8 ms·

Wall Street’s Repeat Violations, Despite Repeated Promises

97 points by equilibrium 15y ago

ramanujan 15y ago
The background here is that the SEC is currently seeking the power[0] to impose fines without judicial review: Even as Judge Jed S. Rakoff of Federal District Court in Manhattan rejected the Securities and Exchange Commission‘s proposed settlement with Citigroup because he did not find it in the public interest, the agency’s chairwoman, Mary S. Schapiro, sought to enhance the S.E.C.’s authority to impose higher financial penalties to deter securities violations. An important part of her proposal would allow the S.E.C. to seek the increased penalties in administrative proceedings, a move that may allow the commission to avoid having to pursue its cases in federal courts in the future, skirting the kind of scrutiny Judge Rakoff applied. This article is a press hit[1] by the SEC's PR folk[2] which encourages people to call for stiffer penalties against those evil firms. Bingo, SEC gets a powerup. The "grassroots" outcry means they can now just ticket & fine companies without the meddling checks and balances of the federal courts system. The SEC's fines have about as much to do with preventing a financial meltdown as local police traffic fines have to do with preventing a murder. It's just safety theater. That is, everyone is familiar with the local/state government phenomenon of cops who ticket to make quota at the end of the month. Whether you are "breaking the law" today depends in large part on whether state/local government needs to make money off you. Tickets for expired registration are profit centers, robbery investigations are cost centers. The federal government is subject to many of the same dynamics, except that it isn't called on the carpet in the same way because federal agencies can intimidate those with knowledge of the situation into silence. Once in a while data comes out on the corruption and malfeasance of (e.g.) FDA[3] or EPA[4] or SEC[5] bureaucrats, but for the most part they have the guns so they are dishing out the punishment. The NYT's role in all this is to act as stenographer. There is no summary of how much the SEC sought to earn in fines from pursuing these prosecutions, nor how many of them were overturned or thrown out of court. [0] http://dealbook.nytimes.com/2011/12/05/s-e-c-seeks-more-power-but-does-it-need-it/ http://dealbook.nytimes.com/2011/12/05/s-e-c-seeks-more-powe... [1] http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html [2] http://www.sec.gov/news/press.shtml http://www.sec.gov/news/press.shtml [3] http://www.washingtonpost.com/business/economy/fda-chemist-pleads-guilty-to-insider-trading/2011/10/18/gIQA6wwyuL_story.html http://www.washingtonpost.com/business/economy/fda-chemist-p... [4] http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=2197064b-802a-23ad-49a0-d86c2080b4f8 http://epw.senate.gov/public/index.cfm?FuseAction=Minority.B... [5] http://abcnews.go.com/GMA/sec-pornography-employees-spent-hours-surfing-porn-sites/story?id=10452544 http://abcnews.go.com/GMA/sec-pornography-employees-spent-ho...
- tpatke 15y ago
  I would add the the SEC is a notoriously corrupt organization in that they need the banks help in order to understand what is going on AND people who work for the SEC tend to find their way into cushie bank jobs. The idea of giving them more power doesn't seem to me like any kind of solution at all. The real problem is that people just don't care enough about white collar crime. When someone mugs you for $5 you want vigilante justice, but when billions (trillions?) of dollars are on the line, we are happy to just shrug our shoulders.
  - dodo53 15y ago
    Who said people were happy about it? I think there's a lot of anger at banks at the moment for perceived corruption. But there's a huge gap between voters caring and measures that are actually effective being put in place with lots of lobbying in between (and I have no idea what measures would be effective; and many people that do probably are also in a position to get a cushie job helping to avoid or lobby against those measures at a bank).
    - tankenmate 15y ago
      Punitive damages on a geometric scale for repeat offences in a 10 year period? 3 times profit made plus any damages for first re-offence, 9 times for second re-offence. Sounds similar to training a child to go to sleep on their own...
      - deleted 15y ago
        [deleted]
      - dodo53 15y ago
