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I hear a lot about how this is just a slap on the wrist but can you explain to me why it is? 5B is a lot of money afaik. Why is this so insignificant?

by xutopia 11y ago

deleted 11y ago
[deleted]
bicknergseng 11y ago
According to Wikipedia, GS made $39.20 billion in revenue in 2015, with $6.08 billion in net income. I'd say a penalty of about half a quarter's worth of revenue and less than one year's worth of profit for being a major player in the greatest financial meltdown in almost 100 years is about as insignificant as it comes. Imagine if bank robbers were penalized by taking 4/5ths of the profit from only one bank robbery, then released to continue robbing banks.
- ikeboy 11y ago
  That assumes that all of their profit is earned illegitimately, which at the very least you'd need to argue for.
- zaroth 11y ago
  Obviously revenue is a red herring, but almost a whole year of profit paid in fines seems pretty substantial to me. 35,000 people worked for 9.5 months to earn the money to pay this. In 2014 they paid an additional $3B. Worth noting that GS played a much smaller role in underwriting the bad loans than the likes of BoA and JPM ($16.6B and $13B settlements), mostly they were vilified for seeing the train wreck coming and helping some investors profit off the implosion. I think the reality is that the fines are absolutely significant and do change behavior at the banks. It is a typical human response to want to crush them under your boot into oblivion, but I think counter-productive.
  - bicknergseng 11y ago
    > Obviously revenue is a red herring I disagree. What if it were a company like Amazon that operates with over 100 billion in revenue but less than a billion in income (many years actually ending up red)? Would 500 million an appropriate fine for, say, willingly misleading consumers about billions of dollars in fraudulent items? If anything, I'd argue income should be the irrelevant number in a scenario like this, though the only numbers that really should matter are ones based on the magnitude of the damage the wrongdoing causes. > the fines are absolutely significant and do change behavior at the banks Is there any evidence of this? > It is a typical human response to want to crush them under your boot into oblivion, but I think counter-productive. Maybe, but I'd argue penalizing one of the major creators of a global financial crisis with a fine that doesn't even cause them to go into red for _one_ year is even worse. Fines all accounted for, GS profited off of the crisis, no executive lost their job, and the behavior that caused millions to lose homes and pensions continues on almost totally unchanged. The human response is to want justice served, and this isn't it.
IkmoIkmo 11y ago
You have to contextualise it. Imagine you were partly responsible in one of the biggest financial meltdowns of all time in your country, that made similar waves across the entire planet. You get caught, and get a penalty. What should it be? Then imagine your penalty was 0 days of jail time, and about 50% of your salary of 2015. Or hell, not your salary, just 50% of your disposable income. Then consider that you profited a multiple of that fine I just mentioned, by engaging in this illegal behaviour in the first place. That's what is called a slap on the wrist.

I hear a lot about how this is just a slap on the wrist but can you explain to me why it is? 5B is a lot of money afaik. Why is this so insignificant?

by xutopia 11y ago

I hear a lot about how this is just a slap on the wrist but can you explain to me why it is? 5B is a lot of money afaik. Why is this so insignificant?

deleted 11y ago

[deleted]

bicknergseng 11y ago

According to Wikipedia, GS made $39.20 billion in revenue in 2015, with $6.08 billion in net income. I'd say a penalty of about half a quarter's worth of revenue and less than one year's worth of profit for being a major player in the greatest financial meltdown in almost 100 years is about as insignificant as it comes. Imagine if bank robbers were penalized by taking 4/5ths of the profit from only one bank robbery, then released to continue robbing banks.

ikeboy 11y ago
That assumes that all of their profit is earned illegitimately, which at the very least you'd need to argue for.
zaroth 11y ago
Obviously revenue is a red herring, but almost a whole year of profit paid in fines seems pretty substantial to me. 35,000 people worked for 9.5 months to earn the money to pay this. In 2014 they paid an additional $3B. Worth noting that GS played a much smaller role in underwriting the bad loans than the likes of BoA and JPM ($16.6B and $13B settlements), mostly they were vilified for seeing the train wreck coming and helping some investors profit off the implosion. I think the reality is that the fines are absolutely significant and do change behavior at the banks. It is a typical human response to want to crush them under your boot into oblivion, but I think counter-productive.
- bicknergseng 11y ago
  > Obviously revenue is a red herring I disagree. What if it were a company like Amazon that operates with over 100 billion in revenue but less than a billion in income (many years actually ending up red)? Would 500 million an appropriate fine for, say, willingly misleading consumers about billions of dollars in fraudulent items? If anything, I'd argue income should be the irrelevant number in a scenario like this, though the only numbers that really should matter are ones based on the magnitude of the damage the wrongdoing causes. > the fines are absolutely significant and do change behavior at the banks Is there any evidence of this? > It is a typical human response to want to crush them under your boot into oblivion, but I think counter-productive. Maybe, but I'd argue penalizing one of the major creators of a global financial crisis with a fine that doesn't even cause them to go into red for _one_ year is even worse. Fines all accounted for, GS profited off of the crisis, no executive lost their job, and the behavior that caused millions to lose homes and pensions continues on almost totally unchanged. The human response is to want justice served, and this isn't it.

IkmoIkmo 11y ago

You have to contextualise it. Imagine you were partly responsible in one of the biggest financial meltdowns of all time in your country, that made similar waves across the entire planet. You get caught, and get a penalty. What should it be? Then imagine your penalty was 0 days of jail time, and about 50% of your salary of 2015. Or hell, not your salary, just 50% of your disposable income. Then consider that you profited a multiple of that fine I just mentioned, by engaging in this illegal behaviour in the first place. That's what is called a slap on the wrist.