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Big Banks Face Another Round of U.S. Charges

dealbook.nytimes.com

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Re: Big Banks Face Another Round of U.S. Charges

#31

Post by rqebmm »

geekpondering wrote: post #29
rqebmm wrote: post #20

Earlier quoted context omitted.

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

...middle-men that aren't providing any service or benefit to anyone except those that profit from those trades. These "middle-men" are injecting themselves between buyer and seller to take their cut simply because they have the money, resources, and -- increasingly these days -- the geographic location to beat someone else to the punch.

isn't the typical benefit of a middle-man that they have the money, resources, and geographic location to help facilitate transactions?

Re: Big Banks Face Another Round of U.S. Charges

#32

Post by forthefuture »

jessaustin wrote: post #25
res0nat0r wrote: post #17

Earlier quoted context omitted.

> No one went to jail for reckless behavior that they had good reason to believe was wrong. Unfortunately most of what the banks did that caused the 2008 crisis was not against the law.

IMHO the far larger injustice is that the federal treasury bailed them out. I'm OK with Goldman Sachs assholes living outside a prison; it's the taxpayer-funded luxury in which they live that really bugs me.

I only know about AIG, but the government bailed them out with a 14% interest rate with money they got from China at a 3% interest rate. The bail out was probably the most profitable thing the US government has ever done.

Re: Big Banks Face Another Round of U.S. Charges

#33

Post by uncoder0 »

rqebmm wrote: post #24
tibbon wrote: post #16

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…

This was only true up until recently. In the last year B of A and JP Morgan settled for $17b[1] and $13b[2] respectively. Each settlement was more than their net income for the preceding year. That hurts. A lot. Furthermore, the settlements since 2008 have largely not precluded the banks from facing criminal charges[2]. The Justice department needs to get these initial settlements out of the way before they can pierc…

A bit pedantic but, at the bottom of [2] it says Net Income for JP Morgan was $21b for 2012 and the settlement for $13bn was in 2013. Looks like BoA's amount was indeed over their previous years net income. Is one years net income really enough? How many billions are the american tax payers on the hook for due to their behavior? They're also getting free money from QE which doesn't seem that punitive. Admittedly I don't know all that much about finance or monetary policy.

On your other point it would be interesting to see if a new Justice department under someone other than Holder does anything differently. Does anyone know the length on the statue of limitations of the sort of crimes they're accused of criminally?

Re: Big Banks Face Another Round of U.S. Charges

#34

Post by jessaustin »

forthefuture wrote: post #32
jessaustin wrote: post #25

Earlier quoted context omitted.

IMHO the far larger injustice is that the federal treasury bailed them out. I'm OK with Goldman Sachs assholes living outside a prison; it's the taxpayer-funded luxury in which they live that really bugs me.

I only know about AIG, but the government bailed them out with a 14% interest rate with money they got from China at a 3% interest rate. The bail out was probably the most profitable thing the US government has ever done.

Why wasn't the rate 50%? Why not 70%? It's not as though anyone else was stumping the cash. (Here's a hint: despite "how it all turned out", this deal was extremely risky at the time. That's why no one else stepped up. I thought they liked "capitalism"; why didn't they see what the market would have borne?) Neither is it as though the bailout was in any sense beneficial to the economy, because now all traders have priced an even more enormous automatic "Uncle Sam's Insurance" policy into all future deals these reptiles put together.

AIG had to lump it or leave it, because they didn't own the last three Treasury secretaries. GS should have been in the same spot. That they weren't, is the epitome of self-dealing. Fuck that.

Re: Big Banks Face Another Round of U.S. Charges

#35

Post by malandrew »

rqebmm wrote: post #24
tibbon wrote: post #16

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…

This was only true up until recently. In the last year B of A and JP Morgan settled for $17b[1] and $13b[2] respectively. Each settlement was more than their net income for the preceding year. That hurts. A lot. Furthermore, the settlements since 2008 have largely not precluded the banks from facing criminal charges[2]. The Justice department needs to get these initial settlements out of the way before they can pierc…

Part of the problem in the past is that we've expected the justice department to go after the heads of the bank. This has been wholly ineffective when we do try because the people at the top do a great job as shielding themselves from hard evidence that implicates them. What I like about this new approach is that the focus is on the rank and file traders and other employees. The great thing about this new strategy is that it gives all these lower level employees caught in a criminal investigation net and incentive to produce the hard evidence necessary against their bosses as part of a plea bargain.

