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How Deutsche Bank Made a $462M Loss Disappear

bloomberg.com

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Re: How Deutsche Bank Made a $462M Loss Disappear

#31

Post by [deleted] »

notgood wrote: post #25
abandonliberty wrote: post #22

Earlier quoted context omitted.

>These enforcement actions have become an unavoidable cost of doing business. I don't know if we realize the gravity of that statement. The current environment rewards companies who take these sorts of actions. A bank that did not take these actions would be out-competed.

We want a world where people "deserve" the things they have/can-do; but I don't think we will ever get close to that (we sure can try tho) It happens the same way in an individual level; the "wolf of wall street" (Jordan Belfortm) did a lot of illegal things; but despite being found guilty and forced to pay fines he is still better off for having done them (~10M offshore money and book/movie money among others). Heck…

[deleted]

Re: How Deutsche Bank Made a $462M Loss Disappear

#32

Post by gozur88 »

abandonliberty wrote: post #22
nickff wrote: post #15

Earlier quoted context omitted.

The laws have gotten increasingly vague, and enforcement increasingly discretionary, so you never know which rule (if any) will be applied to what action. As such, no one can guarantee that any action is 'legal', so the risk team will always say there is a 1-10% chance of being fined/prosecuted. These enforcement actions have become an unavoidable cost of doing business.

>These enforcement actions have become an unavoidable cost of doing business. I don't know if we realize the gravity of that statement. The current environment rewards companies who take these sorts of actions. A bank that did not take these actions would be out-competed.

Is it really so much that the current environment rewards companies that take regulatory risks, or that regulatory risks are so pervasive you can't do business without them?

Re: How Deutsche Bank Made a $462M Loss Disappear

#33

Post by sethrin »

gozur88 wrote: post #32
abandonliberty wrote: post #22

Earlier quoted context omitted.

>These enforcement actions have become an unavoidable cost of doing business. I don't know if we realize the gravity of that statement. The current environment rewards companies who take these sorts of actions. A bank that did not take these actions would be out-competed.

Is it really so much that the current environment rewards companies that take regulatory risks, or that regulatory risks are so pervasive you can't do business without them?

There is some risk of harm of bad dealing at almost every level, but we try to pay attention to the people with the most financial power because they have the greatest ability to do harm. And of course the more incentive there is to subvert the laws. Probably any simple view of this issue is wrong.

Re: How Deutsche Bank Made a $462M Loss Disappear

#34

Post by munificent »

mkesper wrote: post #17
mikeash wrote: post #5

Earlier quoted context omitted.

Companies don't want to police their own departments. This is how lots of modern companies deal with laws they don't like. They commit to obeying the law, tell everybody not to do anything illegal, but at the same time place requirements and expectations on the peons that force them to break the law. Then the peons get caught, they tell everybody how it's not their fault, they told everyone not to do that. The peons…

Like "self-employed" package deliverers. Many of them only can get their workload done by constantly breaking speed limits.

This is the unspoken foundation of the "sharing economy". You get a big pool of individual actors to make exchanges with each other in a marketplace like the ones provided by Uber, TaskRabbit, etc.

The market takes its little cut of every transaction, but takes zero percent of the risk. That's all passed on to the individual participants.

Car break down? Not Uber's fault. Get hit by a drunk driver? Lyft don't care. Have an allergic reaction to your latex gloves? Doesn't have anything to do with TaskRabbit as far as they're concerned.

Re: How Deutsche Bank Made a $462M Loss Disappear

#35

Post by [deleted] »

neximo64 wrote: post #29
chollida1 wrote: post #2

I wrote my feelings about how Deutsche got into this mess here. I think its still a valid take on how things unraveled. https://news.ycombinator.com/item?id=13047056 > Essentially, the trade had little economic purpose—only an accounting one. Yep, that's one of the first things you learn about when you take any kind of trading course. At a lower level in the cash equity markets you have something similar with wash tr…

You have an accurate assessment. It is the prisoner's dilemma problem: Do what others are doing & do it first. Or have them do it get, bet bigger and acquire you, and you'll end up doing it anyway.

