4 ms·

So the question is how much money they concealed by those widespread recordkeeping failures. I'm assuming it's more than 125 mil

onemoresoop 5y ago
You bet, 125 mil is just cost of doing business.
alexfromapex 5y ago
I'd like to know why they get these small slaps on the wrist too. $125 million for them is like a person with average wealth being fined $20.
- AlexTWithBeard 5y ago
  JPMorgan's annual net income is about $30bn. $125 million is roughly 0.5%, which is equivalent to $500 fine for a person making $100k per year. It's probably still a slap, but I'd say a pretty significant one.
  - munk-a 5y ago
    Proportion of revenue is a bad measure for this reason - costs don't scale proportionally. The rent, food and utilities you're siphoning out of that 100k along with all the incidental costs on top of it don't really apply evenly as revenue increases. As someone making right around 100k I'd say that 500$ is a big enough penalty that I'll notice it but if it was a one-off (like this one was) then I'll shrug and eat it. For instance if I were getting my bathroom remodeled and wanted to install some nifty european shower head that's against code... I'd probably be alright with the 500$ surcharge.
    - AlexTWithBeard 5y ago
      Applying human measures to corporations is a bit of a stretch in any case. That being said, as a government you want to milk this cow, not slaughter it.
bidirectional 5y ago
The problem is that it's basically impossible to know. I'd imagine the vast majority of infractions were just employees improperly communicating privileged information via Whatsapp or whatever, without gaining any real advantage by doing so.
- munk-a 5y ago
  The government decided that these record keeping failures were serious enough to warrant a hundred million dollar fine. We've all seen how fines lean toward slaps on the wrist so I would be pretty hesitant to assume the multi-million dollar one here was just because someone was DMing something that needed to be sent over a secure channel.
  - nickff 5y ago
    >"The government decided that these record keeping failures were serious enough to warrant a hundred million dollar fine." The SEC likes to go after these sorts of settlements, as they can post large dollar values without having to prove any actual harm. On the other side, these settlements are so common that they're just a cost of doing business, basically a tax.
AlexTWithBeard 5y ago
I cannot say exactly for this one, but with the LIBOR scandal numbers were probably not that high. LIBOR was probably manipulated by 1 basis point (0.01%), give or take. Even with $1bn notional deal, which is a very large one, the difference would be $25k for 3 month payment. I mean, well, it's still pretty good money, but it's not like they made a couple of trillions and only paid a mere half-a-billion in fine.
- delaaxe 5y ago
  I can't believe for one second that LIBOR was only manipulated for one bip at a time.
  - bidirectional 5y ago
    Well that was the case. Multi-bp LIBOR moves are pretty rare outside of exigent circumstances and the mechanics of doing so would be pretty tricky given that outlier submissions are thrown out. Wilmott had a good article recently on the mechanics of the manipulation [1]. [1]: https://wilmott.com/the-libor-fix/ https://wilmott.com/the-libor-fix/
  - cm2187 5y ago
    There was two distinct manipulations. The first one occured before the crisis. Swap traders asking money market traders to round their libor submission "the right way". That number got averaged across multiple banks, and the impact on the final fixing was likely of the order of a basis point or perhaps a fraction (per the regulator's report). 1 basis point may be small, but is a lot of money to an individual swap trader given the sort of position they must have had on libor futures (and that's money to the trader, not necessary to the rest of the bank who may have a net position the other way). The second manipulation occured at the height of the financial crisis and is of a different nature. Because banks contributions to libor fixing were public, investors were infering from the submissions whether a bank was struggling to fund itself. At the height of the post-lehman panic, some banks decided to lower their submission to not look weak. In this case the order of magnitude would be much higher, in the 10s of basis points. You could argue the banks had a financial gain, but not from the direct impact on libor (it wasn't clear what their position was, though banks tend to be typically net receiver of libor), rather from the perception of not being in distress to investors.

onemoresoop 5y ago

You bet, 125 mil is just cost of doing business.

alexfromapex 5y ago

I'd like to know why they get these small slaps on the wrist too. $125 million for them is like a person with average wealth being fined $20.

AlexTWithBeard 5y ago
JPMorgan's annual net income is about $30bn. $125 million is roughly 0.5%, which is equivalent to $500 fine for a person making $100k per year. It's probably still a slap, but I'd say a pretty significant one.
- munk-a 5y ago
  Proportion of revenue is a bad measure for this reason - costs don't scale proportionally. The rent, food and utilities you're siphoning out of that 100k along with all the incidental costs on top of it don't really apply evenly as revenue increases. As someone making right around 100k I'd say that 500$ is a big enough penalty that I'll notice it but if it was a one-off (like this one was) then I'll shrug and eat it. For instance if I were getting my bathroom remodeled and wanted to install some nifty european shower head that's against code... I'd probably be alright with the 500$ surcharge.
  - AlexTWithBeard 5y ago
    Applying human measures to corporations is a bit of a stretch in any case. That being said, as a government you want to milk this cow, not slaughter it.

bidirectional 5y ago

The problem is that it's basically impossible to know. I'd imagine the vast majority of infractions were just employees improperly communicating privileged information via Whatsapp or whatever, without gaining any real advantage by doing so.

munk-a 5y ago
The government decided that these record keeping failures were serious enough to warrant a hundred million dollar fine. We've all seen how fines lean toward slaps on the wrist so I would be pretty hesitant to assume the multi-million dollar one here was just because someone was DMing something that needed to be sent over a secure channel.
- nickff 5y ago
  >"The government decided that these record keeping failures were serious enough to warrant a hundred million dollar fine." The SEC likes to go after these sorts of settlements, as they can post large dollar values without having to prove any actual harm. On the other side, these settlements are so common that they're just a cost of doing business, basically a tax.

AlexTWithBeard 5y ago

I cannot say exactly for this one, but with the LIBOR scandal numbers were probably not that high. LIBOR was probably manipulated by 1 basis point (0.01%), give or take. Even with $1bn notional deal, which is a very large one, the difference would be $25k for 3 month payment. I mean, well, it's still pretty good money, but it's not like they made a couple of trillions and only paid a mere half-a-billion in fine.

delaaxe 5y ago
I can't believe for one second that LIBOR was only manipulated for one bip at a time.
- bidirectional 5y ago
  Well that was the case. Multi-bp LIBOR moves are pretty rare outside of exigent circumstances and the mechanics of doing so would be pretty tricky given that outlier submissions are thrown out. Wilmott had a good article recently on the mechanics of the manipulation [1]. [1]: https://wilmott.com/the-libor-fix/ https://wilmott.com/the-libor-fix/
- cm2187 5y ago
  There was two distinct manipulations. The first one occured before the crisis. Swap traders asking money market traders to round their libor submission "the right way". That number got averaged across multiple banks, and the impact on the final fixing was likely of the order of a basis point or perhaps a fraction (per the regulator's report). 1 basis point may be small, but is a lot of money to an individual swap trader given the sort of position they must have had on libor futures (and that's money to the trader, not necessary to the rest of the bank who may have a net position the other way). The second manipulation occured at the height of the financial crisis and is of a different nature. Because banks contributions to libor fixing were public, investors were infering from the submissions whether a bank was struggling to fund itself. At the height of the post-lehman panic, some banks decided to lower their submission to not look weak. In this case the order of magnitude would be much higher, in the 10s of basis points. You could argue the banks had a financial gain, but not from the direct impact on libor (it wasn't clear what their position was, though banks tend to be typically net receiver of libor), rather from the perception of not being in distress to investors.