U.S. Secretly Halted JPMorgan’s Growth for Years(bloomberg.com)
bloomberg.com
U.S. Secretly Halted JPMorgan’s Growth for Years
https://www.bloomberg.com/news/articles/2018-10-26/jpmorgan-s-secret-punishment-u-s-halted-its-growth-for-years?srnd=premium
203 comments
The Great Depression II was on the cards in 2007/2008 before governments took on gargantuan debts to brush it under the carpet. We're all paying for that with governments straining under comically heavy debt loads and interest rates held stupidly low long-term to avoid bankrupting the banks. The last thing we should be doing is allowing the same corrupt institutions which created the crisis loose to do it all over again. It will all just happen again with no room for manoeuvre left.
1) The 700B in assets distributed via the Troubled Asset Relief Program (TARP) have all been sold by the government, earning 15.3B in profit in the process [0].
2) The federal funds overnight rate has been raised 4 times in the last year with more raises planned [1].
3) While the federal debt load is high, the actual annual interest paid by the government in servicing the debt is in-line with historic norms [2].
[0] https://projects.propublica.org/bailout/
[1] https://fred.stlouisfed.org/series/EFFR
[2] https://fred.stlouisfed.org/series/FYOIGDA188S
2) The federal funds overnight rate has been raised 4 times in the last year with more raises planned [1].
3) While the federal debt load is high, the actual annual interest paid by the government in servicing the debt is in-line with historic norms [2].
[0] https://projects.propublica.org/bailout/
[1] https://fred.stlouisfed.org/series/EFFR
[2] https://fred.stlouisfed.org/series/FYOIGDA188S
To the points;
2) Rates are on the rise, though its only fair if its also recognised the absolute level is historically low. And most likely these rates have been a significant variable creating share market and property asset bubble many markets and sectors are in right now. And this bubble has reasonable odds of creating another serious debt problem. Time will tell.
3) Repayments are at historic levels relative to the economy. This doesn't make it OK IMOP as the total load is dangerous in that what happens if interest rates rise? And I'm sure here many people will believe 'US controls the rates' but then this comes with additional flow on problems including but not limited to; 1) Monetary policy is now weakened as one of the more influential economic management tools for future use 2) Risk is through the roof should the appetite for US treasuries drop 3) The cost of servicing and repaying this is getting dumped on future generations, which will limit future opportunity of the economy.
And to be clear, I'm not proclaiming US doom. The US has an amazingly strong and diverse economy. But to focus points that post-2008 has not changed the playing field, and not recognise the high risk game the US are playing with their economy seems unfair.
2) Rates are on the rise, though its only fair if its also recognised the absolute level is historically low. And most likely these rates have been a significant variable creating share market and property asset bubble many markets and sectors are in right now. And this bubble has reasonable odds of creating another serious debt problem. Time will tell.
3) Repayments are at historic levels relative to the economy. This doesn't make it OK IMOP as the total load is dangerous in that what happens if interest rates rise? And I'm sure here many people will believe 'US controls the rates' but then this comes with additional flow on problems including but not limited to; 1) Monetary policy is now weakened as one of the more influential economic management tools for future use 2) Risk is through the roof should the appetite for US treasuries drop 3) The cost of servicing and repaying this is getting dumped on future generations, which will limit future opportunity of the economy.
And to be clear, I'm not proclaiming US doom. The US has an amazingly strong and diverse economy. But to focus points that post-2008 has not changed the playing field, and not recognise the high risk game the US are playing with their economy seems unfair.
> market and property asset bubble many markets and sectors are in right now. And this bubble has reasonable odds of creating another serious debt problem. Time will tell.
Trillion dollar companies have me concerned this will ruin 401ks of our parents/grandparents.
Historically Politics will cause economic issues to be postponed on future generations/elections. These interest rates and growing debt are candy, and we will soon be having a stomech ache. The USD is sick.
My interest in Bitcoin is due to my mistrust of the leaders in political and economic sectors.
Trillion dollar companies have me concerned this will ruin 401ks of our parents/grandparents.
Historically Politics will cause economic issues to be postponed on future generations/elections. These interest rates and growing debt are candy, and we will soon be having a stomech ache. The USD is sick.
My interest in Bitcoin is due to my mistrust of the leaders in political and economic sectors.
> earning 15.3B in profit in the process
As compared with the trillion dollars worth of cheap real estate the public would have gotten had the banks been forced to liquidate all their holdings at the same time at massive losses.
As compared with the trillion dollars worth of cheap real estate the public would have gotten had the banks been forced to liquidate all their holdings at the same time at massive losses.
"the public" tend to not have much cash on hand, especially in times of crisis. Those that would have benefitted from a massive real estate firesale would have been savvy 0.1 percenters.
>> Those that would have benefitted from a massive real estate firesale would have been savvy 0.1 percenters.
And many of those buildings would flood the rental market, driving down consumer pricing and enabling affordable rents.
And many of those buildings would flood the rental market, driving down consumer pricing and enabling affordable rents.
...or just sit idle in a portfolio until the market bounced back, which is what happens in large real estate investments.
That’s not true at all. I worked at one of the big pe firms that made lots of money from 2008. Their goal was to move things to profitability asap. Either get a loan to performing (via getting holder to repay or rent), sell the note, or foreclose and sell the property (sometimes to a sister company). Same goes for anyone holding a property. Empty properties are targets for squatting and quickly fall into disrepair. The last thing a savvy investor wants is a nonperforming property.
I think parent's comment was about large real estate investments. Which can often sit idly for years before being sold/reinvested for a profit.
...and a massive plunge in real estate values would probably cause a lot of existing property owners to be upside-down on their holdings, forcing many to sell and/or default on their mortgage/debt repayments, which is sort of how this got started in the first place
[deleted]
On the monetary side it's hard to say which would have been better. There were people in debt, so keeping deflation at bay was important. Then again, even if 0.1 percenters bought these, overall cost of living and consumables would be cheaper, and debt is generally dischargeable, so you could argue keeping deflation at bay wasn't really to protect the debtors but the debt holders.
All said, well considered fiscal stimulus years ago would have been most directly beneficial to "the public" among all measures.
All said, well considered fiscal stimulus years ago would have been most directly beneficial to "the public" among all measures.
> debt is generally dischargeable
How stressful is the process of discharging debt and what is the difference in suicide rate between baseline and those going through this process?
How stressful is the process of discharging debt and what is the difference in suicide rate between baseline and those going through this process?
Compared to?
If a good chunk of the population is doing it it becomes less stressful. It's not like the alternate route (the one we took) has been stress free either.
If a good chunk of the population is doing it it becomes less stressful. It's not like the alternate route (the one we took) has been stress free either.
Do you mean for individuals or for countries?
Speak for yourself. My 10%er friends did buy up property, I only imagine them being able to buy more.
I wonder how many of those TARP assets were bought either directly or indirectly via the FED via QE?
You would also wonder, why not apply this government intervention to all other industries and businesses that are in trouble? Why does Banking get bailed out and others don't?
