As Nassim Taleb observed, the problem here is no skin in the game. Bankers keep the upside, but shareholders have to carry the can. It's an agency problem. The fix to all this is dispensing some good solid jail time.
This is generally a problem with employees in general, especially as tenures decline.
Sales stuffs the channel with products that are later returned as they get their commission. Or they vastly oversell what the product can do.
Engineers rack up tech debt to keep the Scrum Master happy and choose technologies based on how good they look on a resume.
HR people pass around crappy or abusive employees to other departments rather than doing the hard work of terminating them.
Wells Fargo shareholders evidently don't care that much and a big reason for that is that the average shareholder is probably just a fund of sorts, so it isn't really their money either.
Talk about perverse incentives. Their customers, meaning the people who are directly affected, are like the only ones who don't have any power to influence what happens.
And everyone with power to influence the company just isn't affected and doesn't care ...
> Their customers, meaning the people who are directly affected, are like the only ones who don't have any power to influence what happens.
They do, but they would need to actually change their spending. That's the other thing. After scandal after scandal after scandal, plenty of people still bank at Wells Fargo.
> After scandal after scandal after scandal, plenty of people still bank at Wells Fargo.
It’s not always exactly a choice. Wells Fargo bought my mortgage from a local bank. The only way to change your lender is to do a refinance, which incurs closing costs. Despite several serious WF fuck ups like double and triple charging my mortgage payment, failing to correctly maintain escrow, etc there is literally nothing I could do without losing tens of thousands of dollars until market conditions had changed and enough time made it feasible to re-fi, which I did promptly.
The problem with big banks is not just that they’re criminally fraudulent assholes, it’s that they will straight buy your customership on the backend in ways you are locked into. The same thing temporarily made me a Bank of America customer when they just straight bought a local bank chain. I’m now with a credit union and moved everything there, but it’s non trivial to do.
I think the tenure decline is a symptom of the removal of incentives outside of simple base pay from the majority of employees. When you have a pension that can only be paid in retirement if the company remains solvent you tend not to make these short term choices.
What you are drafting is the difference between private ownership (ie the company is owned by current a former employees who have an incentive to keep a watchful eye for long term risks) and public ownership (ie the company is owned by anyone who either buys a share or has money with a fund manager who buys the shares), where no single person has any long term incentives.
I don't think that terminating an at-will employee is any hard work.
What's hard is to hire a replacement; it can easily take months, and cost months of the employee's salary in the interviewing costs. And somebody got to do the jerk employee's work in the meantime.
(And this is in the US; I can't start imagining the hurdles of firing somebody in the EU.)
> And this is in the US; I can't start imagining the hurdles of firing somebody in the EU.
German (and Workers Council member at my employer) here. Firing incompetent workers is possible here, although you do have to show efforts on your part as well to have improved the situation (e.g. by providing training to the employee), and firing malicious-acting employees (e.g. in cases of theft, violence or intentional property damage) is easy.
European worker protection laws demand good will from both sides, not just from the employee - so for example you can't be fired because you damaged or destroyed a piece of machinery in an accident if the employer hasn't taken reasonable steps to prevent such accidents, including not overloading your employees with work.
>I don't think that terminating an at-will employee is any hard work.
Contrary to what HN may have implied, you still have to comply with federal labor law in at-will states and if you want to terminate someone in a manner where you can be all but guaranteed you will not have to settle a frivolous wrongful termination lawsuit there is a pretty decent amount of coordination and documentation work that needs to be done. I wouldn't call it hard work but it's not non-work and it does take time.
Taleb's got lots of very critical thoughts on banking in general and bailouts in particular [0]. In a reddit thread he said he's got no banker friends (considers it unethical). He champions free markets with skin in the game constraints, plus scale considerations.
Absolutely true!
Bankers can make short term gains by sacrificing long term growth and nobody does anything, because by the time the true costs appear, the "old" bankers are already gone and there is nothing you can do here, and the "new" bankers came after and are not responsible for what their predecessors did.
All of a sudden you are in a situation where no one has any accountability and long term thinking is not a viable strategy.
And this agency problem is partially caused by regulators and "good governance" rules who demand that the board is "independent" from the shareholders. But this makes them have less skin in the game and diminishing the effect of fines!
