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It’s sort of amazing how easy and widely accepted it is to submit, under oath, completely different corporate financial attestations depending on whether you ar

by jl2718 6y ago

It’s sort of amazing how easy and widely accepted it is to submit, under oath, completely different corporate financial attestations depending on whether you are dealing with the IRS, the SEC, or FINRA. I can imagine 50 years ago, when they all got the ability to check electronically, and knew that everybody was cheating, but they couldn’t do anything because it would it would crash the economy, and also these computers were taking their jobs, so the agencies decided to be willfully ignorant and inefficient and setting rules according to whatever people were doing already. So now it’s like, “OMG we never saw this coming!”

larrydag 6y ago
50 years ago banking was a very personal business. A business would work locally with their own bank. The bank knew the owners and since they banked with them knew their cash flows. Now banks are national conglomerates. There is a lot of cost in banking and many of the large banks have moved to automated systems to reduce overhead and labor. This doesn't excuse the bank but they are permitting credit for all sorts of things they probably don't want on their books. It's a bit of a mess right now in the banking industry. You may ask are they knowingly allowing these loose standards? Perhaps, but I'm willing to bet it's more in the line of ignorance is bliss.
- zentiggr 6y ago
  How about greed? How many decades of repeated patterns of cooking figures, "losing" paperwork, and outright fraud does it take to see that a sizeable percentage of people running the largest financial companies just want to rake in whatever they can. Since so many products are so arcane and/or never disclosed in detail, there's ample opportunity to mess with and profit from just about anything that isn't prima facie simple. I don't know how to rein in the seemingly endless stream of schemers... and the thought that "everybody does it" (think LIBOR), and that shining the proverbial sunlight into the back rooms will cripple what financial system we have just makes me want to burn it all down anyway. Lots of frustration, little action. No answers.
  - rapind 6y ago
    The first step is to stop bailing out all this fuckery. Look at your politicians stance on wall street bailouts.
    - lotsofpulp 6y ago
      And then look at all the voters’ stances when they find out their 401k don’t look so great, or when their governments have to raise taxes to pay for pensions since the pension fund isn’t worth much.
      - rapind 6y ago
        Easier to swallow if the bailout goes directly to these voters instead of this trickle down nonsense.
        lotsofpulp 6y ago
        It’s hard to make a cash bailout that isn’t based on income/wealth due to the optics. By inflating asset values, it isn’t as discriminating against those on the upper end of the income/wealth scale, who also probably have major business interests in propping up asset values.
      - eli_gottlieb 6y ago
        Voter here. It's not just that I'm willing to subsist on dog kibble in 35 years to see most of Wall Street go to jail. It's that I'm willing to make that trade this year. If you founded a political party whose platform was "fuck Wall Street in every way possible, and damn the consequences", I think most of my generation would vote for that.
        lotsofpulp 6y ago
        It would be nice if people who thought that came out and voted (skewing towards younger population). Obviously, a larger portion of the older population who do have their wealth tied up are not going to be a fan, and they tend to be the ones with the funds and votes to dictate political discourse.
wpietri 6y ago
My understanding is that after 9/11, a lot of federal law enforcement resources got retasked away from white collar crime and just never went back. And I think it's part of a general decline in interest in holding people with money to account; in the 1970s, the IRS used to audit 2.5% of returns. Now that's down to 0.45% and falling. This makes a fair bit of sense when you look at who has influence with legislators and elected politicians: the donors. But what I think a lot of this misses is that the more a financial system is prone to cash extraction, the less good it becomes at value generation. As an example, we can look in software at the era of Microsoft's dominance. Microsoft was a great cash generator, but its dominance (and misuse of its market power) discouraged a lot of startups). Then antitrust enforcement and the rise of the browser unleashed a whole wave of innovation.
- Ididntdothis 6y ago
  "But what I think a lot of this misses is that the more a financial system is prone to cash extraction, the less good it becomes at value generation. As an example, we can look in software at the era of Microsoft's dominance. Microsoft was a great cash generator, but its dominance (and misuse of its market power) discouraged a lot of startups). Then antitrust enforcement and the rise of the browser unleashed a whole wave of innovation. " Pretty much all big companies are good at making cash while killing innovation. Compared to their size the innovation output of the big tech companies is pretty low. Since 2008 it has become clear that the financial sector is viewed as an industry that needs to be protected no matter what the cost so you should expect them to keep doing crooked stuff while making boatloads of money. This comes at the expense of other sectors in the economy.
  - wpietri 6y ago
    I agree totally, but want to draw one distinction. I think big companies are fine in big, competitive markets. They're generally terrible at innovation, of course (although not always; 3M is a counterexample, as is Apple). But as long as there is room for upstarts to make a good living, that doesn't worry me.
    - 6y ago
Tyrek 6y ago
As a direct response, this is not strictly true. The SEC and IRS require financials prepared under different accounting standards, due to a different focus of each group (SEC - focused on overall profitability and activities of the Company; IRS - focused on cash flow and triggers of taxable events) I'm not familiar with the FINRA standards, but companies maintain their books and files to translate between SEC numbers ('book basis') and IRS basis ('tax basis')