You would also wonder, why not apply this government intervention to all other industries and businesses that are in trouble? Why does Banking get bailed out and others don't?
Over 90% of the monetary supply consists of credit as opposed to money. If companies and people can't borrow money, the world economy freezes and banks control credit unfortunately.
Certainly, you would think they ought to be regulated or constructed in such a fashion where taking down the entire world economy through their own greed should be impossible?
As it stands, they reap the profit in the good times, they get bailed out in the bad (and still make a profit I expect).
Essentially the taxpayer subsidises and protects one of the richest industries in the world from their own mistakes and greed.
As it stands, they reap the profit in the good times, they get bailed out in the bad (and still make a profit I expect).
Essentially the taxpayer subsidises and protects one of the richest industries in the world from their own mistakes and greed.
That's the spirit of the current system, and it mostly works. The 2008 crisis was crazy because nobody anticipated the magnitude of moral hazard between insurers <=> (banks <=> rating agencies <=> pension funds) <=> mortgage lenders <=> homebuyers. Homebuyers thought they were in great financial shape because lenders kept pushing them easier loans, lenders were writing mortgages with their eyes closed because the banks buying the mortgages were making so much money packaging them into MBSes and selling them to pension funds, the pension funds were enjoying great returns on these products rated AAA by rating agencies asleep at the wheel, and meanwhile the banks offloaded their MBS risk by purchasing CDSes from insurers who were blindly making lots of money selling them. The whole thing was a self-reinforcing feedback loop that burst violently.
I definitely blame the banks for being overly creative in coming up with perverse, complicated multi-party incentive structures that are hard to regulate while lobbying for deregulation. But at the same time, the mortgage lenders, insurers and rating agencies deserve some blame for being negligent at their jobs.
I definitely blame the banks for being overly creative in coming up with perverse, complicated multi-party incentive structures that are hard to regulate while lobbying for deregulation. But at the same time, the mortgage lenders, insurers and rating agencies deserve some blame for being negligent at their jobs.
Bingo, and to this point, GE had to go to a government program despite great credit ratings to fund short-term debt in 2008, because the financial lending market had seized up that badly:
https://www.propublica.org/article/general-electric-tapped-f...
https://www.propublica.org/article/general-electric-tapped-f...
because without banks to act as facilitators you would not be able to finance a house or car. Small businesses lending would dry up as would most lending for equipment and commercial real estate.
Banks did a lot to earn their terrible reputations over the past 15 years but it is also true that they provide necessary liquidity to a vast number of markets.
Banks did a lot to earn their terrible reputations over the past 15 years but it is also true that they provide necessary liquidity to a vast number of markets.
#3 provides little comfort, given we're not showing any signs of reducing it and rates will likely rise due to, e.g. #2.
#1 doesn't seem like a compelling argument, there were probably far better investment opportunities than +2% ROI, so this was likely still a subsidy, even if there were nominal gains. Not that we shouldn't have done it, but that argument isn't convincing to me.
#1 doesn't seem like a compelling argument, there were probably far better investment opportunities than +2% ROI, so this was likely still a subsidy, even if there were nominal gains. Not that we shouldn't have done it, but that argument isn't convincing to me.
Rates will rise, but that doesn't affect the interest rate for bonds already issued, of course.
No disagreement on opportunity cost - I was responding to the prior posters assertion that the government "took on gargantuan debts to brush [the financial crisis] under the carpet".
I guess you could say that some of the debt incurred during the crisis was attributable to a loss in tax revenue as well as the cost of the approximately 1T in stimulus funds between the Economic Stimulus Act and the American Recovery and Reinvestment Act. That's still a relatively small portion of the total debt of ~16T which is probably mostly due to a mixture of the Bush tax cuts and growing Social Security/Medicare outlays.
No disagreement on opportunity cost - I was responding to the prior posters assertion that the government "took on gargantuan debts to brush [the financial crisis] under the carpet".
I guess you could say that some of the debt incurred during the crisis was attributable to a loss in tax revenue as well as the cost of the approximately 1T in stimulus funds between the Economic Stimulus Act and the American Recovery and Reinvestment Act. That's still a relatively small portion of the total debt of ~16T which is probably mostly due to a mixture of the Bush tax cuts and growing Social Security/Medicare outlays.
Bonds already issued were bought by people like you and me and pension funds who will now be paid many years of below-market interest. It's also embedded into the inflated pricing of every other asset that will have low expected returns going forward. No matter how you seem to want to do funny accounting, you're still paying that cost.
Yields (rates) are pretty much directly correlated with inflation. Low rates, low inflation. The real return is probably the same.
Which is not true at all. US real yield has gone from less than -1.5% on the short end [1] to around 1% recently across the yield curve. Historically it was around 2%. Not only that, the term premium is still likely negative [2]. The financial repression was real.
[1] https://www.treasury.gov/resource-center/data-chart-center/i... (Note that there was a further 80 basis point spread between nominal overnight rates and the nominal 5 year rate, so real overnight rates were really really negative.)
[2] https://fred.stlouisfed.org/series/THREEFYTP10
[1] https://www.treasury.gov/resource-center/data-chart-center/i... (Note that there was a further 80 basis point spread between nominal overnight rates and the nominal 5 year rate, so real overnight rates were really really negative.)
[2] https://fred.stlouisfed.org/series/THREEFYTP10
This does not mean that without low interest rates things would be better. (And I'm not saying Greenspan et al. handled the early 2000s well. But I'm also not convinced that the economy's set point is the federal funds rate. I think it's just an aspect, and business fundamentals - like real aggregate demand, which is much more sensitive to disposable income than to interest rates - are much more important for growth.)
$15.3B is, what, 2.19% ROI? Do you know what else could have been done with an investment of $700B in government outlay in the same period?
The Fed funds rate is being raised on the backs of long-term investors who are forced to suffer interest-rate risk, bar the ones who got out in time of course with sufficient inside information -- guess who those are. This is just the flip side of the Fed funds rate being kept low on the backs of short-term investors in prior years. If you were in short-term investment until recently and began investing as the economy got better -- all very rational, risk-averse behavior -- or were just beginning to accumulate savings, you just got screwed twice. You'll get screwed a third time when the next financial crisis hits. We're all literally still paying for the banks' last mistakes, and will continue to do so for many years to come.
And yeah, your chart [2] conveniently ends at 2017-01-01 just after the time when interest rates troughed. This is also with the backdrop of a relatively strong GDP and not considering the increasing fiscal load being shunted to the state and local levels. The fiscal situation is not good and the only thing propping it up is dollar seigniorage, which, let's be honest, is necessarily going to end at the worst moment when you most need it.
The Fed funds rate is being raised on the backs of long-term investors who are forced to suffer interest-rate risk, bar the ones who got out in time of course with sufficient inside information -- guess who those are. This is just the flip side of the Fed funds rate being kept low on the backs of short-term investors in prior years. If you were in short-term investment until recently and began investing as the economy got better -- all very rational, risk-averse behavior -- or were just beginning to accumulate savings, you just got screwed twice. You'll get screwed a third time when the next financial crisis hits. We're all literally still paying for the banks' last mistakes, and will continue to do so for many years to come.