The problem is, who else would have the desire and expertise to be on the committee? Regulatory capture is a hard problem, because anyone qualified to regulate is going to have some interest.
My other suggestion is that to practise banking, one needs a license, which can be revoked.
Now that I think of it, Taleb's suggested that banking should be a civil servant job. So, no financial engineering or bonuses, just boring paperwork.
In the wake of the financial crisis of 2008 (IIRC), the role of regular banking and hedge fund activities was split in two. The idea is, of course, that if all the fancy derivatives blow up, it wouldn't take retail banking with it. I read recently that the UK government was thinking of dropping this, which seemed a bad idea.
That is already case, it isn't formalized though. If you want to be a bank executive you must prove both theoretical and practical skills and management experience. That is already a steep hill. Also, any criminal record, especially related to banking or money makes it harder or outright impossible to qualify.
You can also be straight-up banned from the industry, which has the same kind of effect as revoking a license, but doesn't really seem to have been enough of a deterrent.
No. In the US, ant any given time the fed nominates about 10 banks that are “too big to fail”. There are hundreds of banks in the US and a couple fail every year.
An interesting question is should the fed use that distinction at all? And if so should it be removed as a penalty for bad behavior.
> In the wake of the financial crisis of 2008 (IIRC), the role of regular banking and hedge fund activities was split in two.
This thing comes and goes in waves.
IIRC the requirement that retail banking and proprietary trading not be mixed was already part of the Glass-Steagall Act that came in the wake of the great depression. Clinton repealed it, which somehow played a role in the Citigroup-Salomon Brothers merger.
After the 2008 financial crisis, the "Volcker Rule" was a regulatory effort to bring back this separation, but it took long to implement, is still not fully rolled out (there are exceptions granted, allowing banks a very long time period to trade out of positions they previously held), and there's already talk of rolling it back again.
...sorry, just recounting something from memory I had read a long time ago, with the original source unavailable to me right now. Maybe the original had some bias, or I misremembered or something.
>My other suggestion is that to practise banking, one needs a license, which can be revoked.
You are ignorant of current regulation. While there is no paper license that you have to apply for in most cases there is tons of "if you do X you are a Y and must register yourself with some regulatory agency Z and follow our list of rules for your business to be lawful" which is functionally identical to a license.
> My other suggestion is that to practise banking, one needs a license, which can be revoked.
That's slightly true already with SEC sanctions, but it doesn't really matter. If I make my millions in bonuses but then I can't practice banking anymore? Oh well nbd.
Shareholders hold shares by choice, so they don't "have to" do anything.
If there are 22 years of records about which fines were paid, then the market must have already priced in this information a long time ago. Shareholders chose to pay that market price.
If some institutions track indexes, why don't indexes drop the chronically underperforming asset?
If it's not actually underperforming, that is, a lot of the market does comparably, not much better, them $1B / year is just the cost of doing business, however cynical this may sound.
I wonder what would happen if pensions, funds and other would pass through voting rights of the share they own to the fund share owners.
This way if you own a share in a fund or have a right in pension, if the fund chooses to buy shares of company A, when there is a shareholder vote of company A instead having the fund manager to vote, the fund manager would transmit this voting rights to you.
This would overwhelm the Little Guy, and he just wouldn’t vote. The reality is that few will go through the hundreds of companies to vote on all the things.
I would literally get hundreds of votes a year from all the index funds in my savings plans.
Everybody would give management their proxy, same as fund managers do now, or corporate governorship would grind to a halt as they never reached quorum at shareholder votes.
When you sign up for someone (like a pension plan, and yes, it's a choice) to manage your money, you can't pick and choose individual stock. Just like when you go to a restaurant, you can't order them to go and buy a different kind of carrots because you have a major problem with what kind of carrots they use. However, money managers do have their metrics they are held up to, and if they generally don't perform, they get fired. At some point, a decision was made to work for an organization that compensates their employees via a pension plan vs. for example taking a salary and picking individual stocks personally, that is presumably a free will decision just like when I choose to get my food at a restaurant, I give up my option of picking every single ingredient in my food.
> Bankers keep the upside, but shareholders have to carry the can.
While I'm not against throwing corrupt bank execs in jail, shareholders could also take their job seriously and only send people to the board of directors that actually hold the company officials accountable.
