Yet another example of why Matt Levine’s Money Stuff is a daily must read for me:
It’s always a little embarrassing to talk about presidential candidates’ plans for financial regulation, since they seem so unlikely to be enacted even if the candidate wins, but at least Bernie Sanders seems to mean his attack yesterday on Wall Street corruption, too-big-to-fail banks, and $4 ATM fees. I mean, I wouldn’t hold my breath for a complete breakup of the largest banks within the first year of a Sanders presidency, but I don’t think that President Sanders would just forget about that promise, either. And honestly I feel like the president of the U.S., if he really put his mind to it, probably could get ATM fees capped at $2? Like I can’t point you to a constitutional provision that gives the president power to set ATM fees, but I just think that the bully pulpit of the presidency extends at least that far.
There is also stuff about sending bankers to prison, turning credit rating agencies into nonprofits, capping credit-card interest rates, monkeying with the Federal Reserve, and postal banking. Sanders’s frequent refrain is “that fraud is the business model on Wall Street. It is not the exception to the rule. It is the rule.” His speech yesterday adduced a lot of examples, taking the fact that “Since 2009, major financial institutions in this country have been fined $204 billion” as evidence that they’re just committing fraud all the time. And I suppose the fines are evidence that there is a lot of fraud. But they are not evidence that the business model is fraud: They are evidence that fraud is frowned upon, and zealously punished (or at least fined).
I like to point out that the area of American life whose business model is actually fraud — where the way to succeed is by lying, and where lying is not only consequence-free but constitutionally protected — is actually politics. If the government were fined for every time a politician lied about the benefits of a program, or for every time it funded tyranny or conflict, those fines would get above $204 billion really quick.
That said: “JPMorgan Chase & Co. will pay $48 million to settle the last in a series of missteps in its handling of foreclosures after the 2008 credit crisis, according to the Office of the Comptroller of the Currency.”
If you’d like to get Money Stuff in handy e-mail form, right in your inbox, you can subscribe at this link.
Previously:
Levine on Fed Day (December 16th, 2015)
Yes using the amount of the fines as a gauge the fraudulence of the Wall Street bankster business model is not the way to go. The wast majority of their fraud has been legalized or made impossible to prosecute. The absurd low penalties for so-called “missteps” also make for a huge underestimation of their fraud.
A much better way to evaluate it is to ask the question: What % of their business is NOT designed to misrepresent the product they offer in order to overcharge for it? Under that standard there can be no doubt that Wall Street is one big machine of fraud.
Yes. Wherever powerful interests are willing to pay up for it then fraud both in its broad sense, a betrayal of trust, and in its narrower sense as a fiduciary responsibility has either been legalized or provided with multiple loopholes and ample evasions. Mr Levine should study the concept of economic rents more carefully.
Politicians may only be ranked among the Cossacks; they should not be mistaken for the Czar.
This is the both sides do it meme again. I got news Matt both sides are getting away with it. Any constructive suggestions?
considering how much wall street made, those fines are just the cost of doing business (and they can take them off their taxes)
WAY TO MISS THE MAIN POINT
Fear the Bern
I’d say “Wall Street’s business model is the creation and exploitation of information asymmetries.”
Which is kind of what Bernie said.
I take big issue with Mr. Levine’s flip comment “But they are not evidence that the business model is fraud: They are evidence that fraud is frowned upon, and zealously punished (or at least fined).” Oh really?!? Zealously punished!??! NONSENSE! If you take into account how much law has been changed to allow or make unprosecutable what would otherwise be called fraud as well as how hard it is to prosecute Wall St firms along with the revolving door between government financial oversight, lobbying, and Wall St. the case can be made that fraud (in fact!) has been institutionalized. I would further infer that Mr. Levine’s comments reflect a conflict of interest that is not favorable to the consumer. I want to suggest to Mr. Levine that he read up on and start a dialogue with William K Black.
Outstanding, and correct. A bit of Stockholm Syndrome here.
And Bill Black is The Man.
If fraud on Wall Street and in the banks was taken seriously, they would be charged with treason and executed or disappeared….like China. Or maybe, just a possibility…at least charged with the crimes committed and jailed, like in the old days what happened during the savings and loan issues….