And yeah, your chart [2] conveniently ends at 2017-01-01 just after the time when interest rates troughed. This is also with the backdrop of a relatively strong GDP and not considering the increasing fiscal load being shunted to the state and local levels. The fiscal situation is not good and the only thing propping it up is dollar seigniorage, which, let's be honest, is necessarily going to end at the worst moment when you most need it.
Investors invest in both good and bad times. It's not like they are just sitting on money when it rains, but of course risk adjusted returns are lower in a pessimistic economic climate, and a lot of project gets put back into the drawer, the economy ('s growth rate) contracts.
That 700B was essential to stagger that contraction, and it was too small, because Congress is retarded, so the Fed tried its best with QE and other ZIRP compatible tools.
It's of course not a secret that there are possible things to do on the federal level that would generate more ROI than what Congress currently spends on. (For example health care reform, criminal justice reform, public transport and urban planning reform.)
The rate rise is to keep inflation at the 2.0 mark, which is the Fed's target. Like it or not, they are doing what they have to do to meet that target. Investors might be negatively affected by this, but the general population very much favors this.
Also, (both long and short term) investors have options to hedge interest rate changes, if they want.
There are many, many problems with regulations (SEC, CFTC, FinCEN are not proactive, the CFPB is currently being dismantled, and the market is at the same time too oligopolistic and too heterogeneous, too many layers of laws, only the big players can afford to navigate the legal maze), with banks (only the ruthless remains, the sane ones were long priced out of the market), and with the Fed policies of the past (Greenspan et al.'s handling of early 2000s), and even the financial news media is to blame (as they are very biased, either for or against the establishment, detached rational analysis is simply not bringing in the clicks).
That 700B was essential to stagger that contraction, and it was too small, because Congress is retarded, so the Fed tried its best with QE and other ZIRP compatible tools.
It's of course not a secret that there are possible things to do on the federal level that would generate more ROI than what Congress currently spends on. (For example health care reform, criminal justice reform, public transport and urban planning reform.)
The rate rise is to keep inflation at the 2.0 mark, which is the Fed's target. Like it or not, they are doing what they have to do to meet that target. Investors might be negatively affected by this, but the general population very much favors this.
Also, (both long and short term) investors have options to hedge interest rate changes, if they want.
There are many, many problems with regulations (SEC, CFTC, FinCEN are not proactive, the CFPB is currently being dismantled, and the market is at the same time too oligopolistic and too heterogeneous, too many layers of laws, only the big players can afford to navigate the legal maze), with banks (only the ruthless remains, the sane ones were long priced out of the market), and with the Fed policies of the past (Greenspan et al.'s handling of early 2000s), and even the financial news media is to blame (as they are very biased, either for or against the establishment, detached rational analysis is simply not bringing in the clicks).
Interest rate hedges are not free. There is no free lunch. Anyway I am not suggesting that there is a way to avoid paying the cost one way or the other, once the horse has left the barn when the banks put junk on their books with depositors' money. Unless you can unwind those or claw back years of executive compensation the damage is done.
Agreed, but long term rates are and always were (to my knowledge) higher exactly because of the larger uncertainty.
That said, "mark to market" is better than some magical nominal pricing. Of course creative accounting is the name of the game, that's why regulators need proper authority to request reports that help clarify things (so that helps them to stay ahead).
That said, "mark to market" is better than some magical nominal pricing. Of course creative accounting is the name of the game, that's why regulators need proper authority to request reports that help clarify things (so that helps them to stay ahead).
1) yes, but was TARP worth the governments risk? Given the riskiness of the debt, perhaps the government should have taken a lot more profit. A dime less in profit given the massive risk profile is de-facto a subsidy for the bank.
2) The 'big whale' you didn't mention is the trillion dollars in crap mortgages that are sitting on the Fed's balance sheet at face value. That more than doubled the Fed's assets, and those assets were way overvalued ... basically making the USD backed by crap. Which is a 'cost' to anyone using USD, esp. those issuing debt in USD, like the Government, i.e. taxpayer.
So while it's fine and good some of the bailouts were above board, there's too much of it that wasn't.
The government should have eaten all those banks, turfed the execs, and the sold them later for a massive profit a few years later basically wiping out most shareholder value and taking the profit into public coffers. That would actually be closer to capitalism than the bailout program.
2) The 'big whale' you didn't mention is the trillion dollars in crap mortgages that are sitting on the Fed's balance sheet at face value. That more than doubled the Fed's assets, and those assets were way overvalued ... basically making the USD backed by crap. Which is a 'cost' to anyone using USD, esp. those issuing debt in USD, like the Government, i.e. taxpayer.
So while it's fine and good some of the bailouts were above board, there's too much of it that wasn't.
The government should have eaten all those banks, turfed the execs, and the sold them later for a massive profit a few years later basically wiping out most shareholder value and taking the profit into public coffers. That would actually be closer to capitalism than the bailout program.
> The government should have eaten all those banks, turfed the execs, and the sold them later for a massive profit a few years later basically wiping out most shareholder value and taking the profit into public coffers. That would actually be closer to capitalism than the bailout program.
The closest thing to capitalism that would have also massively benefited people - not major corporations - would be to let capitalism do its thing, aka punish those who overleveraged via market-based mechanisms.... like bankruptcy and liquidation. Those who didn't do stupid shit would benefit from the flood of assets.
We controlled variance - how well we did this is arguable - at a massive cost. Maybe it was worth it, but let's not act like there wasn't a huge cost to bear.
The closest thing to capitalism that would have also massively benefited people - not major corporations - would be to let capitalism do its thing, aka punish those who overleveraged via market-based mechanisms.... like bankruptcy and liquidation. Those who didn't do stupid shit would benefit from the flood of assets.
We controlled variance - how well we did this is arguable - at a massive cost. Maybe it was worth it, but let's not act like there wasn't a huge cost to bear.
Yes but if you let the banks go down, they would have taken each other down, and the entire economy would have gone down a black hole.
That's why I said 'closest thing' to capitalism, because capitalism would have eaten itself in 2008.
A better bailout would have been to wipe out bank shareholders and nationalize the banks for a few years.
That's why I said 'closest thing' to capitalism, because capitalism would have eaten itself in 2008.
A better bailout would have been to wipe out bank shareholders and nationalize the banks for a few years.
You forgot the most important point, Moral Hazard.
Everyone knows that the govt will bail them out during the next crisis so no need to check the reckless behaviour.
Capitalism for profits, Socialism for losses.
Everyone knows that the govt will bail them out during the next crisis so no need to check the reckless behaviour.
Capitalism for profits, Socialism for losses.
[deleted]
> no room for manoeuvre left
no room for manoeuvre within the current system. So we'll have to change the system. Unfortunately, I have not yet seen dissent proposals of what the new system should look like (I don't consider crypto a feasible alternative). Nevertheless, I am optimistic.
no room for manoeuvre within the current system. So we'll have to change the system. Unfortunately, I have not yet seen dissent proposals of what the new system should look like (I don't consider crypto a feasible alternative). Nevertheless, I am optimistic.