Unfortunately, an increasingly large amount of stocks is held by "neutral" investors (=passive ETFs) or neutral-ish investors (pension funds, insurances and the uber wealthy's private wealth management), which creates a lot of leverage for "activist investors" that push for short-term beneficial actions even if these end up damaging to the company long term, such as going for questionably legal operations.
To u/gowld: you seem to be shadow banned or immediately downvoted to oblivion, not sure what's the case here (and vouching for it didn't help?).
To reply to your point... I agree that broad market funds are a problem, but I would not place the blame on the buyers. We can't expect people to be hobby traders for their retirement funds and it's incredibly risky as well, if going by the regular loss porn on r/wallstreetbets. The problem for me rather lies in the system that the US have set up in the first place by forcing people to invest into the stock markets for their retirement - it gives an insane amount of political leverage to the big corporations (i.e. at least S&P 500), as politicians always have to consider the impact of a political move (e.g. the banning of ICE car sale) on the stock markets because sending the stocks for affected companies tanking has a real impact on voters' retirement security.
Why is this question almost only asked about rich criminals, not poor criminals? Maybe if rich people had more skin in the game, we'd see real incarceration reform.
Graeber has an observation on a different part of this: the penalties are never greater than the profit that triggered the penalties. We're basically telling the bankers that "it's okay as long as the government gets a cut of the loot".
I'm assuming that's exactly the message the government wants to send. They keep saying it over and over through "administrative actions" and bailouts where the alternative would be arrests and bankruptcies.
It's not exactly how bad-things taxes work, though. Sure, from a business point of view the nicotine tax is seen as "you're allowed to peddle it as long as the government gets a cut of the loot" but from the consumer perspective, there is actually evidence that it reduces the inclination to make the transaction in the first place.
This is not the case with banking penalties which are clearly only a net positive exchange for the banks.
They already celebrated their earnings in the past, people got bonus or raises or promos on their "performance" using the fruits of their bad behavior. Probably there is different leadership now. The new leadership can use these things to explain any slow quarter, then they try to write off any problems they have now and combine it with this problem (and blame the old person).
You see this cycle again and again. Until companies are killed or leadership is fired, and loses their potential for future employment/mayhem, goes to jail - if there is no immediate serious personal repercussions or the company might die, then there won't be much change.
Okay but that sounds more like a principal agent problem as noted in the root comment rather than the "punishment is smaller than the crime" problem I was questioning.
I like the idea of prison time but that's only going to happen with an impartial legal system that treats everyone the same; regardless of wealth, upbringing or Ivy League attendance among others.
In the meantime how about fining companies so much that the bank will become insolvent if they don't give a crap and passing laws (if they don't exist already) to force a halt in trade for x-days/weeks?
I think the banking industry is already very heavy regulated since 2008. In fact these regulations are (in my limited experience) at least as bad for the consumer as for the banks. Dealing with banks in general since 2008 has been a huge pain in the ass, and it's not really the bankers' faults (other than the huge debacles that led to regulation).
Better to just let the banks doing stupid risky crap fail instead of even more regulation. And if the stupid risky crap they're doing is also illegal, then make the penalties matter, as others have already said.
>Dealing with banks in general since 2008 has been a huge pain in the ass,
In which ways? I cannot say I have noticed any difference pre and post 2008. If anything, the CFPB which was established after 2008, helped save me a ton of time and effort when I could not easily get a hold of a bank employee who could resolve my issue.
What would be the 'cost' international competition wise to harming your own banking sector with penalties for the banks and not individuals? It's not a leading question. Are there enough banks and enough 'good' banks to do this obvious domestic win with no international consequences?
> I like the idea of prison time but that's only going to happen with an impartial legal system that treats everyone the same; regardless of wealth, upbringing or Ivy League attendance among others.
Why? These inequities exist all over the US legal system yet prison time is handed out for many offenses anyway.
WF keeps doing this over and over. It’s baffling how the fines haven’t just gone up exponentially and folks haven’t gone to jail. They literally do not care. They know exactly what will happen and the math makes sense every time.
In the USA, politicians are bought and paid for by megacorps. They can’t really punish anyone without losing money themselves. In China, politicians are part of the CCP. If they don’t do what the CCP wants they have very serious consequences. Two systems, two very different yet serious problems.
