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Stop Fining the Banks Already

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July 12, 2012 – Comments (15) | RELATED TICKERS: STO , P

Taxpayers threw hundreds of billions of dollars at the banks to prevent a total crash.  We then in turn have been fining these same institutions for predatory lending, robo signing bankruptcy paperwork, loan rate discrimination, and inevitably on the Libor scandal.

So these banks basically pay these fines with company money.  How about this, start fining the PEOPLE involved.  A corporation is simply a piece of paper (certificate of incorporation).  The ACTIVITIES of the corporation are done by people.  Start going after the people involved and fine or jail them. Eventually the message will get out and hopefully deter future transgressions.  But simply fining or settling for money from just the corporations sends the clear message that there will be little individual accountability.

15 Comments – Post Your Own

#1) On July 13, 2012 at 1:33 AM, Valyooo (99.54) wrote:

I completely agree.  When bubbles occur, these executives (its usually a handful of them, that screw their own people as well) take HUGE bonuses, and then leave when things go south.  And then the lower employees get hated by friends and neighbors, and they are not allowed to recover, meanwhile 5-10 guys in the company that actually screwed things up, arent even there anymore. *cough ken lewis cough*

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#2) On July 13, 2012 at 2:31 AM, pjani06 (29.24) wrote:

And usually its those at the top, the board of directors, that allow for the company's direction & strategy in operation.

The management (CEO, CFO, COO, etc) all have to report to the board of directors and often follow their orders on directions, etc. 

The individuals at the board should always be looked at first to be held accountable for large-scale wrongdoings.

Individual basis for petty things.

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#3) On July 13, 2012 at 8:41 AM, edwjm (99.87) wrote:

Fines for those that are that rich are not the answer.

Prison terms (and I don't mean house arrest) are.

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#4) On July 13, 2012 at 9:52 AM, awallejr (79.57) wrote:

Don't get me started on Board of Directors.  It is a total "club" where CEOs of other companies are also on Board of Directors who dictate CEO compensation.  It is a club that virtually no viewer of this site will ever be in.

And so today we find out the JPM lost over $4 BILLION dollars and the woman in charge, Ina Drew, is retiring on $57 MILLION dollars, although she offered to return 2 years worth of compensation.  And then you have that snake Jamie Dimon, who to wall street can do no wrong, cooing how what a peach of a gal she is.  She was a total INCOMPETENT yet she gets millions to still keep.  Heaven forbid a teller should ask for a 2% cost of living raise.

What is going on is just sickening.  No individual accountability anymore.  SEC, CFTC, AG all just failing to go after all the PEOPLE, they thinking fining institutions that the taxpayer is supporting is good enough.

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#5) On July 13, 2012 at 12:02 PM, leohaas (32.36) wrote:

Great idea, but our law does not support that.

People incorporate businesses for many reasons. The most important is probably to shield the people in the business from liability for business actions. For instance, if a business goes belly up, the owners and employees do not want to be personally liable for the debts. They typically are not. Same goes for legal wrongdoing to some extent.

You can (actually, you do) argue that that is wrong. However, without this kind of protection fewer people would go into business.

FWIW: Ina Drew was not at all incompetent. She executed a risky strategy because she was challenged to do so. Risky investments pay off with higher returns, but also lose more money if things go wrong. That is exactly what happened at JPM. Her office contributed greatly to the JPM bottom line until their "whale position" was exposed.

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#6) On July 13, 2012 at 1:39 PM, awallejr (79.57) wrote:

Incorporation shields owners of the company, not the employees of the company.  There are a ton of regulations out there that can be enforced against individuals.  But the SEC and AG would rather go after a headline case instead.  You start going after the people that are violating the regulations you will then send a message of accountability.

And as for Ina, even Dimon said what happened was "egregious."  If that doesn't warrant the "incompetent" tag I don't know what else would.  The loss can now possibly exceed 7.5 billion.  Think Dimon is going to give back any of his increased millions in salary even though he told Congress the buck stops with him and that he takes full responsibility?  Of course not.

