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I don't want to defend all regulation is evil strawman, and I don't know if this particular regulation is good or bad but your argument looks very weak. A prop

I don't want to defend all regulation is evil strawman, and I don't know if this particular regulation is good or bad but your argument looks very weak. A proper value comparison would be 'cost of all audits caused by this regulation' vs 'benefits gained from mistakes found by it'. You also need to assess risk reduction, what kind of risks it protects from and set a value on that. Then you could realistically say if it's net positive or not. And when something is mandatory across industry it's easy to price in directly to consumers because nobody can compete on it, so this likely doesn't eat on a bottom line but increase price for consumers. Again not trying to argue that this or all regulation is bad, just that your evaluation of what's working seems deeply flawed.

mrgordon 9y ago
Honestly if Citi stole $1000 from me but now everyone has to pay $0.01 towards an audit so everyone can get their stolen money back, it’s worth it. They stole the money and they should pay it back with interest. I don’t care if it’s expensive for them because they didn’t build in basic mathematical safeguards when their business is literally charging interest on numbers. I’m not sure where this idea comes from that companies pass all costs on to customers. Citi does have profitable quarters and unprofitable quarters. If they have to take a $350 million charge off for overcharging people, then they will have a less profitable quarter and their shareholders will have to deal with it. If they try to jack prices way up to cover for it, then many people will just switch to Chase or Amex since they have better deals anyway. It’s like saying we shouldn’t charge Volkswagen for the emissions scandal because our cars will get too expensive. In reality, VWs will stay at basically the same price. If they got more expensive right after they got caught cheating everyone, then they simply won’t sell.
- selectodude 9y ago
  I just bought a Volkswagen, not only are they not more expensive, they’re substantially cheaper than they were a few years ago.
adjkant 9y ago
> A proper value comparison would be 'cost of all audits caused by this regulation' vs 'benefits gained from mistakes found by it' I don't think accurately captures it and is certainly not fair to the customers. The cost is not from the same source. Let's say audit cost per year is $100, and savings per year is $100: If they choose to forgo auditing: Citi: $200 Customers: -$100 If they do auditing: Citi: -$100 Customers: $100 It's apples and oranges. Regulation is about the customer and societal protections, not the protection of the company's profits. If a regulation is sound in terms of need but too expensive for a business, we shouldn't do away with the regulation altogether. As with your post, this isn't defending all regulations or that specific parent argument, just pointing out that the cost on the company being regulated versus money saved is not a valid metric for deciding if a regulation is needed. The regulation accounts for many more intangibles such as fair customer protections, and again, is not aimed at the value of the regulation for the company being regulated, though a regulation that causes a needed private business to be unprofitable is likely not sound.
- conanbatt 9y ago
  I think those numbers don't add up? Starting situation(note there are only 100 bucks): Citi: $0 Customer: $100 Without audit: Citi: $100 Customer: $0 With audit(a): Citi: $0 Customer: $0 Government: $100 Alternate with audit(b): Citi: -$100 Customer: $100 Government: $100 But citi can't run negative as a whole. Its a business, if it didnt make money, it would shut down. So A is whats actually happening with the numbers provided.
  - adjkant 9y ago
    I think the math could be corrected slightly for clarity, but the general point still holds I think: the money is not apples and oranges here. Where does the government get the $100 from? The audit isn't conducted by the government as far as I'm aware, just mandated by them. Correct me if I'm wrong there of course. > note there are only 100 bucks That's my whole point: there isn't. The money they accidentally stole from customers (and eventually are now giving back) is different from the money they spent to conduct the audit, regardless of if for any given audit they find money that was misplaced. > But citi can't run negative as a whole. Its a business, if it didnt make money, it would shut down. People are acting as if this audit's cost will run Citi out of business, which I would find very hard to believe to be the case. If you actually read my post carefully, I too believe a regulation that causes that is likely flawed. My whole point is being missed here: some good regulations can cut into profits of businesses and still be worth it from the perspective of the society as a whole. Only once a regulation is so strong of a profit cut that a needed business cannot exist is a regulation likely flawed. Of course, there are many other ways for a regulation to be flawed as well.
thisisit 9y ago
The whole value comparison thing is weird because rules are not always made to gain net positive value. Because if they did then stuff like Universal healthcare will never happen. Secondly, businesses are a complex beast. It's not a simple debit/credit and there are tons of different schedules which run simultaneously. It is easy to get lost - whether it is customer's or the business' own money. So, every business run audits and reviews. Banks more so because they have other people's money. The only difference is whether they have legally mandated to share the findings and take corrective action.
- rubber_duck 9y ago
  I don't disagree with you - I just wanted to point out that "see this caught 300m$ error therefore it's worth it, and it also validates other regulations" (which is how I read OP and a common line of reasoning I see in public debates) is dangerously wrong because it ignores costs completely.