One could make the argument that the USA became an oligarchy during the 1896 Presidential election season. McKinley’s campaign was run by Mark Hanna, and the campaign managed to secure funding from Standard Oil as well as various mining companies. This doomed the Bryan campaign. I find it interesting that the McKinley administration launched the US into war against Spain, and the USA has thereafter been continually at war… so first modern campaign finance, modern press involvement, military-industrial complex, and so on. McKinley looks to be the first truly bought and paid for politician in the USA. The rich got what they wanted and the poor were sent to fight and die and slaughter the innocent in a poor nation (the Philippines in this case). Seems startlingly similar to the current state of the USA.
The culture goes even further. We demand individuals to do pointless self flogging rituals like tediously organizing their recycling just to have it be buried in china. Meanwhile corporations are free to waste as much plastic product as they care to without repercussion.
America is all about squeezing the individual for the few in power and wealth.
> We demand individuals to do pointless self flogging rituals like tediously organizing their recycling just to have it be buried in china.
German here. It's not that hard to separate paper, glass, metal, plastics and remainder waste. Paper, glass and metal are recycled at very high rates (over 80% for paper and glass [1][2] and over 90% for metal), and the separation between plastics and remainder waste allows trash incinerator plants to better control their output and, at least assuming that we get large scale post-consumer plastics recycling plants, we already have the behavior and logistics established in place and only need to divert the streams at the collection level.
The key thing is, this sorting has to happen at the consumer, because filtering out valuables for recycling from a merged waste stream is all but impossible and at least in the case of paper, permanently kills off its recyclability.
In America we do things differently. We carefully organize our recycling but instead of it being recycled it is sent to China, who extracts the tiny amount of value it can from it, and then buries or dumps the rest in the ocean. There’s some nice articles about it.
I’m stupid enough that I still performatively wash out the glass and aluminum so the workers in China have to do less. But what is a West coast American if not performative?
The first article does blame the consumer education and habits, which is funny. When a company bids on a contract from the government it is much easier and cheaper to collect the “recycling” and ship to China for pseudo-sorting and disposal rather than developing the infrastructure to properly recycle. Cheapest bid wins here in the US so it gets shipped out and the “uneducated” consumer gets the blame for the policy.
In the end how can you encourage someone who does not recycle to do so with this ridiculous reality in place? There’s a nice NYT article about it from a few years ago.
You should do some deeper research into how what recycling really is.
It is that hard when the vast majority of it is just buried. And the take that it needs to be at the consumer level is corporate brainwashing - if corporations aren’t allowed to use plastic excessively, that would alleviate waste far more than any recycling campaign ever has.
Just make sure to consider the sources you’re using to formulate your opinions.
But look at Bank of America[0]. 4x that meager $22B of WFC. Or Chase[1], which is only slightly worse than WFC. BK and USB are almost poster childs with only ~1B of penalties each[2][3].
...and then look at (for example) Charles Schwab, fined "only" $833M in that time period, with over half of that coming from TD Ameritrade, with the offense prior to acquisition. There are much less predatory institutions out there.
Fines would be part of the expenses that go into calculating net profit.
But a business like Wells Fargo with lots of physical locations and staff has a lot of fixed costs. Their operating profit is $80B, but net profit is $20B.
I do not see a reason to ignore $60B of expenses when comparing fines to a measure of the business’s performance.
Some of us don’t have a choice. I got a mortgage from a local bank. One week after we closed I got a letter that WF now owns my mortgage, and I can send future payments to them.
Yeah. I wish there were terms to exclude certain banks when getting a mortgage. WF fines since 2000 should be closer to $100B for all the fraud they’ve committed. Will anything change without jail time? I doubt it.
That’s terrible. My wife banks there and has done so before we got married. It’s a spot of contention for us since she wants us to merge accounts and I don’t want to for obvious reasons.
Instead of wasting resources punishing arbitrary capitalists (the next Wells CEO is no doubt biding its time), the state should seize some portion of the bank's operations and use them for the creation of operationally resourced public banks [1]. Then use this as a basis for the creation of plan for responsible community re-investment.