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#7) On July 13, 2012 at 3:29 PM, somrh (78.84) wrote:

I think part of the problem here stems from the fact that executive incentives are skewed by a poorly constructed bonus structure. It encourages high risk, high reward short-term profits at the expense of long-term stability. And as you point out the executives and BOD are more or less a "good 'ol boys club". Many executives are appointed to the BOD of other firms (which in turn appoint those executives their own company's BOD).

As an interesting side note, a study found a negative relation between CEO incentive pay and subsequent stock performance:

Performance for pay?

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#8) On July 13, 2012 at 5:47 PM, ikkyu2 (99.24) wrote:

The PEOPLE involved here, as you call them, are in effect your feudal overlords.  It is all fine and good for the mice to complain - but who will bell this cat?  Not Congress, who are bought and paid for themselves.

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#9) On July 13, 2012 at 10:43 PM, pjani06 (29.24) wrote:

Why would Congress (let alone anyone in govt) or Regulators want to have effective punishment on their friends & themselves?

Look at the names, there is a revolving door between the largest corporations (and their B.O.D.), the regulatory agencies, and washington DC - this is not capitalism...

...isn't this more akin to monopolistic fascism?

aren't these oligopolies the rule of the land here protected by regulators who shut down and raid the small guys that begin to threaten?

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#10) On July 14, 2012 at 1:38 AM, awallejr (79.57) wrote:

Well I am a firm believer in the rule of law.  I much prefer it to the rule of force where some dictator can have you killed on his whim.  But what bothers me is the fact that while we have all these rules and regulations the people in charge with enforcement choose to go against pieces of paper instead of the individuals who are committing the wrongs.

Pieces of paper don't commit crimes, people do.  I really wish Eliot Spitzer would be appointed head of the SEC.  I don't care about hookers, that is between him and his wife.  I do care in that at least the guy was a pit bull against Wall Street abuse during his tenure as NY AG.  Stop appointing sheep at these positions.

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#11) On July 14, 2012 at 9:57 AM, Valyooo (99.54) wrote:

Never gonna happen. These guys rule the world behind closed doors 

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#12) On July 15, 2012 at 11:43 PM, awallejr (79.57) wrote:

Well you are already hearing that now.  Former prosecutors and law professors saying how hard it is to convict yada yada yada.  Except you get the indictments (which aren't impossible to get) and you let juries decide.  Win or lose at least you put the people on notice that "we are coming to get you."  Go civilly too, which has a lower burden of proof.  And again you put people on notice that "we are coming to get you."

You do nothing and raise your hands in the air saying "it is hard to prove" and all you do is claim individual accountability is irrelevant.

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#13) On July 20, 2012 at 12:00 AM, awallejr (79.57) wrote:

Yeah and now the banks are trying to enter into some kind of quick settlement regarding Libor maniputation because guess what they would rather the corporations pay the fines (and hence the stockholders) than find the INDIVIDUAL's involved be found liable. 

If that happens then just screw the credibility of the enforcement agencies.  They would be telling you they don't care about individual accountability and that it really is a rigged game in the end.

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#14) On July 23, 2012 at 12:07 AM, awallejr (79.57) wrote:

Maybe people read my blogs afterall.  About time too.

http://finance.yahoo.com/news/exclusive-prosecutors-regulators-close-making-153410438.html;_ylt=Are3YIpDiNVIjUVkC7.Y3eCiuYdG;_ylu=X3oDMTNyanRncW9mBG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDYzQxMTIxYjgtZmNjNS0zZDhhLWE1MGUtNjMyYmQxNzBkZjMzBHBvcwMxBHNlYwN0b3Bfc3RvcnkEdmVyA2FjYjdhZGUwLWQ0NGItMTFlMS1hOTgxLWRkMjdkZDBkYTBjMQ--;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3

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#15) On July 23, 2012 at 12:08 AM, awallejr (79.57) wrote:

Wow that link went nuts.

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