Care to explain how historically low interest is bad for governments in debt? Because that is completely the opposite of how it actually works for lenders (high interest destroys them).
His point is that we are at risk of high interest rates causing exactly that, and we are getting used to low interest as if it is normal while piling up more and more debt.
The entire economy has been debt-based since at least the 1970s.
Or even sooner. Money is the story of wealth, but the real working and growing economy was almost always about debt. The moment someone invented writing someone wrote a letter of credit. Kings used it, and countries got built on next year's harvests, and of course went bankrupt when that harvest turned out bad.
It was in 1971 that US got off the gold standard, but yea even in the 1960s there was signs of trouble I think.
nuguy(5)
That’s already guaranteed, you can see bubbles everywhere you look today and all of these institutions have grown bigger
... and th biggest bubble of them all might be in early stage startups..
Naked short selling [1] and short and distort [2][3] were also a big part of the pump and dump then the crash, they nearly broke the entire market.
> During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price. Democratic Senator Christopher Dodd felt this was more than rumors and said, "This is about collusion." Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with Enron.
Naked short selling rules went into effect Thursday, Sept. 18, 2008 three days after the Sept. 15, 2008 Great Recession cliff that dropped Lehman and kicked it off [3]. Much cheaper to buy value and extract it when it is cheaper from a crash, the worst kind of players in the market extracted the value from the value creators.
Lots of the games played then are back with hedge funds creating movement to skim, short and distort and in some cases try to shakeup companies [3][4]. Amazon, Tesla, Apple, and many more are getting these attacks currently, we aren't ready for another big game, they might truly break public markets next time.
[1] https://www.sec.gov/news/press/2008/2008-204.htm
[2] https://en.wikipedia.org/wiki/Short_and_distort
[3] https://www.sec.gov/news/press-release/2018-190
[4] https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...
> During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price. Democratic Senator Christopher Dodd felt this was more than rumors and said, "This is about collusion." Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with Enron.
Naked short selling rules went into effect Thursday, Sept. 18, 2008 three days after the Sept. 15, 2008 Great Recession cliff that dropped Lehman and kicked it off [3]. Much cheaper to buy value and extract it when it is cheaper from a crash, the worst kind of players in the market extracted the value from the value creators.
Lots of the games played then are back with hedge funds creating movement to skim, short and distort and in some cases try to shakeup companies [3][4]. Amazon, Tesla, Apple, and many more are getting these attacks currently, we aren't ready for another big game, they might truly break public markets next time.
[1] https://www.sec.gov/news/press/2008/2008-204.htm
[2] https://en.wikipedia.org/wiki/Short_and_distort
[3] https://www.sec.gov/news/press-release/2018-190
[4] https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...
Lehman was insolvant, short sellers didn't create the crash nor the recession. 2008 isn't the story of a malicious rumor that went wrong.
Naked short selling and pump and dump was in effect which is indisputable by the facts, Lehman was just a trigger point. Making it all about Lehman is disingenuous to the full statement and event.
The Great Recession was a value extraction event plain and simple, a banking squeeze in the end. Naked short selling, short and distort and pump and dump were the fuel, the value extractors took from the value creators.
The Great Recession wasn't an typical market correction but engineered, many banks and funds paid fines for their part [1][2].
Short and distort is back in full force, gearing up for another round [3].
People will not be ok with 'too big to fail' this time around, and if another Great Recession happens, it may permanently harm public markets for good.
[1] https://www.nytimes.com/2016/01/15/business/dealbook/goldman...
[2] https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-b...
[3] https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...
The Great Recession was a value extraction event plain and simple, a banking squeeze in the end. Naked short selling, short and distort and pump and dump were the fuel, the value extractors took from the value creators.
The Great Recession wasn't an typical market correction but engineered, many banks and funds paid fines for their part [1][2].
Short and distort is back in full force, gearing up for another round [3].
People will not be ok with 'too big to fail' this time around, and if another Great Recession happens, it may permanently harm public markets for good.
[1] https://www.nytimes.com/2016/01/15/business/dealbook/goldman...
[2] https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-b...
[3] https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...
This post reads like Elon Musk trying to justify why he hates short sellers.
> Naked short selling rules went into effect Thursday, Sept. 18, 2008 three days after the Sept. 15, 2008 Great Recession cliff
How you twisted that into your hate on Musk seems biased.
Clearly the facts are short selling and naked short selling exacerbated the Great Recession. Your Musk hate is outshining the facts.
The Great Recession wasn't an typical market correction but engineered, many banks and funds paid fines for their part on the fraudulent ramp up pump [1][2].
And naked short selling rules were reigned in 3 days after the Great Recession cliff [3].
Though little has been done to reign in securities fraud using short and distort besides this SEC warning shot on a smaller fish this year [4]. Short and distort is illegal and needs to be a major regulatory push to avert another crisis, especially since the market is more automated and HFT run now.
The SEC short and distort warning shot this year happened almost a decade later almost to the day of the Great Recession cliff (Sept. 15, 2008 - Sept. 12, 2018) putting the big fish on notice [4].
> “While short-sellers are free to express their opinions about particular companies, they may not bolster those opinions with false statements, which is what we allege Lemelson did here,” said David Becker, an Assistant Director in the SEC’s Division of Enforcement. [4]
People will not be ok with 'too big to fail' this time around, and if another Great Recession happens, it may permanently harm public markets for good.
[1] https://www.nytimes.com/2016/01/15/business/dealbook/goldman...
[2] https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-b...
[3] https://www.sec.gov/news/press/2008/2008-204.htm
[4] https://www.sec.gov/news/press-release/2018-190
How you twisted that into your hate on Musk seems biased.
Clearly the facts are short selling and naked short selling exacerbated the Great Recession. Your Musk hate is outshining the facts.
The Great Recession wasn't an typical market correction but engineered, many banks and funds paid fines for their part on the fraudulent ramp up pump [1][2].
And naked short selling rules were reigned in 3 days after the Great Recession cliff [3].
Though little has been done to reign in securities fraud using short and distort besides this SEC warning shot on a smaller fish this year [4]. Short and distort is illegal and needs to be a major regulatory push to avert another crisis, especially since the market is more automated and HFT run now.
The SEC short and distort warning shot this year happened almost a decade later almost to the day of the Great Recession cliff (Sept. 15, 2008 - Sept. 12, 2018) putting the big fish on notice [4].
> “While short-sellers are free to express their opinions about particular companies, they may not bolster those opinions with false statements, which is what we allege Lemelson did here,” said David Becker, an Assistant Director in the SEC’s Division of Enforcement. [4]
People will not be ok with 'too big to fail' this time around, and if another Great Recession happens, it may permanently harm public markets for good.
[1] https://www.nytimes.com/2016/01/15/business/dealbook/goldman...
[2] https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-b...
[3] https://www.sec.gov/news/press/2008/2008-204.htm
[4] https://www.sec.gov/news/press-release/2018-190
> How you twisted that into your hate on Musk seems biased.