As Lenin observed:
" It is absurd to control and regulate deliveries of grain, or the production and distribution of goods generally, without controlling and regulating bank operations. It is like trying to snatch at odd kopeks and closing one’s eyes to millions of rubles. Banks nowadays are so closely and intimately bound up with trade (in grain and everything else) and with industry that without "laying hands" on the banks nothing of any value, nothing “revolutionary-democratic”, can be accomplished. " [2]
But when large companies get to control every aspect of one's life, and one is practically forced to use a bank, and banks are an oligopoly, I favor state intervention.
The money supply, controlled mostly by commercial banks, dictates whether we are in a boom or a recession. Credit scores are instruments of surveillance. Banking policies against certain activities (legal ones) impose de-facto bans on those activities, ostensibly to reduce the risk of illegal activities.
As long as banks have enormous power over individuals, and as long as there is little competition, the state must regulate them.
I've never understood why this ideology is deemed acceptable in polite conversation. If you quoted Hitler in glowing terms, you'd be rightly banished from society. But the much worse Lenin (& friends) is a-ok.
No, it's not. One actually has a valid business with flawed implementation which effected a portion of customers. The other is a Ponzi scheme that stole 100% of assets from 100% of customers. In Wells case, affected customers have legal recourse that can compensate them for their suffering, because the overall business is solvent. In FTX case, you get nothing, nada, zero, zip.
I remember I was about 19, getting into a screaming match with a branch manager about multiple “new accounts” I had opened that were now overdrawn because of fees. Problem was, I had proof the signature wasn’t mine and I was out of the state at the time they were signed.
Free days later I get a call asking me to come close my accounts, all these strange accounts went from -$300-500 each, to $5.
For years and years people thought I was crazy when I said I don’t do business there and they were scammers, why would a bank steal? lol, here we are two decades later and they are still up to no good.
What level of malice must a company site repeatedly teach before regulators actually protect those they are set to protect?
At this point, it seems Wells Fargo execs have decided that as a company strategy, these fines are going to be a Opex line item on their balance sheet. Cost of doing business - plain and simple.
The most disturbing aspect of the last Wells Fargo “issue” is that many employees came forward to HR to raise the issue. Instead of investigating, and acting in the best interest of the customers and employees, HR helped facilitate the deception. The head of HR should have been severely punished. Instead the deputy general council left WF. The rot was much deeper, and nobody went to jail. I’m not aware of any being subject to clawback. These were people who orchestrated the firing of whistleblowers.
The U.S. Department of Labor's Occupational Safety and Health Administration found Wells Fargo violated the whistleblower protection provisions of the Sarbanes-Oxley Act.
Wells Fargo continues to show up with these headlines. The only way thats possible is if HR is facilitating this effort. Congress needs to expand whistleblower protection to result in criminal prosecution of those who facilitated the whistleblower retaliation.
Until then, these violations will continue.
Right now, HR is incentivized to thwart the investigations, and get rid of the whistleblowers. Nothing has changed.
Maybe more novel punishments, like if you do X, then all senior staff, CEO, board members, VPs, etc are restricted for a period of x years from using private jets, charters, or business class in commercial airlines. If they fly it MUST be in economy class; this applies to both work and personal travel.
Let's start taking away the perks. Golf course memberships are next - they can only use lower tier public courses. Next are restaurants and lodgings, 3 stars or lower.
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[ 2.8 ms ] story [ 182 ms ] threadHow do they account for this in their financial statements?
Sales stuffs the channel with products that are later returned as they get their commission. Or they vastly oversell what the product can do.
Engineers rack up tech debt to keep the Scrum Master happy and choose technologies based on how good they look on a resume.
HR people pass around crappy or abusive employees to other departments rather than doing the hard work of terminating them.
Wells Fargo shareholders evidently don't care that much and a big reason for that is that the average shareholder is probably just a fund of sorts, so it isn't really their money either.
Talk about perverse incentives. Their customers, meaning the people who are directly affected, are like the only ones who don't have any power to influence what happens.
And everyone with power to influence the company just isn't affected and doesn't care ...
They do, but they would need to actually change their spending. That's the other thing. After scandal after scandal after scandal, plenty of people still bank at Wells Fargo.
It’s not always exactly a choice. Wells Fargo bought my mortgage from a local bank. The only way to change your lender is to do a refinance, which incurs closing costs. Despite several serious WF fuck ups like double and triple charging my mortgage payment, failing to correctly maintain escrow, etc there is literally nothing I could do without losing tens of thousands of dollars until market conditions had changed and enough time made it feasible to re-fi, which I did promptly.
