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I'd even go so far as to say it's worse than that. Those fines aren't coming from the top executives (or even mid-level) who made the decisions to promote this behavior, but rather the investors. Frankly, it's more of the same, private rewards, socialized costs. "I make millions for the bank with fraud, I make millions. I lose millions for the bank through fraud, the investors lose millions, I still make millions with a golden parachute." I'm shocked (shocked!) this type of moral hazard still exists in the banking world after 2008! I'm sure Congress will do something to make sure this never happens again. But remember, this fraud was only perpetrated by a conspiracy of 5300 low-level employees who have already been fired. (and if you believe that, I have a bridge to sell you.) But to quickly go back to the investors. Not only are these people eating the costs from incredibly poor (and criminal) management, but when the government fails to do anything meaningful, the smaller investors have no real recourse. What are they going to do, sell their stock at a loss? Sue a bank which spends hundreds of millions on lawyers in a year? At least theoretically, the government could get rid of some of the bad apples, but then, who would bribe the politicians? Maybe a more apt analogy is someone who makes $100k a year having their parents pay a $215 fine? |
The investors are responsible for hiring and delegating authority to the top managers of the firm -- and through them the rest of the employees -- they may choose to be hands off, but that doesn't eliminate their responsibility.
The are also responsible for establishing procedures for holding those managers, etc., accountable for harms they cause to customers and/or the firm itself, so if the firm is (and, thereby, the investors are) getting hurt with no recourse, that's largely the investors own fault.