mrgordon 9y ago

Honestly if Citi stole $1000 from me but now everyone has to pay $0.01 towards an audit so everyone can get their stolen money back, it’s worth it. They stole the money and they should pay it back with interest. I don’t care if it’s expensive for them because they didn’t build in basic mathematical safeguards when their business is literally charging interest on numbers. I’m not sure where this idea comes from that companies pass all costs on to customers. Citi does have profitable quarters and unprofitable quarters. If they have to take a $350 million charge off for overcharging people, then they will have a less profitable quarter and their shareholders will have to deal with it. If they try to jack prices way up to cover for it, then many people will just switch to Chase or Amex since they have better deals anyway. It’s like saying we shouldn’t charge Volkswagen for the emissions scandal because our cars will get too expensive. In reality, VWs will stay at basically the same price. If they got more expensive right after they got caught cheating everyone, then they simply won’t sell.

selectodude 9y ago
I just bought a Volkswagen, not only are they not more expensive, they’re substantially cheaper than they were a few years ago.

adjkant 9y ago

> A proper value comparison would be 'cost of all audits caused by this regulation' vs 'benefits gained from mistakes found by it' I don't think accurately captures it and is certainly not fair to the customers. The cost is not from the same source. Let's say audit cost per year is $100, and savings per year is $100: If they choose to forgo auditing: Citi: $200 Customers: -$100 If they do auditing: Citi: -$100 Customers: $100 It's apples and oranges. Regulation is about the customer and societal protections, not the protection of the company's profits. If a regulation is sound in terms of need but too expensive for a business, we shouldn't do away with the regulation altogether. As with your post, this isn't defending all regulations or that specific parent argument, just pointing out that the cost on the company being regulated versus money saved is not a valid metric for deciding if a regulation is needed. The regulation accounts for many more intangibles such as fair customer protections, and again, is not aimed at the value of the regulation for the company being regulated, though a regulation that causes a needed private business to be unprofitable is likely not sound.

conanbatt 9y ago
I think those numbers don't add up? Starting situation(note there are only 100 bucks): Citi: $0 Customer: $100 Without audit: Citi: $100 Customer: $0 With audit(a): Citi: $0 Customer: $0 Government: $100 Alternate with audit(b): Citi: -$100 Customer: $100 Government: $100 But citi can't run negative as a whole. Its a business, if it didnt make money, it would shut down. So A is whats actually happening with the numbers provided.
- adjkant 9y ago
  I think the math could be corrected slightly for clarity, but the general point still holds I think: the money is not apples and oranges here. Where does the government get the $100 from? The audit isn't conducted by the government as far as I'm aware, just mandated by them. Correct me if I'm wrong there of course. > note there are only 100 bucks That's my whole point: there isn't. The money they accidentally stole from customers (and eventually are now giving back) is different from the money they spent to conduct the audit, regardless of if for any given audit they find money that was misplaced. > But citi can't run negative as a whole. Its a business, if it didnt make money, it would shut down. People are acting as if this audit's cost will run Citi out of business, which I would find very hard to believe to be the case. If you actually read my post carefully, I too believe a regulation that causes that is likely flawed. My whole point is being missed here: some good regulations can cut into profits of businesses and still be worth it from the perspective of the society as a whole. Only once a regulation is so strong of a profit cut that a needed business cannot exist is a regulation likely flawed. Of course, there are many other ways for a regulation to be flawed as well.

thisisit 9y ago

The whole value comparison thing is weird because rules are not always made to gain net positive value. Because if they did then stuff like Universal healthcare will never happen. Secondly, businesses are a complex beast. It's not a simple debit/credit and there are tons of different schedules which run simultaneously. It is easy to get lost - whether it is customer's or the business' own money. So, every business run audits and reviews. Banks more so because they have other people's money. The only difference is whether they have legally mandated to share the findings and take corrective action.

rubber_duck 9y ago
I don't disagree with you - I just wanted to point out that "see this caught 300m$ error therefore it's worth it, and it also validates other regulations" (which is how I read OP and a common line of reasoning I see in public debates) is dangerously wrong because it ignores costs completely.