The problem with big banks is not just that they’re criminally fraudulent assholes, it’s that they will straight buy your customership on the backend in ways you are locked into. The same thing temporarily made me a Bank of America customer when they just straight bought a local bank chain. I’m now with a credit union and moved everything there, but it’s non trivial to do.
I don't think that terminating an at-will employee is any hard work.
What's hard is to hire a replacement; it can easily take months, and cost months of the employee's salary in the interviewing costs. And somebody got to do the jerk employee's work in the meantime.
(And this is in the US; I can't start imagining the hurdles of firing somebody in the EU.)
German (and Workers Council member at my employer) here. Firing incompetent workers is possible here, although you do have to show efforts on your part as well to have improved the situation (e.g. by providing training to the employee), and firing malicious-acting employees (e.g. in cases of theft, violence or intentional property damage) is easy.
European worker protection laws demand good will from both sides, not just from the employee - so for example you can't be fired because you damaged or destroyed a piece of machinery in an accident if the employer hasn't taken reasonable steps to prevent such accidents, including not overloading your employees with work.
Contrary to what HN may have implied, you still have to comply with federal labor law in at-will states and if you want to terminate someone in a manner where you can be all but guaranteed you will not have to settle a frivolous wrongful termination lawsuit there is a pretty decent amount of coordination and documentation work that needs to be done. I wouldn't call it hard work but it's not non-work and it does take time.
[0] https://twitter.com/search?q=from%3A%40nntaleb%20bankers
All of a sudden you are in a situation where no one has any accountability and long term thinking is not a viable strategy.
Now that I think of it, Taleb's suggested that banking should be a civil servant job. So, no financial engineering or bonuses, just boring paperwork.
In the wake of the financial crisis of 2008 (IIRC), the role of regular banking and hedge fund activities was split in two. The idea is, of course, that if all the fancy derivatives blow up, it wouldn't take retail banking with it. I read recently that the UK government was thinking of dropping this, which seemed a bad idea.
https://www.finance-watch.org/still-going-round-in-circles-t...
Most banks are "too big to fail".
An interesting question is should the fed use that distinction at all? And if so should it be removed as a penalty for bad behavior.
This thing comes and goes in waves.
IIRC the requirement that retail banking and proprietary trading not be mixed was already part of the Glass-Steagall Act that came in the wake of the great depression. Clinton repealed it, which somehow played a role in the Citigroup-Salomon Brothers merger.
After the 2008 financial crisis, the "Volcker Rule" was a regulatory effort to bring back this separation, but it took long to implement, is still not fully rolled out (there are exceptions granted, allowing banks a very long time period to trade out of positions they previously held), and there's already talk of rolling it back again.
Hadn’t realised he was taking a break from the presidency and interning for the Republican Party at the time.
(The repeal was of course a Republican bill with voting more or less along party lines…)
Thanks for the correction.
Nobody really wants that. We all want to get high on new and inventive financial instruments, to fund our increasingly "chase that paper" lifestyles.
In theory it sounds great, in practice the whole world lives in the fast lane now.
You are ignorant of current regulation. While there is no paper license that you have to apply for in most cases there is tons of "if you do X you are a Y and must register yourself with some regulatory agency Z and follow our list of rules for your business to be lawful" which is functionally identical to a license.
That's slightly true already with SEC sanctions, but it doesn't really matter. If I make my millions in bonuses but then I can't practice banking anymore? Oh well nbd.
Shareholders hold shares by choice, so they don't "have to" do anything.
If there are 22 years of records about which fines were paid, then the market must have already priced in this information a long time ago. Shareholders chose to pay that market price.
That's not how pensions, ETFs, index funds or pretty much anything works.
If it's not actually underperforming, that is, a lot of the market does comparably, not much better, them $1B / year is just the cost of doing business, however cynical this may sound.
https://g.co/finance/WFC:NYSE?window=5Y&comparison=NYSEARCA%...
This way if you own a share in a fund or have a right in pension, if the fund chooses to buy shares of company A, when there is a shareholder vote of company A instead having the fund manager to vote, the fund manager would transmit this voting rights to you.
Everybody would give management their proxy, same as fund managers do now, or corporate governorship would grind to a halt as they never reached quorum at shareholder votes.
