Big Banks Face Another Round of U.S. Charges

A couple of things about these settlements. The settlement amount is a large number but these "landmark" settlements don't seem to come anywhere close to the spoils gained by criminal activity. Combine that with the deferred prosecution agreements that come with a lot of these settlements and we're in a spot where shareholders foot the loss on the penalty and those that absolutely did commit and benefit from committing ridiculous crimes can't end up in jail.

I don't really care about settlement amounts in dollars. I'd like to see criminals end up in jail.

It's interesting, and troubling, that so many still trust these institutions:

* Banks that have been caught repeatedly both intentionally defrauding people and acting with extreme incompetence (and who knows who often they haven't been caught). Yet most customers, from individuals and to large corporations continue to trust the banks with their money and to take the banks' advice.

* They trust LIBOR and similar services as accurate and fair, when they've been tampered with repeatedly.

* They trust the financial markets as safe, fair places to invest, despite the problems above and others that pervert markets directly, such as high-frequency trading.

* They trust the 'Free Market', a good idea in concept but in execution appears to be a rigged marketplace, where the powerful win and if they don't, they get bailed out.

Do you still invest your savings in the financial markets? Do you have debts whose rates are tied to LIBOR? If Goldman Sachs offered to advise your company, would you trust them? Most people, knowing all of the above, still say yes. I think in part that's because there aren't many alternatives and in part it's due to lifetimes of of habit. These problems must be hurting trust and I imagine many people eventually will realize the disconnect at some point -- maybe in reaction to some big event -- and pull out.

The point of regulation is to make markets safe, which prevents fraud and attracts more investment. It's good for everyone. It seems like many in the financial industry, and the knee-jerk anti-regulation crowd, have lost sight of that.

These companies (bank in specific) often repeatedly do these type of things trying to get away with m/billions in profit. When caught, the penalties just aren't enough to dissuade them from it. They probably get away with it most of the time, so there is no incentive to do otherwise. I really wish we would push for real penalties (jailtime, as we have done in the past during bank scandals) or even entire shutdown of the companies when they act unethically.

That would generate political mileage with the left, but probably generate howls of 'socialism!' from the right, since the systemic nature of the financial crisis and the widespread abuses would mean multiple institutions being dismantled or split up.

Financial crimes are generally slow and difficult to prosecute because of the vast quantity of documentation that has to be sifted through for evidence, so when you look at the DoJ's financial fraud page you see a bias towards smaller firms - not necessarily because they're weaker legally, but simply because it's easier to pinpoint individuals (eg some of the insider trading prosecutions). Another issue specific to the financial crisis is that in some cases large firms erred by being negligent and/or overconfident in their market strategies, resulting in huge losses and/or bailouts, but they imprudent rather than mendacious and their conduct did not cross the line into criminality. In a normal market those firms would have gone out of business and things would have been resolved through civil lawsuits, which was what happened with Lehman bros. and Bear Stearns. But in the financial crisis so many institutions were over-leveraged, and so many markets were moving in sync with each other (eg Europe and US both having huge housing bubbles) that the options were government stepping in to backstop the financial industry as a whole or the collapse of the payment system, which would have been a disaster.

Getting back to politics, my read of the US landscape is that about 20% of the US electorate leans to the left and wouldn't object to hanging all the bankers. About 30% leans to the right, and they've convinced themselves that the whole financial crisis was caused by Those Bums on Welfare and the Democratic party who forced the banks to give money to TBoW. The other 50% of the electorate is more fact- than narrative-driven and while they have misgivings about who should bear responsibility for the crisis they're also more pragmatic and primarily concerned about economic stability. There's a danger in this, insofar as many of the socioeconomic conditions that led up to the crisis remain unresolved or have even worsened in some respects, which means greater political tension and potential for crises; on the other hand revolutionary change is notoriously difficult to manage which is why no developed country has so far attempted to grasp that particular nettle.

How does High Frequency Trading pervert the market? They are acting as middle-men.