[deleted]

Re: How Deutsche Bank Made a $462M Loss Disappear

#36

Post by robryan »

nickff wrote: post #15
erikpukinskis wrote: post #13

Earlier quoted context omitted.

> in this case even the risk team singed off on it. What more could a CEO do. This doesn't seem like a valid excuse. The risk team will just tell you the probability of being fined at various levels. If the risk team tells you "there's only a 0.1% chance you will get caught for this murder" and then you get caught murdering someone you can't just say "but the risk team said I probably wouldn't get caught!"

The laws have gotten increasingly vague, and enforcement increasingly discretionary, so you never know which rule (if any) will be applied to what action. As such, no one can guarantee that any action is 'legal', so the risk team will always say there is a 1-10% chance of being fined/prosecuted. These enforcement actions have become an unavoidable cost of doing business.

The financial instruments have become so complicated that I think the laws need to be vague to ensure that there is power to do something if an investigation happens.

At the same time there is complaints about how complicated the tax codes have become.

Re: How Deutsche Bank Made a $462M Loss Disappear

#37

Post by D-Coder »

eru wrote: post #21
iheartmemcache wrote: post #20

Earlier quoted context omitted.

How do you incentivize "produce less goods/generate less profit"[1]? That's a genuine question. We can barely de -incentivize flat-out criminal behavior. The line between malice and negligence is a tenuous at best. DA's feel lucky when they get a Grand Jury to indict which almost always results in a plea bargain being offered by the State, accepted by the indicted, and stamped on through by the Judge hearing the case…

You could incentivise more people to audit their banks by eliminating deposit insurance.

Been there done that bought the Great Depression.

Re: How Deutsche Bank Made a $462M Loss Disappear

#38

Post by pbecotte »

bsder wrote: post #24
iheartmemcache wrote: post #20

Earlier quoted context omitted.

How do you incentivize "produce less goods/generate less profit"[1]? That's a genuine question. We can barely de -incentivize flat-out criminal behavior. The line between malice and negligence is a tenuous at best. DA's feel lucky when they get a Grand Jury to indict which almost always results in a plea bargain being offered by the State, accepted by the indicted, and stamped on through by the Judge hearing the case…

> How do you incentivize "produce less goods/generate less profit"[1]? Simple, you make the fines bigger. Until the fines become an existential threat to the company, the fines are too small. Once the fines actually start impacting the returns, everybody inside the company will start paying more attention.

Well... Not really. The company going bankrupt doesn't really motivate the worker bee... His downside is limited to his potential bonus for this year.

Re: How Deutsche Bank Made a $462M Loss Disappear

#39

Post by sprafa »

munificent wrote: post #34
mkesper wrote: post #17

Earlier quoted context omitted.

Like "self-employed" package deliverers. Many of them only can get their workload done by constantly breaking speed limits.

This is the unspoken foundation of the "sharing economy". You get a big pool of individual actors to make exchanges with each other in a marketplace like the ones provided by Uber, TaskRabbit, etc. The market takes its little cut of every transaction, but takes zero percent of the risk. That's all passed on to the individual participants. Car break down? Not Uber's fault. Get hit by a drunk driver? Lyft don't care. H…

a good analysis. Would be great to take a look at how much of the cost saving is actually reduced interaction with externalities that are now costed out or left to the final-service-provider instead of the "platform.

Re: How Deutsche Bank Made a $462M Loss Disappear

#40

Post by roenxi »

pbecotte wrote: post #38
bsder wrote: post #24

Earlier quoted context omitted.

> How do you incentivize "produce less goods/generate less profit"[1]? Simple, you make the fines bigger. Until the fines become an existential threat to the company, the fines are too small. Once the fines actually start impacting the returns, everybody inside the company will start paying more attention.

Well... Not really. The company going bankrupt doesn't really motivate the worker bee... His downside is limited to his potential bonus for this year.

The idea being that the companies that survive will be the ones that happen to have effective systems that incentivise law abiding behavior.
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