I'm actually a pretty big Musk defender here. Good read, though.
I'm actually a pretty big Musk defender here. Good read, though.
JP Morgan _still_ hasn't provided clean drinking water[0] to New Yorkers yet, so it's simply karma.
[0]: https://en.wikipedia.org/wiki/The_Manhattan_Company
[0]: https://en.wikipedia.org/wiki/The_Manhattan_Company
The tone of this article is really weird.
It openly admits that various banks we're being constrained due to their notorious bad behavior, but casts those constraints in a passively negative light, and then tacitly celebrates that these bad actors are now less constrained to act badly.
It openly admits that various banks we're being constrained due to their notorious bad behavior, but casts those constraints in a passively negative light, and then tacitly celebrates that these bad actors are now less constrained to act badly.
That's common when the financial press is talking about financial companies. Remember their audience.
Edit: I'm mainly thinking of Bloomberg and WSJ. The Economist is better on this one.
Edit: I'm mainly thinking of Bloomberg and WSJ. The Economist is better on this one.
It's pretty bad if you ask me. A governments job is to follow the law too and not use its discretion in 'unwritten law' that is secretive.
No problem if they publicly said they would do this, but this way is precisely the problem of developing countries. You wouldn't think it would happen in America.
No problem if they publicly said they would do this, but this way is precisely the problem of developing countries. You wouldn't think it would happen in America.
This is a financial paper championing it’s core audience.
For example it makes no mention of the harm caused 10 years ago in 2008, and the causal link between bank behavior and the final disaster.
Instead it is painted as an unrighteous limit to the banks natural path, using hidden tools to curb their growth.
Wsj, Bloomberg etc would assume that profitable growth at any cost is good (except of course at the cost of bad PR).
Regulations and limitations are bad and simply evil barriers to firms manifest destiny.
Don’t put much stock in it.
For example it makes no mention of the harm caused 10 years ago in 2008, and the causal link between bank behavior and the final disaster.
Instead it is painted as an unrighteous limit to the banks natural path, using hidden tools to curb their growth.
Wsj, Bloomberg etc would assume that profitable growth at any cost is good (except of course at the cost of bad PR).
Regulations and limitations are bad and simply evil barriers to firms manifest destiny.
Don’t put much stock in it.
No, it does not excuse the behavior of the banks. The point is that the regulatory behavior was bad, not that it wasn't punishing a real crime.
It would have been significantly better if they announced publicly that JPM was going to have it's growth restricted because of reason X. This would have acted as a deterrent to other banks, sent a message to the public that the banks were indeed being punished, and avoided the image of a secret governance process.
Everyone who reads these publications is well aware of the financial disaster so it doesn't need to be reiterated on every article because the knowledge is assumed.
It would have been significantly better if they announced publicly that JPM was going to have it's growth restricted because of reason X. This would have acted as a deterrent to other banks, sent a message to the public that the banks were indeed being punished, and avoided the image of a secret governance process.
Everyone who reads these publications is well aware of the financial disaster so it doesn't need to be reiterated on every article because the knowledge is assumed.
Disclosure is what happens all the time. I havent really heard of a recent or distant event where it was the norm to not disclose SEC actions. (barring some privacy clause or agreement reached via settlement)
Most likely, and I say this as an opinion, several of the banks they bought in 2008 were restricted from expanding until their house was in order.
These moves were, with 100% certainty, would have been announced and published at inception.
And no, the meaning of "financial disaster" is VERY different depending on which side of Fin services you stand on.
To many banks and bankers, the debacle is a failure of market participants - the cost of living in such exalted times. More regulation would only hamper future efficiency and delicious growth to shareholders.
For main street, this was a watershed moment where they saw that banks were a force unto themselves.
Their market niche so critical, that letting them continue more necessary than justice - overturning a basic tenet of American expectations (bad firms fail, merit rises).
"too big to fail", is the shadow of "too big to care".
Main street does not read Bloomberg or WSJ, so they tailor their articles to their audience's bias.
Most likely, and I say this as an opinion, several of the banks they bought in 2008 were restricted from expanding until their house was in order.
These moves were, with 100% certainty, would have been announced and published at inception.
And no, the meaning of "financial disaster" is VERY different depending on which side of Fin services you stand on.
To many banks and bankers, the debacle is a failure of market participants - the cost of living in such exalted times. More regulation would only hamper future efficiency and delicious growth to shareholders.
For main street, this was a watershed moment where they saw that banks were a force unto themselves.
Their market niche so critical, that letting them continue more necessary than justice - overturning a basic tenet of American expectations (bad firms fail, merit rises).
"too big to fail", is the shadow of "too big to care".
Main street does not read Bloomberg or WSJ, so they tailor their articles to their audience's bias.
Curious why this has been downvoted, I’d prefer understanding than assuming what the error was.
? JPM was actually cleaning up it's holdings of risky junk and taking write downs long before 2008. Posting poor results compared to peers but this allowed them to be in fairly good shape in 2008.
Well their job (The Office of the Comptroller of the Currency[1]) by law is to regulate banks for systemic risk. Recall that this same government bailed out the banks due to systemic risks. JP Morgan is then participating in risky activities and wants to expand thus becoming more important in the banking system. The government pushes back as it has had transgressions.
The whole "unwritten rule" thing is kinda nonsense. The OCC which was preventing the expansion was chartered to ensure the soundness of the banking system. That is pretty arbitrary and they have the authority to arbitrate on that. That sounds like they can use their discretion.
What you would think would not happen in America is that the government bails out private banks that behaved badly. If it were truly American capitalism they would fail. Banks would then not be able to become so large due to people and banks not wanting to have too much liability with any one institution. So it is inconsistent to have a system where the government cannot use their discretion in the growth of banks, yet be on the line for a huge bailout to stop the economy from collapsing when the banks get too greedy.
[1] https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_t...
The whole "unwritten rule" thing is kinda nonsense. The OCC which was preventing the expansion was chartered to ensure the soundness of the banking system. That is pretty arbitrary and they have the authority to arbitrate on that. That sounds like they can use their discretion.
What you would think would not happen in America is that the government bails out private banks that behaved badly. If it were truly American capitalism they would fail. Banks would then not be able to become so large due to people and banks not wanting to have too much liability with any one institution. So it is inconsistent to have a system where the government cannot use their discretion in the growth of banks, yet be on the line for a huge bailout to stop the economy from collapsing when the banks get too greedy.
[1] https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_t...
I think you're mixing up the OCC with the Fed.
I can't believe you're being downvoted. The HN hivemind is the worst part of HN.
The law says that the regulator has a bunch of power to regulate the banks. They are following the law and the constitution, all of it. Stop making up bullshit conspiracy theories.
Ad hoc, secret regulatory actions might be allowed, but it's a surfire way to breed corruption since unfair enforcement becomes extremely difficult to detect.
Lots of court filings and records are sealed. Its really not surprising at all. It's not really unwritten law just because it wasn't public.
The best part is how scrupulously Michelle Davis avoided any uncomfortable mentions of the crimes that brought said punishments. Wells Fargo’s business tactic of forcing their sales staff to commit fraud and identity theft is instead described as “a pattern of lapses and abuses”.