Yes, it's exactly how that stuff works.
Why is it not the pension managers responsibility to make sure his clients are not invested in these things if there is financial risk?
Or, if you decide to invest in a market-wide ETF, you are explicitly choosing to take the bad with the good.
I love how people think you can outsource decision making to absolve yourself of responsibility.
That's the problem, there is no financial risk, check out Wells Fargo stock price.
These are social problems these companies are spinning off, any financial problems are externalized.
> I love how people think you can outsource decision making to absolve yourself of responsibility.
Real "and yet you participate in society" vibes.
Can you respond with a detailed plan for how my 80 year old father can get his pension plan to divest itself of misbehaving companies.
Be specific.
A Wells Fargo stock holder would have lost out on ~70% of returns over the last 5 years compared to a relatively riskless investment in sp500.
https://g.co/finance/WFC:NYSE?window=5Y&comparison=NYSEARCA%...
Total return for past 10 years is 4.79% per year.
https://dqydj.com/stock-return-calculator/
JPM 10 year return is is 15% and BAC is 13%.
5y -33%
Chase +21%
SP500 +44%
Sociopaths follow the rules if there are repercussions to breaking them, a fine is not really a repercussion.
While I'm not against throwing corrupt bank execs in jail, shareholders could also take their job seriously and only send people to the board of directors that actually hold the company officials accountable.
Unfortunately, an increasingly large amount of stocks is held by "neutral" investors (=passive ETFs) or neutral-ish investors (pension funds, insurances and the uber wealthy's private wealth management), which creates a lot of leverage for "activist investors" that push for short-term beneficial actions even if these end up damaging to the company long term, such as going for questionably legal operations.
[1] https://blogs.cfainstitute.org/investor/2022/01/21/myth-bust...
To reply to your point... I agree that broad market funds are a problem, but I would not place the blame on the buyers. We can't expect people to be hobby traders for their retirement funds and it's incredibly risky as well, if going by the regular loss porn on r/wallstreetbets. The problem for me rather lies in the system that the US have set up in the first place by forcing people to invest into the stock markets for their retirement - it gives an insane amount of political leverage to the big corporations (i.e. at least S&P 500), as politicians always have to consider the impact of a political move (e.g. the banning of ICE car sale) on the stock markets because sending the stocks for affected companies tanking has a real impact on voters' retirement security.
Ah yes, incarceration, the solution to all of American's problems.
How many of these fines are even criminal, let alone worthy of prison time?
That's how most "bad things" work. Why would asinine banking practices be different?
This is not the case with banking penalties which are clearly only a net positive exchange for the banks.
Are you sure? In the most recent case they had to return all $2B taken from customers and pay a $1.7B fine.
I'd be willing to look at evidence to the contrary. (Cynicism is not evidence)
You see this cycle again and again. Until companies are killed or leadership is fired, and loses their potential for future employment/mayhem, goes to jail - if there is no immediate serious personal repercussions or the company might die, then there won't be much change.
In the meantime how about fining companies so much that the bank will become insolvent if they don't give a crap and passing laws (if they don't exist already) to force a halt in trade for x-days/weeks?
Better to just let the banks doing stupid risky crap fail instead of even more regulation. And if the stupid risky crap they're doing is also illegal, then make the penalties matter, as others have already said.
In which ways? I cannot say I have noticed any difference pre and post 2008. If anything, the CFPB which was established after 2008, helped save me a ton of time and effort when I could not easily get a hold of a bank employee who could resolve my issue.
Why? These inequities exist all over the US legal system yet prison time is handed out for many offenses anyway.
Or is it still a democracy and the blame ultimately lies with voters who vote on corporate-backed candidates?
They are almost always out-spent and out-campaigned from all sides because both bought parties want to maintain the two-party system at all costs.
There are exceptions of course, but not meaningfully.
Blame Citizens United for all this. That decision marked the day the US completely stopped being a "by the people, for the people" country.
But yes, America needs to go for the brass more often.
America is all about squeezing the individual for the few in power and wealth.
German here. It's not that hard to separate paper, glass, metal, plastics and remainder waste. Paper, glass and metal are recycled at very high rates (over 80% for paper and glass [1][2] and over 90% for metal), and the separation between plastics and remainder waste allows trash incinerator plants to better control their output and, at least assuming that we get large scale post-consumer plastics recycling plants, we already have the behavior and logistics established in place and only need to divert the streams at the collection level.