        I'm guessing the devil is in the detail (and I don't know much so I'll shut up shortly) - could companies set up shell legal entities to offend for them / shop around for a better jurisdiction to do dodgy deals in / is current law clear enough that serious penalties wouldn't end up having a chilling effect on all business (OP was implying that the current status is that if the SEC wants to, they can probably find some law you're breaking). Serious penalties would probably demand a lot of legal boilerplate to make absolutely sure 'good business' wasn't effected and the government doesn't have power to destroy politically inconvenient companies without due process; the more boilerplate, the more likely the more expensive lawyers at the banks will outwit the lawyers writing the laws. Add some (possibly sponsored) political rhetoric about regulations killing jobs in a recession and I think it gets very hard to actually nail it down.
deleted 15y ago
[deleted]
reader2000 15y ago
So why should the financial industry be subject to fewer regulations? Because they can be trusted with their word?
zzzeek 15y ago
This article is nothing more than yet another example of shameful class warfare perpetrated against America's Job Creators.
- danssig 15y ago
  And who would these "America's Job Creators" be? The banks? I don't suppose you can provide any kind of non-Fox news citation for this nonsense?
  - zzzeek 15y ago
    not without the same sarcasm I think you missed !
gallerytungsten 15y ago
Mitt Romney says corporations are people. Ok, time for a "three strikes" law for Wall St.
- Toady 15y ago
  The law says corporations are people; it's called corporate personhood. It doesn't apply in all cases, but it does confer to them many rights that an individual is considered to have.
- Roboprog 15y ago
  Perhaps if more of them received the death penalty, it would make the ones obeying laws look better???
  - paulhauggis 15y ago
    As long as you also include labor unions. Many people want laws that only effect corporations, when labor unions are pretty much the same thing, have just as much power, and can be just as corrupt.
    - drumdance 15y ago
      I'll grant unions are very corrupt, but there's no way I believe they have just as much power. I'll believe that when top execs at labor unions pull in as much money as public company CEOs.
      - anamax 15y ago
        > there's no way I believe they have just as much power. I'll believe that when top execs at labor unions pull in as much money as public company CEOs. It seems silly to equate organization "power" with "how much does the top guy make". For example, Obama makes less than the president of GM. (Heck - Obama makes less than the president of the UAW.)
      - rdl 15y ago
        While I agree that corporations have a lot more money than unions, the presidents of many large unions make about as much in cash compensation (vs. equity) as most small to medium public company CEOs -- $200-500k.
shareme 15y ago
Funny that SEC asking for a law to avoid having to follow the US Constitution
Symmetry 15y ago
I'm not sure what this is supposed to prove. Say you're the CEO of one of these companies and you are absolutely convinced that you don't want any of your employees doing any of this stuff. How do you actually accomplish that?
- screwt 15y ago
  You can never do this 100% reliably, but depending on how important it is to you, there are measures that can be taken. To go to the complete extreme, you could employ someone to shadow every one of your current employees, and report to you if they break any of these rules. At the other extreme, you could issue a memo saying "Don't let me catch you doing any of this stuff, which will make you more profitable and earn you a bigger bonus, hint hint." In between turning a blind eye and adding ridiculous amounts of oversight, the CEO can make very clear what is and what isn't acceptable, what the penalties are for employees who break these rules. S/he can also instigate appropriate oversight to make it more likely to catch offenders. Like I said at the start, this can never be 100% reliable, but it can cut down the rate of offence a lot. [edit] tl;dr : If it is important enough to you, you'll find a way to ensure it doesn't happen.
- cantankerous 15y ago
  I think it probably just boils down to keeping a paper trail and policies to employees explicitly stating that such behavior will make you criminally and civilly liable. When a violation occurs, throw the malefactors under the bus like and go on about your business.
Winterhalf 15y ago
The political class bought votes with so much borrowed money that they finally could not repay, now they want us to blame the people who give them the money. Like the alcoholic who blames the bar tender for his car crashes.
- drumdance 15y ago
  Huh?