I had an interesting experience in Wells Fargo around 2012. I had probably 10 business accounts there, including the main receivable account, as well as an account from which about 7 contractors were paid monthly to the tune of $100,000/mo.
I was the only signatory to the account, the only person with a login. I had my personal accounts attached there as well. A some point I log in into WF from my regular office laptop (static IP) and instead of the account balances I see a warning: your access has been restricted due to security. Please call an 800 number. I log in from my phone via different IP, same result. My attempts to talk to the assigned business banker went nowhere: she repeated the same number. When I called that number, I got treated like a criminal, I got yelled at and I was told that all accounts needed to be renumbered, and the previous accounts would disappear including the account history. With multiple vendors and contractors, renumbering accounts is true hell. When I asked this person about the alternatives and for a reason for this action I was told that this was done "for my safety", and if I needed the details they could only be obtained via a subpoena. I tell her that according to my knowledge, a subpoena can be obtained only during a civil litigation, and I am asking her if she invites her customer to litigate against the bank? She rudely responds that if I do not want my accounts renumbered, she would leave this as as (with the security warning and no account access). Since this is business critical, I acquiesce and she removes the warning, but the accounts are read-only now. She then tells me that I need to go to a branch, killing my workday. At the branch a salesperson tries to sell me their new accounts and packages (that are of course worse than the original ones). When she realizes I am not an easy target, she just asks me if I am ready for the account renumbering. I ask her if my accountants will have access to the CSV - without this we cannot even make quarterly tax payments. She says sure. I ask her that just in case, I want to download the accounts (all 10 plus 4 personal ones). She says go ahead on your laptop (like I am paranoid, I don't need this). I ask her if they have WiFi in the branch. Not for me. No problem, I tether to my phone (for 2012 it was advanced) and download. Then she hits the button- the accounts are completely gone! Only the end balances got transferred to the new accounts. I leave. Then I call Wells Fargo and ask how I can get the CSV histories. A business Banker tells me that she can fax the hard copies of each monthly statement for $12 per statement per account!
When I discuss this later this awful experience with my regular business banker at my branch, I ask her if higher balance accounts get treated the same. She says that my accounts (low 7 digit balance) are too small, but starting from 8 digit, you get a different treatment!
I still cannot understand what kind of "safety" a new account number can provide, because every time I write a check I disclose my account number.
> Wells Fargo’s business tactic of forcing their sales staff to commit fraud and identity theft
That’s just a dishonest characterization. Wells Fargo didn’t “force” their staff to do any such thing. Staff gamed an incentive structure and WF didn’t catch it. “Lapse” is the most accurate characterization.
That’s just a dishonest characterization. Wells Fargo didn’t “force” their staff to do any such thing. Staff gamed an incentive structure and WF didn’t catch it. “Lapse” is the most accurate characterization.
Coercion combined with ignoring customer complaints is the most accurate characterization.
No. Words have meaning. Forcing someone to do something means coercion + intent to achieve a specific outcome. There was no evidence that WF intended anyone to commit identity fraud. You don’t get to redefine the meaning of well understood words.
There was a decade of complaints and more than enough to connect the dots. Looking the other way because you like the results goes to intent.
Threatening ones job unless they sign up X many customers for a product is coercion. Sales quotas are inherently coercive. If you choose to do zero quality control and employees learn cheating is okay then it is bad.
Threatening ones job unless they sign up X many customers for a product is coercion. Sales quotas are inherently coercive. If you choose to do zero quality control and employees learn cheating is okay then it is bad.
The branch employees were effectively forced to cheat because that was the only way to meet their sales goals and keep their jobs. The executives knew this, but chose to look the other way.
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Recently, Bloomberg has had some very stilted articles -- editorial tone pushed in to articles and choice of coverage. It feels odd, and it feels wrong.
Dunno, this article seems pretty much par for the course when it comes to reporting by financial magazines on industry.
Pro business (especially finance), anti regulation, with little respect or care for regulations and no admission of culpability and harm.
Pro business (especially finance), anti regulation, with little respect or care for regulations and no admission of culpability and harm.
They and some other finance newspapers do seem like the last bastion of separation of facts and opinions
Agreed. I was curious what this was above, then as I started reading it, I was saying to myself "wait, I thought this was actually well-known that these TBTF banks were being curtailed out of punishment for their behavior." I don't see how this was secret, nor do I think it was even a problem since they appear to have been doing extremely well since then even with their growth "halted".
> tone of this article is really weird
The limits make sense, the secrecy not so much. That guarantees an odd tone for an article to be read by (a) JPMorgan Chase shareholders and (b) Americans who don’t want another financial crisis.
The limits make sense, the secrecy not so much. That guarantees an odd tone for an article to be read by (a) JPMorgan Chase shareholders and (b) Americans who don’t want another financial crisis.
During that time period I held investments in JPM. This was material information that should have been available to investors.
Yeah it's a pretty odd article. It seems like things were working as they're supposed to and yet it implies that it's gonna be great now that the regulations have been lifted by the Trump admin. Unfortunately though, I'd imagine the banks will just continue with their bad behavior now that the shackles are off and it seems like there won't be anything in their way to slow down or halt their plans. Doesn't seem like a good thing really...
I don't find it odd. Economists are typically skeptical of government picking winners and losers. Here this is mentioned as the result of an unwritten rule, and as the title says, it was not done transparently.
It's not picking winners and losers in any sense of that phrase. They are literally punishing the bank for bad behavior and that's to be expected from what a regulator should be doing. If someone breaks the law and you send that person to jail you're not picking winners and losers in any way. You're meting out discipline as needed to punish the bad behavior and try to make it so that it doesn't happen again.
Also can you show where economists are skeptical of government picking winners and losers since the government has been doing it for ages and the economy has been marching on for a long while. In fact, picking winners and losers in the 2008 recession is what led to moving out of the recession.
Also can you show where economists are skeptical of government picking winners and losers since the government has been doing it for ages and the economy has been marching on for a long while. In fact, picking winners and losers in the 2008 recession is what led to moving out of the recession.
>t's not picking winners and losers in any sense of that phrase. They are literally punishing the bank for bad behavior
This response repeats the confusion that I just responded to, and tried to correct.
Note that my post does not actually disagree with enforcement of regulatory authority. I also believe that regulators should enforce their regulations. What I pointed to was something different than this.
>If someone breaks the law and you send that person to jail
But that's not a valid comparison. I think this is where you, and others, are confused.
The judicial branch has the authority to enforce laws for breaking crimes. That's what you're comparing this to.
Regulators also have authority to enforce regulatory law.
But what is happening is that a regulator is arguably not using their regulatory authority appropriately. They are, "behind closed doors," and using "unwritten rules" using their authority to punish a company for bad behavior.
The problems here are of transparency, accountability, fairness, competitiveness, and freedom.
I could agree with you if I believed the regulator can do no wrong, but I don't believe that.
This response repeats the confusion that I just responded to, and tried to correct.