The key thing is, this sorting has to happen at the consumer, because filtering out valuables for recycling from a merged waste stream is all but impossible and at least in the case of paper, permanently kills off its recyclability.
[1] https://www.umweltbundesamt.de/daten/ressourcen-abfall/verwe...
[2] https://www.bmuv.de/themen/wasser-ressourcen-abfall/kreislau...
[3] https://de.statista.com/statistik/daten/studie/156541/umfrag...
I’m stupid enough that I still performatively wash out the glass and aluminum so the workers in China have to do less. But what is a West coast American if not performative?
[1] https://cen.acs.org/materials/inorganic-chemistry/glass-recy...
[2] https://www.bcg.com/publications/2022/whats-holding-back-alu...
In the end how can you encourage someone who does not recycle to do so with this ridiculous reality in place? There’s a nice NYT article about it from a few years ago.
It is that hard when the vast majority of it is just buried. And the take that it needs to be at the consumer level is corporate brainwashing - if corporations aren’t allowed to use plastic excessively, that would alleviate waste far more than any recycling campaign ever has.
Just make sure to consider the sources you’re using to formulate your opinions.
[0] https://violationtracker.goodjobsfirst.org/?parent=bank-of-a... [1] https://violationtracker.goodjobsfirst.org/parent/jpmorgan-c... [2] https://violationtracker.goodjobsfirst.org/parent/us-bancorp [3] https://violationtracker.goodjobsfirst.org/parent/bank-of-ne...
so 29% of one years profit
Inflation adjusted Gross profit 2000 was 32,485,000,000
But a business like Wells Fargo with lots of physical locations and staff has a lot of fixed costs. Their operating profit is $80B, but net profit is $20B.
I do not see a reason to ignore $60B of expenses when comparing fines to a measure of the business’s performance.
(Or 'touche' or 'I see the validity of your argument' hard to communicate tone through text especially with a multi-lingual userbase)
As Lenin observed:
" It is absurd to control and regulate deliveries of grain, or the production and distribution of goods generally, without controlling and regulating bank operations. It is like trying to snatch at odd kopeks and closing one’s eyes to millions of rubles. Banks nowadays are so closely and intimately bound up with trade (in grain and everything else) and with industry that without "laying hands" on the banks nothing of any value, nothing “revolutionary-democratic”, can be accomplished. " [2]
[1] https://www.marxists.org/archive/lenin/works/cw/volume25.htm...
[2] Collected Works, Volume 25, https://www.marxists.org/archive/lenin/works/1917/ichtci/04....
But when large companies get to control every aspect of one's life, and one is practically forced to use a bank, and banks are an oligopoly, I favor state intervention.
The money supply, controlled mostly by commercial banks, dictates whether we are in a boom or a recession. Credit scores are instruments of surveillance. Banking policies against certain activities (legal ones) impose de-facto bans on those activities, ostensibly to reduce the risk of illegal activities.
As long as banks have enormous power over individuals, and as long as there is little competition, the state must regulate them.
For comparison sake, Bank of America was penalized almost 4X ($83,354,221,356) in the same time period: https://violationtracker.goodjobsfirst.org/summary?parent=ba...
Free days later I get a call asking me to come close my accounts, all these strange accounts went from -$300-500 each, to $5.
For years and years people thought I was crazy when I said I don’t do business there and they were scammers, why would a bank steal? lol, here we are two decades later and they are still up to no good.
What level of malice must a company site repeatedly teach before regulators actually protect those they are set to protect?
The U.S. Department of Labor's Occupational Safety and Health Administration found Wells Fargo violated the whistleblower protection provisions of the Sarbanes-Oxley Act.
Wells Fargo continues to show up with these headlines. The only way thats possible is if HR is facilitating this effort. Congress needs to expand whistleblower protection to result in criminal prosecution of those who facilitated the whistleblower retaliation.
Until then, these violations will continue.
Right now, HR is incentivized to thwart the investigations, and get rid of the whistleblowers. Nothing has changed.
Let's start taking away the perks. Golf course memberships are next - they can only use lower tier public courses. Next are restaurants and lodgings, 3 stars or lower.