by jl2718 6y ago

larrydag 6y ago

50 years ago banking was a very personal business. A business would work locally with their own bank. The bank knew the owners and since they banked with them knew their cash flows. Now banks are national conglomerates. There is a lot of cost in banking and many of the large banks have moved to automated systems to reduce overhead and labor. This doesn't excuse the bank but they are permitting credit for all sorts of things they probably don't want on their books. It's a bit of a mess right now in the banking industry. You may ask are they knowingly allowing these loose standards? Perhaps, but I'm willing to bet it's more in the line of ignorance is bliss.

zentiggr 6y ago
How about greed? How many decades of repeated patterns of cooking figures, "losing" paperwork, and outright fraud does it take to see that a sizeable percentage of people running the largest financial companies just want to rake in whatever they can. Since so many products are so arcane and/or never disclosed in detail, there's ample opportunity to mess with and profit from just about anything that isn't prima facie simple. I don't know how to rein in the seemingly endless stream of schemers... and the thought that "everybody does it" (think LIBOR), and that shining the proverbial sunlight into the back rooms will cripple what financial system we have just makes me want to burn it all down anyway. Lots of frustration, little action. No answers.
- rapind 6y ago
  The first step is to stop bailing out all this fuckery. Look at your politicians stance on wall street bailouts.
  - lotsofpulp 6y ago
    And then look at all the voters’ stances when they find out their 401k don’t look so great, or when their governments have to raise taxes to pay for pensions since the pension fund isn’t worth much.
    - rapind 6y ago
      Easier to swallow if the bailout goes directly to these voters instead of this trickle down nonsense.
      - lotsofpulp 6y ago
        It’s hard to make a cash bailout that isn’t based on income/wealth due to the optics. By inflating asset values, it isn’t as discriminating against those on the upper end of the income/wealth scale, who also probably have major business interests in propping up asset values.
    - eli_gottlieb 6y ago
      Voter here. It's not just that I'm willing to subsist on dog kibble in 35 years to see most of Wall Street go to jail. It's that I'm willing to make that trade this year. If you founded a political party whose platform was "fuck Wall Street in every way possible, and damn the consequences", I think most of my generation would vote for that.
      - lotsofpulp 6y ago
        It would be nice if people who thought that came out and voted (skewing towards younger population). Obviously, a larger portion of the older population who do have their wealth tied up are not going to be a fan, and they tend to be the ones with the funds and votes to dictate political discourse.

wpietri 6y ago

My understanding is that after 9/11, a lot of federal law enforcement resources got retasked away from white collar crime and just never went back. And I think it's part of a general decline in interest in holding people with money to account; in the 1970s, the IRS used to audit 2.5% of returns. Now that's down to 0.45% and falling. This makes a fair bit of sense when you look at who has influence with legislators and elected politicians: the donors. But what I think a lot of this misses is that the more a financial system is prone to cash extraction, the less good it becomes at value generation. As an example, we can look in software at the era of Microsoft's dominance. Microsoft was a great cash generator, but its dominance (and misuse of its market power) discouraged a lot of startups). Then antitrust enforcement and the rise of the browser unleashed a whole wave of innovation.

Ididntdothis 6y ago
"But what I think a lot of this misses is that the more a financial system is prone to cash extraction, the less good it becomes at value generation. As an example, we can look in software at the era of Microsoft's dominance. Microsoft was a great cash generator, but its dominance (and misuse of its market power) discouraged a lot of startups). Then antitrust enforcement and the rise of the browser unleashed a whole wave of innovation. " Pretty much all big companies are good at making cash while killing innovation. Compared to their size the innovation output of the big tech companies is pretty low. Since 2008 it has become clear that the financial sector is viewed as an industry that needs to be protected no matter what the cost so you should expect them to keep doing crooked stuff while making boatloads of money. This comes at the expense of other sectors in the economy.
- wpietri 6y ago
  I agree totally, but want to draw one distinction. I think big companies are fine in big, competitive markets. They're generally terrible at innovation, of course (although not always; 3M is a counterexample, as is Apple). But as long as there is room for upstarts to make a good living, that doesn't worry me.
  - 6y ago

Tyrek 6y ago

As a direct response, this is not strictly true. The SEC and IRS require financials prepared under different accounting standards, due to a different focus of each group (SEC - focused on overall profitability and activities of the Company; IRS - focused on cash flow and triggers of taxable events) I'm not familiar with the FINRA standards, but companies maintain their books and files to translate between SEC numbers ('book basis') and IRS basis ('tax basis')