Note that my post does not actually disagree with enforcement of regulatory authority. I also believe that regulators should enforce their regulations. What I pointed to was something different than this.
>If someone breaks the law and you send that person to jail
But that's not a valid comparison. I think this is where you, and others, are confused.
The judicial branch has the authority to enforce laws for breaking crimes. That's what you're comparing this to.
Regulators also have authority to enforce regulatory law.
But what is happening is that a regulator is arguably not using their regulatory authority appropriately. They are, "behind closed doors," and using "unwritten rules" using their authority to punish a company for bad behavior.
The problems here are of transparency, accountability, fairness, competitiveness, and freedom.
I could agree with you if I believed the regulator can do no wrong, but I don't believe that.
Regulators enforce laws too... They are the banking police.
JPMorgan has the resources to fight the regulator in court if it’s exceeded its scope. It happens all the time.
JPMorgan has the resources to fight the regulator in court if it’s exceeded its scope. It happens all the time.
Banking is an industry with regulatory oversight/law, but that does not mean regulatory law or authority are the "banking police."
Although I said in the above post that JP Morgan should be held accountable to regulatory law... So the disagreement here seems to be with something I never said.
Although I said in the above post that JP Morgan should be held accountable to regulatory law... So the disagreement here seems to be with something I never said.
You said the judicial branch enforced laws which is incorrect. The judicial branch cannot bring charges. The police do, which may or may not end up in court. Here it was the banking police.
Ok, the judiciary does not technically enforce criminal law, but applies and interprets them. But that is a technicality of language which neither refutes nor reinforces the point I was making: this is not an example of criminal law being enforced. This is a case of regulatory law/oversight.
Should regulators hurt some companies and help others, behind closed doors and for unwritten rules?
That's a different kind of question than should "the courts and police enforce criminal law," which the above user I was responding to was confused about.
That is what the point was.
I can see how reasonable minds can agree on what amount of trust they place in the hands of regulators. Clearly, judging by downvotes, a majority HN believes they should have authority to manipulate markets by picking winners and losers based on determinations of good or bad behavior--and all behind closed doors and outside of written rules. I just simply dont agree with that, as most other economists and Bloomberg news clearly does not, either.
Should regulators hurt some companies and help others, behind closed doors and for unwritten rules?
That's a different kind of question than should "the courts and police enforce criminal law," which the above user I was responding to was confused about.
That is what the point was.
I can see how reasonable minds can agree on what amount of trust they place in the hands of regulators. Clearly, judging by downvotes, a majority HN believes they should have authority to manipulate markets by picking winners and losers based on determinations of good or bad behavior--and all behind closed doors and outside of written rules. I just simply dont agree with that, as most other economists and Bloomberg news clearly does not, either.
Again... you're injecting some sort of belief that they are manipulating markets and picking winners and losers when there is no such evidence of either of those statements being true including none in the article itself. You're stating that that punishing an organization for fraud is manipulating the market. It seems that you're cloaking that odd argument under the 'behind closed doors' and 'outside of written rules' aspect when they are not connected in any way. One has been created out of whole cloth and the other might actually be pretty valid. You're also hand-wavingly saying 'most other economists' don't agree with that organization policing fraud which multiple others have said (and myself) doesn't seem accurate while not providing any evidence that economists believe that. I'm not sure why you're taking this stance honestly as you're not giving any proof or evidence for any of it.
If you are punishing one organization for bad behavior 1) in secret and 2) without expressly breaking any written rules (the article says they broke "unwritten rules") then this is going beyond enforcement of regulatory oversight.
I dont disagree with the end result, I disagree with the method.
Also, you may disagree, but I dont believe you honestly dont understand what I am saying.
I dont disagree with the end result, I disagree with the method.
Also, you may disagree, but I dont believe you honestly dont understand what I am saying.
You could also use this argument to imply we should have allowed banks to fail in the mortgage crisis.
What we should have done is saved the banks only to break them up. And it's not too late to do just that.
Yep. "too big to fail" is just too big, period.
In fact, at that time, mainstream economists expressed the same concern which I am expressing now: gregmankiw.blogspot.com/2008/12/
This is not the same concern you're expressing unfortunately. You're arguing elsewhere that the government punishing outright fraud is manipulating the market and choosing winners and losers. I see nothing about that at your link and nothing that defends your belief in that. He's saying that the fed and the government should step in and make decisions about trying to buoy the market, which is what you want them to do when the economy might go belly up so that people don't all lose their jobs and riot and starve. I do see that it's where you got the phrase 'government should pick winners and losers' from however but the context is vastly different than what the original article we're commenting on is about.
I dont disagree that JP Morgan should not be punished. I already explained that. You're confusing some things. Another example of your confusion is you mentioned here that the government is punishing fraud; but in reality, they punished them in secret for "unwritten rules" which were broken.
A regulator should not pick and choose who to punish, in secret, and for unwritten rules. That's ridiculous, and this kind of secrecy and ambiguity is not an example of good governance, fair treatment, or competitive markets.
In a competitive market where government treat everyone equally (no picking winners and losers) everyone abides by the same rules, transparently. That's not what happened.
In fact, when government decides to meddle in markets in secret and without any written rule or law, this raises fear of exactly that. Probably in this case, the end result seems to be not unjust, but the method is horrible, and I have no idea why they did it this way.
And yes, this kind of market meddling, or "picking winners or losere," is a type of market meddling, not unlike what I linked to.
I would suggest going back over the article to see where your confusion started, and also the posts here, and my other response to you.
A regulator should not pick and choose who to punish, in secret, and for unwritten rules. That's ridiculous, and this kind of secrecy and ambiguity is not an example of good governance, fair treatment, or competitive markets.
In a competitive market where government treat everyone equally (no picking winners and losers) everyone abides by the same rules, transparently. That's not what happened.
In fact, when government decides to meddle in markets in secret and without any written rule or law, this raises fear of exactly that. Probably in this case, the end result seems to be not unjust, but the method is horrible, and I have no idea why they did it this way.
And yes, this kind of market meddling, or "picking winners or losere," is a type of market meddling, not unlike what I linked to.
I would suggest going back over the article to see where your confusion started, and also the posts here, and my other response to you.
In a competitive market government should treat everyone equally by the same rules. Big banks do not exist in a competitive market as they are heavily shielded from competition, protected from failure, and massively subsidized by the government. As such they should be required to adhere to far more stringent rules.
I do agree that those rules should be transparent and not "unwritten" though.
I do agree that those rules should be transparent and not "unwritten" though.
I think we are not in disagreement here.
How did you go from "punishment for multiple crimes and regulatory violations" to "picking winners and losers"? Economists typically think laws governing fraud should be enforced.
Laws should also be transparent. If there is a crime, the punishment should be known in advance and be imposed openly. How else will it act as a deterrent?
But that's not what happened. The law was an "unwritten rule" which was enforced in secret.
As another user here stated, regulatory law needs to be enforced openly and transparently.
As another user here stated, regulatory law needs to be enforced openly and transparently.