97 points by equilibrium 15y ago

The background here is that the SEC is currently seeking the power[0] to impose fines without judicial review: Even as Judge Jed S. Rakoff of Federal District Court in Manhattan rejected the Securities and Exchange Commission‘s proposed settlement with Citigroup because he did not find it in the public interest, the agency’s chairwoman, Mary S. Schapiro, sought to enhance the S.E.C.’s authority to impose higher financial penalties to deter securities violations. An important part of her proposal would allow the S.E.C. to seek the increased penalties in administrative proceedings, a move that may allow the commission to avoid having to pursue its cases in federal courts in the future, skirting the kind of scrutiny Judge Rakoff applied. This article is a press hit[1] by the SEC's PR folk[2] which encourages people to call for stiffer penalties against those evil firms. Bingo, SEC gets a powerup. The "grassroots" outcry means they can now just ticket & fine companies without the meddling checks and balances of the federal courts system. The SEC's fines have about as much to do with preventing a financial meltdown as local police traffic fines have to do with preventing a murder. It's just safety theater. That is, everyone is familiar with the local/state government phenomenon of cops who ticket to make quota at the end of the month. Whether you are "breaking the law" today depends in large part on whether state/local government needs to make money off you. Tickets for expired registration are profit centers, robbery investigations are cost centers. The federal government is subject to many of the same dynamics, except that it isn't called on the carpet in the same way because federal agencies can intimidate those with knowledge of the situation into silence. Once in a while data comes out on the corruption and malfeasance of (e.g.) FDA[3] or EPA[4] or SEC[5] bureaucrats, but for the most part they have the guns so they are dishing out the punishment. The NYT's role in all this is to act as stenographer. There is no summary of how much the SEC sought to earn in fines from pursuing these prosecutions, nor how many of them were overturned or thrown out of court. [0] http://dealbook.nytimes.com/2011/12/05/s-e-c-seeks-more-power-but-does-it-need-it/ http://dealbook.nytimes.com/2011/12/05/s-e-c-seeks-more-powe... [1] http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html [2] http://www.sec.gov/news/press.shtml http://www.sec.gov/news/press.shtml [3] http://www.washingtonpost.com/business/economy/fda-chemist-pleads-guilty-to-insider-trading/2011/10/18/gIQA6wwyuL_story.html http://www.washingtonpost.com/business/economy/fda-chemist-p... [4] http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=2197064b-802a-23ad-49a0-d86c2080b4f8 http://epw.senate.gov/public/index.cfm?FuseAction=Minority.B... [5] http://abcnews.go.com/GMA/sec-pornography-employees-spent-hours-surfing-porn-sites/story?id=10452544 http://abcnews.go.com/GMA/sec-pornography-employees-spent-ho...

tpatke 15y ago
I would add the the SEC is a notoriously corrupt organization in that they need the banks help in order to understand what is going on AND people who work for the SEC tend to find their way into cushie bank jobs. The idea of giving them more power doesn't seem to me like any kind of solution at all. The real problem is that people just don't care enough about white collar crime. When someone mugs you for $5 you want vigilante justice, but when billions (trillions?) of dollars are on the line, we are happy to just shrug our shoulders.
- dodo53 15y ago
  Who said people were happy about it? I think there's a lot of anger at banks at the moment for perceived corruption. But there's a huge gap between voters caring and measures that are actually effective being put in place with lots of lobbying in between (and I have no idea what measures would be effective; and many people that do probably are also in a position to get a cushie job helping to avoid or lobby against those measures at a bank).
  - tankenmate 15y ago
    Punitive damages on a geometric scale for repeat offences in a 10 year period? 3 times profit made plus any damages for first re-offence, 9 times for second re-offence. Sounds similar to training a child to go to sleep on their own...
    - deleted 15y ago
      [deleted]
    - dodo53 15y ago
      I'm guessing the devil is in the detail (and I don't know much so I'll shut up shortly) - could companies set up shell legal entities to offend for them / shop around for a better jurisdiction to do dodgy deals in / is current law clear enough that serious penalties wouldn't end up having a chilling effect on all business (OP was implying that the current status is that if the SEC wants to, they can probably find some law you're breaking). Serious penalties would probably demand a lot of legal boilerplate to make absolutely sure 'good business' wasn't effected and the government doesn't have power to destroy politically inconvenient companies without due process; the more boilerplate, the more likely the more expensive lawyers at the banks will outwit the lawyers writing the laws. Add some (possibly sponsored) political rhetoric about regulations killing jobs in a recession and I think it gets very hard to actually nail it down.

