5 ms·

“Moreover, the dollar transfers earned HSBC hefty fees. The Senate investigation quoted an HSBC email lamenting how the bank would lose $2.6 billion in revenue

by smadge 8y ago

“Moreover, the dollar transfers earned HSBC hefty fees. The Senate investigation quoted an HSBC email lamenting how the bank would lose $2.6 billion in revenue from U.S. dollar accounts that it was forced to close because of the Mexico fiasco.” * First, apparently HSBC was making 2.6 billion USD (annual?) revenue from these accounts, and was fined 1.9 billion USD. Second, it is not a certainty that a company engaging in illegal behavior will get caught and fined. The company’s “expected value” function would multiply the expected fines by the chance of being caught. We can only observe the world in which they get caught and perhaps pay a fine larger than what they made. We don’t see the world in which they don’t get fined, which makes the illegal behavior on average profitable. * https://www.npr.org/sections/parallels/2014/03/20/291934724/awash-in-cash-drug-cartels-rely-on-big-banks-to-launder-profits https://www.npr.org/sections/parallels/2014/03/20/291934724/...

harryh 8y ago
1) 2.6B in revenue != 2.6B in profit. HSBC earns maybe 20% margins so we're talking about ~500M in revenue or far less than the fine. 2) Your point about expected value is well taken, but here you are saying something far different from what themagician said and I was objecting to.
- gpm 8y ago
  You can't just apply the margin like that. You have to estimate the marginal cost of the extra business. For something like banking I'm fairly certain that the marginal cost is tiny. It takes a lot of money to setup all the systems needed for moving money around, but once they are in place the difference between 10b and 11b flowing through them is tiny. As such HSBC probably pocketed most of that revenue.
shadowxs76 8y ago
My take on legal punishment of banks that commit these sorts of frauds: the only method of punishment that strikes me as likely to actually make them feel the pain of their acts is to also pursue indictment of specific executives that knowingly allowed activity that was very evidently shady to continue. Multimillion and multibillion dollar fines levied against giant corporations are ineffective for the very reasons stated above by others, they're proportionally absurd for these kinds of corporate actors and the costs of these fines are mostly an abstraction (no one bank executive or group of them really feels the drain from their own pocket) that most likely get subtly passed onto customers anyhow.

by smadge 8y ago

harryh 8y ago

1) 2.6B in revenue != 2.6B in profit. HSBC earns maybe 20% margins so we're talking about ~500M in revenue or far less than the fine. 2) Your point about expected value is well taken, but here you are saying something far different from what themagician said and I was objecting to.

gpm 8y ago
You can't just apply the margin like that. You have to estimate the marginal cost of the extra business. For something like banking I'm fairly certain that the marginal cost is tiny. It takes a lot of money to setup all the systems needed for moving money around, but once they are in place the difference between 10b and 11b flowing through them is tiny. As such HSBC probably pocketed most of that revenue.

shadowxs76 8y ago

My take on legal punishment of banks that commit these sorts of frauds: the only method of punishment that strikes me as likely to actually make them feel the pain of their acts is to also pursue indictment of specific executives that knowingly allowed activity that was very evidently shady to continue. Multimillion and multibillion dollar fines levied against giant corporations are ineffective for the very reasons stated above by others, they're proportionally absurd for these kinds of corporate actors and the costs of these fines are mostly an abstraction (no one bank executive or group of them really feels the drain from their own pocket) that most likely get subtly passed onto customers anyhow.