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Of course, that evil Obama administration, they punished little billy for not playing nice, boohoo.
Why are there only spoken deals, and why is a major thing like this not public.
That has to change. Investors have a right, Americans have a right.
That has to change. Investors have a right, Americans have a right.
I assume it was private because it would hurt JP Morgan's stock price if it was made public. You could say investors have a right to know but my guess is JPMorgan wanted to keep it private.
Wish it had been public but I’m still okay with this.
A French economist, I think it's Charles Gave, said something like "bankruptcy is to finance what hell is to Catholics : if there was no hell they wouldn't behave well".
“Severe punishment “ constitutes expansion ban and fees. Great! Break the law, no jail for those people. It’s clear that as long as you are a banker you can do whatever the hell you want.
Exactly. Until bad behavior actually destroys profitability or sends people to jail, the banks are free to continue their abuse of the American citizenry.
Petition Congress for more proactive financial regulation agencies, otherwise they won't be able to jail bankers much.
Everything that matters was by the book. (The risk offloading.) The DoJ managed to get DPAs worth billions for stuff that wouldn't have landed anyone in jail anyway.
Everything that matters was by the book. (The risk offloading.) The DoJ managed to get DPAs worth billions for stuff that wouldn't have landed anyone in jail anyway.
Good advertisement for the banking industry
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"regulators under President Donald Trump, the people said, it’s planning to open 400 branches"
really? "the people said"? who write like this?
really? "the people said"? who write like this?
I scanned the article title.
I thought “huh”.
I saw the source (Bloomberg). I thought “oh”.
Post “the big hack” effect. Is that bad?
I saw the source (Bloomberg). I thought “oh”.
Post “the big hack” effect. Is that bad?
It is bad because you are willing to believe one side (composed of multiple companies) when it's in their interest to say what they are saying and completely discount no just their article but their publication.
> JPMorgan has racked up more than $30 billion in penalties, legal costs and related obligations since the 2008 financial crisis, some of which stemmed from its acquisitions of Bear Stearns Cos. and Washington Mutual Inc.
So they were being punished for agreeing to purchase companies that were failing and that Obama had pushed them to buy... and then he turned around and fined them for the crimes these previous companies committed.
I don't think JPM is innocent in the 2008 debacle as is outlined later on in the article, but it just rubs me wrong that they were punished for BSC and WMI.
So they were being punished for agreeing to purchase companies that were failing and that Obama had pushed them to buy... and then he turned around and fined them for the crimes these previous companies committed.
I don't think JPM is innocent in the 2008 debacle as is outlined later on in the article, but it just rubs me wrong that they were punished for BSC and WMI.
It seems that if you don't punish them for the bad things the companies they acquired did then companies will just do bad things and then get acquired, even by another subsidiary or holding company just to evade the laws and regulations. Isn't that a huge loophole you'd be opening?
Makes sense to me. Unpunished crimes could be seen as an existing liability, and something the parent company acquires when they buy the violating company.
I would argue that they in fact are definitely a liability, but one which has been calculated to be worth it if you continue with the acquisition. Just because you buy a company doesn't mean their previous crimes should now magic-wanded away. It would be far too easy to take advantage of that. (If it wasn't clear, I'm agreeing with you 100%)
> I don't think JPM is innocent in the 2008 debacle as is outlined later on in the article, but it just rubs me wrong that they were punished for BSC and WMI.
Once their crimes are public knowledge, the expected cost of the future penalties should be priced into the purchase price. Unless the penalties were larger than expected (and if anything they were smaller), they got what they paid for.
Once their crimes are public knowledge, the expected cost of the future penalties should be priced into the purchase price. Unless the penalties were larger than expected (and if anything they were smaller), they got what they paid for.
IIRC, Bank of America was told in no uncertain terms by Bernanke and Paulson that they were buying Merrill Lynch. It was a shot-gun wedding at a pivotal moment in the crisis.
I don't remember if JP Morgan had a gun to their head, but there was likely significant pressure. Combined with the fast pace of events and uncertain liability (the crimes were not all known), the purchase prices were very rough guesses.
I hesitate to say that it was unfair that BofA and JPM were punished for the sins of the banks they bailed out. For one thing, neither of them were exactly innocent. Secondly, 10 years on they're both doing really well. While it's great they both took one for the team, so to speak, it's not like either made a great sacrifice.
I don't remember if JP Morgan had a gun to their head, but there was likely significant pressure. Combined with the fast pace of events and uncertain liability (the crimes were not all known), the purchase prices were very rough guesses.
I hesitate to say that it was unfair that BofA and JPM were punished for the sins of the banks they bailed out. For one thing, neither of them were exactly innocent. Secondly, 10 years on they're both doing really well. While it's great they both took one for the team, so to speak, it's not like either made a great sacrifice.
I'm not familiar with the specifics of how the negotiations actually went down, but I can't imagine negotiations work like this when regulators are telling you "You must buy Company X" and you weren't interested in acquiring Company X to begin with.
Purchase prices only reflect a acquirer's view of the value of Company X under market conditions, which seems to have clearly not have been the case when the acquisition occurred.
Purchase prices only reflect a acquirer's view of the value of Company X under market conditions, which seems to have clearly not have been the case when the acquisition occurred.
They paid $2/share for Bear Stearns, in stock rather than cash. The closing price that Friday had been $30/share (and was $150/share the year before).
https://www.marketwatch.com/story/jp-morgan-to-buy-bear-stea...
https://www.marketwatch.com/story/jp-morgan-to-buy-bear-stea...
Both the Bear Stearns and Washington Mutual purchases were during the Bush administration.
I find it funny how the partisans blame the bailouts on one party or the other but in reality it was one of the few perfectly bipartisan efforts during the last decades.
I thought about that recently, specifically the tight (at least, so it seemed) integration of the Obama transition with the Bush crisis management team when the sky was falling.
It truly was a remarkably bipartisan moment in time.
It truly was a remarkably bipartisan moment in time.
When it comes to bailing out billionaires, both parties can agree that it's a great thing to do.
you're right, I should've been clearer, the fines came from the Obama admin.
I can imagine that paying for the wrongdoings of the banks being bought was a part if the deal.
This was also strangely worded. Did the penalties come before or after the acquisitions?
Why should penalties on a company go away if that company gets acquired by another?
Why should penalties on a company go away if that company gets acquired by another?
It kind of felt like to me that the government had a backdoor agreement in place for them to purchase WM well before they declined to offer WM a bailout and declared them insolvent. It was a matter of hours between those two events and there is no way any due diligence was done and negotiations couldn't happen that quick.
I had bet money on the bailout so I was bitter for a while. First real market lesson for me.
I had bet money on the bailout so I was bitter for a while. First real market lesson for me.
> that Obama had pushed them to buy
This is just anti-Democrat bias. How could Obama have forced this sale when the election hadn’t even taken place?
https://www.nytimes.com/2008/03/16/business/16cnd-bear.html
This is just anti-Democrat bias. How could Obama have forced this sale when the election hadn’t even taken place?
https://www.nytimes.com/2008/03/16/business/16cnd-bear.html