an arbitrary move by LL, with little or now warning, I suggest you consider these points:

  1. We own the intellectual property, but the Lindens own the Grid; they have the right, in the end, to pull the switch if they choose to and make the whole of SL so much etherware, because they own Second Life.
  2. Any investment, anywhere, involves risk — even something as safe seeming as banks. SL banks are wobblier than most (outside, perhaps, of Russia during the days immediately following the collapse of the Soviet Union). LL didn’t make you invest your money; you chose to. If you get burned in a banking run, it’s your problem. It’s a little principle of business called laissez-faire — along with another concept: caveat emptor.
  3. The extreme interest rates offered by some SL banks should be a tipoff that these banks need to be regulated; and the people who have the regulation mechanism in place are the RL governments. Besides the simple fact that no reputable (and sane) RL bank would offer such high interest, rates of 50-95% annually on simple deposit savings haven’t been seen since the late Seventies, when RL inflation in America was growing out of hand, and banks were offering daily interest — compounded! — to lure depositors. It took the Federal Reserve yanking on the choke collar to bring that inflation under control. Now imagine inflation like that running rampant in world. The linden is relatively steady now; how much would we bitch if it were caused to become unsteady? Prices through solid roofs, never mind the phantom ones, all our gaudy clothes and cars becoming unaffordable, etc. Forcing the banks to obey standard banking laws — and be RL liable to investors under those laws — is probably a very sound economic move on the Lindens’ part.
  4. If Linden Lab got caught up in a civil or criminal action, and ended up having to pay out lots of real U. S. dollars in fines or settlements — not to mention legal fees — they might be forced to shut down anyway, and all carping about lost capital would be moot. £500,000 equal only some $1900 U. S. at current exchange rates. Compared to the hundreds of thousands — or millions — LL would face in liability actions in various courts, which matters more to the business? It’s said that in show business, there’s the show, and there’s the business. In Second Life, there’s the lives we lead, and then there’s the Real World — which bites a lot harder.

Think about all aspects before you take LL to task for this action. This just might mean the saving of the Grid in the long run!


News and Blogs (updated 1/9, 6:10 SLT):

The SLogosphere is either getting up to steam, as the expanding list of blog articles suggests, or I just needed to use more than one technique of looking for scribblings on the subject (grin). In any case, there’s plenty of discussion (read: venting) in the Linden-run Forums. Search on “banks” for a taste, and be prepared for some extreme opinions. (Registered payment info required!)

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