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The most useful aspects of the financial industry are the most heavily regulated... by government. Banks have rules on what they can use the money in your savi

The most useful aspects of the financial industry are the most heavily regulated... by government. Banks have rules on what they can use the money in your savings account for. They have government backed insurance. Regular stocks are also heavily regulated. Financial reporting requirements, disclosures, auditing, etc. Why does all this regulation exist? Because people we getting screwed over, and it was bad enough the government had to step in. The mortgage industry was not heavily regulated enough, and what happened there? A large financial crash. And who got bailed out? The banks, many of whom were somewhat complicit and profiting off the situation. Who didn't get bailed out? The little people. This is still happening now. Most hedge funds, high frequency trading, the lure of day trading, and may other schemes exist to siphon off money from regular people. Think for a minute about the hedge fund manager who gets tens of millions in bonuses. Where does that money come from? Ultimately the companies and other investors. That money could have gone into higher wages for the workers, but instead is being funneled to a few elites. Since ancient times, the powerful have sought to retain and grow their own power. They use whatever means are available to them. It can be the use of force, but things have gotten more sophisticated.

caylus 5y ago
> Why does all this regulation exist? Because people we getting screwed over, and it was bad enough the government had to step in. I think the analogy still holds here. Medicine is highly regulated because people sometimes die as a result of medical intervention, and as a result of that regulation (hopefully, but debatably) less people die, but that doesn't prove that medicine is designed to kill people.
- ansible 5y ago
  > I think the analogy still holds here. I really don't think so. Let me tell you a little story. Banks have offered checking accounts (now usually via debit cards) for a long time. Everyone understood how they worked, and if you wrote a check, it would be refused payment if you didn't have enough money in your account. This is the classic bounced check, and the merchant would be angry with you. Fast forward to the 2000's. Banks changed the rules, and now (unless you explicitly disallow it) if your check was going to bounce, they will instead charge you an overdraft fee. Even if your account was in the negative by one cent. All in the name of profit, because the fee would be like $35. And of course, this hit the poorest people the most. And let's not talk about check cashing services, which really screw over the people. Now if banks stopped there, that would be one thing. However, one of the "innovations" that Wells Fargo came up with (it was innovated for the profit margin, for a little while) was to re-order transactions any way they saw fit. Suppose you have $5 in your checking account. This morning, you deposit $50, and in the afternoon, you withdraw $30, secure in the knowledge that you have $55 in your account. Seems safe, right? You're doing the right thing, and playing by the rules, you'll still have $25 left. You are still out and about, so later, you take out another $5 for a meal. No problem, you still have $20 left. But Wells Fargo changed the rules. They decided that all the transactions coming in on the same day could be ordered (serialized in database terminology) in whatever order they decided. So they would process the $10 withdrawal first, charge you a $35 overdraft fee, and then apply the deposit, leaving you at -$10. Then, when you take out another $5, this is allowed, but because you're already negative, they charge you another overdraft fee, so now you're sitting at -$50. That is innovation in the modern age of the financial industry.

caylus 5y ago

> Why does all this regulation exist? Because people we getting screwed over, and it was bad enough the government had to step in. I think the analogy still holds here. Medicine is highly regulated because people sometimes die as a result of medical intervention, and as a result of that regulation (hopefully, but debatably) less people die, but that doesn't prove that medicine is designed to kill people.

ansible 5y ago
> I think the analogy still holds here. I really don't think so. Let me tell you a little story. Banks have offered checking accounts (now usually via debit cards) for a long time. Everyone understood how they worked, and if you wrote a check, it would be refused payment if you didn't have enough money in your account. This is the classic bounced check, and the merchant would be angry with you. Fast forward to the 2000's. Banks changed the rules, and now (unless you explicitly disallow it) if your check was going to bounce, they will instead charge you an overdraft fee. Even if your account was in the negative by one cent. All in the name of profit, because the fee would be like $35. And of course, this hit the poorest people the most. And let's not talk about check cashing services, which really screw over the people. Now if banks stopped there, that would be one thing. However, one of the "innovations" that Wells Fargo came up with (it was innovated for the profit margin, for a little while) was to re-order transactions any way they saw fit. Suppose you have $5 in your checking account. This morning, you deposit $50, and in the afternoon, you withdraw $30, secure in the knowledge that you have $55 in your account. Seems safe, right? You're doing the right thing, and playing by the rules, you'll still have $25 left. You are still out and about, so later, you take out another $5 for a meal. No problem, you still have $20 left. But Wells Fargo changed the rules. They decided that all the transactions coming in on the same day could be ordered (serialized in database terminology) in whatever order they decided. So they would process the $10 withdrawal first, charge you a $35 overdraft fee, and then apply the deposit, leaving you at -$10. Then, when you take out another $5, this is allowed, but because you're already negative, they charge you another overdraft fee, so now you're sitting at -$50. That is innovation in the modern age of the financial industry.