Once we go through at least one round of these types of criminal investigations, any future lower level employees would be stupid if they didn't intentionally keep hard evidence against their bosses in their possession as a get out of jail free card next time the shit hits the fan.

All in all, splendid news.

Re: Big Banks Face Another Round of U.S. Charges

#36

Post by mattgrice »

DMac87 wrote: post #23
nodata wrote: post #15

Earlier quoted context omitted.

What alternatives do you personally use?

(Not original poster, but some suggestions) : - Use a local credit union as opposed to big national bank. Yes, there may be minor inconveniences in service, but in this day of online banking, they should be minimal. - Invest with a financial advisor you know and trust, who will pick up the phone when you call and explain things to any level of detail you desire (or who will bring in experts to do so if you won't). Ba…

Investing with a financial advisor you know and trust doesn't sound like a good idea to me. That's what Bernie Madoff's clients were doing. You want a financial advisor who is trustworthy, which is a very different thing and much harder to find.

Re: Big Banks Face Another Round of U.S. Charges

#37

Post by whyenot »

How about going after some of the human beings who directed and profited from all this illegal activity instead of just milking banks for more money.

This country is so screwed up. We send in a SWAT team when someone is growing okra in their backyard (apparently it looks like marijuana from a helicopter) yet let the rich and connected get off scot free after stealing billions of dollars.

Re: Big Banks Face Another Round of U.S. Charges

#38

Post by geekpondering »

rqebmm wrote: post #31
geekpondering wrote: post #29

Earlier quoted context omitted.

...middle-men that aren't providing any service or benefit to anyone except those that profit from those trades. These "middle-men" are injecting themselves between buyer and seller to take their cut simply because they have the money, resources, and -- increasingly these days -- the geographic location to beat someone else to the punch.

isn't the typical benefit of a middle-man that they have the money, resources, and geographic location to help facilitate transactions?

HFT doesn't "facilitate transactions".

What is often happening is Seller A wants to sell something for $10. Buyers B, C and D submit an order to buy it for $10. The computer sees this, knows that it might be worth more than $10, and while Buyers B and C get their orders through, the computer buys it out from under Buyer D because their computers are faster. Buyer D now gets a notice that "oh, sorry, that thing you wanted is now $11."

It's the same thing as you overhearing your neighbor saying the Apple Store only has one iPhone left for sale at the Apple Store and, because you have a faster car than your neighbor, you get to the store and buy it and then offer it for resale at a higher price. That's not facilitating a transaction, and it certainly is perverting the market. When the people with the fastest computers and best geographical location get items cheapest, that's not a 'free market'.

Middle-men have classically existed to provide a _service_, adding value to a previously less valuable or more difficult transaction -- wholesalers or retailers. Wholesalers existed to pare down which goods are offered, and existed primarily because smaller retailers couldn't afford to purchase in bulk. Most 'middle men' of these classes have gone away due to the digital age and/or conglomeration. Grocery stores or websites that provide value by having multiple items in the same place that you can pay for all in one financial transaction.

Re: Big Banks Face Another Round of U.S. Charges

#39

Post by jessaustin »

Hario wrote: post #11

I'm with Richard Stallman on this. http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-... Banks have way too much power in both our politics and economy. We have to change that.

If RMS and NNT agree on something [splitting up dangerously large corporations], how can anyone disagree?

Re: Big Banks Face Another Round of U.S. Charges

#40

Post by tsunamifury »

hackuser wrote: post #14

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 servi…

Because given the choice between being aligned with:

1) A powerful bad guy 2) A weak and ineffectual good guy

Most people will pick the powerful bad guy to protect their funds, advise their company and make decisions for them. We want the power, not the morality. These guys don't let their morality get in the way of winning.

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