[salesforce_wha]

I wish -- just once -- there would be a story where a bank is actually punished in a meaningful way.

Look at this way: A bank is fined $x for doing an action which generated $y. If x < y, there is no incentive to stop any behavior. Further, it seems to be the trend that y is far larger than x and this case proves it out.

The libor scandal cost the U.S. at least $6 billion in interest charges (y) and another $4 billion just to unwind their positions. Whereas the banks have only been fined $2.1 billion to date (x). When you take inflation into account and the fact that this is a world wide financial scandal (libor influences a $350 trillion derivatives market), the math is skewed even heavier in the direction of banks having had a sizable revenue stream after the fines.

[easytiger]

> The libor scandal cost the U.S. at least $6 billion in interest charges (y) and another $4 billion just to unwind their positions.

Got a reference for that? Not being a dick just interested to read more. For that amount of damage to have occured in < 10 years it would require borrowingin the hundreds of billions wouldn't it?

Libor is an interesting and important concept. An open way to show its calculation should exist.

[salesforce_wha]

No problem, I got it from Wikipedia which in return cites a bloomberg article. http://en.wikipedia.org/wiki/Libor#Aftermath

Finding actual damages proved really difficult on this subject.

[easytiger]

Yea their citations are to paywalls RE the costs to US. But well written wikipedia page nonetheless. Prob the most accessible journalism I've read on the matter.

Definitely worth more investigation. Definitely a part of our world that needs more light shed on it. Got to be some interesting angles there too ;)

[gohrt]

Considering a theft of $5000 can land a person in jail, it shouldnt be a grave concern that we can't say exactly how many $billions were stolen by the LIBOR cospirators.

[grecy]

> Look at this way: A bank is fined $x for doing an action which generated $y. If x < y, there is no incentive to stop any behavior.

Not only is there no incentive to stop, that's actually incentive to keep doing it, faster and on a bigger scale!

If you told me I'd get fined $10k for doing something that resulted in $15k of "earnings" (and no other penalty), I'd start a business and start hiring as many people as possible to do exactly that activity, profiting $5k every time.

[Shivetya]

but in the end you are not punishing the bank, it merely is an entity with no physical means of being punished. To punish it you need to throw their boards into jail.

Fines are paid by share holders if any, hence is the bank punished? Not unless depositors leave in droves. You cannot fine a bank for its holdings as those are the funds and properties of other people, the bank is merely managing money for others.

if you attempt to dissolve a bank, who takes over the loans, how do you get the depositor funds back. You cannot confiscate them in the names of the state, the distress to the economy would be drastic.

In the end its back to the people running the show, put them in jail, or force them out, or fine them, or all of the above. However like politicians there are so many levels here than they are nearly immune to their actions

TL;DR

Monetary fines are irrelevant, punishing the people who run it is the only means to correct future behavior

[salesforce_wha]

Working under the assumption that: 1. The banks only care about one thing -- profits. 2. Individuals at the bank primarily only care about their pay (talking about the ones responsible for massive fraud and have bonus structures that encourage it, not the tellers at your local branch).

If government took actions to pull all revenue (plus some) generated by these schemes it could go a long way in changing the culture. It appears to me, and probably many others, that the punishment imposed (fines) are simply a cost doing business as the banks appear to still be making profits, or at the very least keeping large portions of revenue, off of illegal activity.

There is no simple solution, and this might be the wrong one, but the current solution doesn't appear to be working.

[shit_parade]

>There is no simple solution,

How do you know, perhaps jail time for executives would work. The problem is there is no simple implementation and to expect a corrupt government to police a corrupt bank is laughable, these people are often colleagues, co-workers, even friends who take turns writing laws and giving each other pay checks.

[quotient]

I think you mean "that y is far larger than x"

[salesforce_wha]

Yes, thank you. I corrected it.