deleted 15y ago

[deleted]

reader2000 15y ago

So why should the financial industry be subject to fewer regulations? Because they can be trusted with their word?

zzzeek 15y ago

This article is nothing more than yet another example of shameful class warfare perpetrated against America's Job Creators.

danssig 15y ago
And who would these "America's Job Creators" be? The banks? I don't suppose you can provide any kind of non-Fox news citation for this nonsense?
- zzzeek 15y ago
  not without the same sarcasm I think you missed !

gallerytungsten 15y ago

Mitt Romney says corporations are people. Ok, time for a "three strikes" law for Wall St.

Toady 15y ago
The law says corporations are people; it's called corporate personhood. It doesn't apply in all cases, but it does confer to them many rights that an individual is considered to have.
Roboprog 15y ago
Perhaps if more of them received the death penalty, it would make the ones obeying laws look better???
- paulhauggis 15y ago
  As long as you also include labor unions. Many people want laws that only effect corporations, when labor unions are pretty much the same thing, have just as much power, and can be just as corrupt.
  - drumdance 15y ago
    I'll grant unions are very corrupt, but there's no way I believe they have just as much power. I'll believe that when top execs at labor unions pull in as much money as public company CEOs.
    - anamax 15y ago
      > there's no way I believe they have just as much power. I'll believe that when top execs at labor unions pull in as much money as public company CEOs. It seems silly to equate organization "power" with "how much does the top guy make". For example, Obama makes less than the president of GM. (Heck - Obama makes less than the president of the UAW.)
    - rdl 15y ago
      While I agree that corporations have a lot more money than unions, the presidents of many large unions make about as much in cash compensation (vs. equity) as most small to medium public company CEOs -- $200-500k.

shareme 15y ago

Funny that SEC asking for a law to avoid having to follow the US Constitution

Symmetry 15y ago

I'm not sure what this is supposed to prove. Say you're the CEO of one of these companies and you are absolutely convinced that you don't want any of your employees doing any of this stuff. How do you actually accomplish that?

screwt 15y ago
You can never do this 100% reliably, but depending on how important it is to you, there are measures that can be taken. To go to the complete extreme, you could employ someone to shadow every one of your current employees, and report to you if they break any of these rules. At the other extreme, you could issue a memo saying "Don't let me catch you doing any of this stuff, which will make you more profitable and earn you a bigger bonus, hint hint." In between turning a blind eye and adding ridiculous amounts of oversight, the CEO can make very clear what is and what isn't acceptable, what the penalties are for employees who break these rules. S/he can also instigate appropriate oversight to make it more likely to catch offenders. Like I said at the start, this can never be 100% reliable, but it can cut down the rate of offence a lot. [edit] tl;dr : If it is important enough to you, you'll find a way to ensure it doesn't happen.
cantankerous 15y ago
I think it probably just boils down to keeping a paper trail and policies to employees explicitly stating that such behavior will make you criminally and civilly liable. When a violation occurs, throw the malefactors under the bus like and go on about your business.

Winterhalf 15y ago

The political class bought votes with so much borrowed money that they finally could not repay, now they want us to blame the people who give them the money. Like the alcoholic who blames the bar tender for his car crashes.

drumdance 15y ago
Huh?