

Wall Street’s Repeat Violations, Despite Repeated Promises - equilibrium
http://www.nytimes.com/interactive/2011/11/08/business/Wall-Streets-Repeat-Violations-Despite-PromisesStsssss.html

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ramanujan
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-
powe...](http://dealbook.nytimes.com/2011/12/05/s-e-c-seeks-more-power-but-
does-it-need-it/)

[1] <http://www.paulgraham.com/submarine.html>

[2] <http://www.sec.gov/news/press.shtml>

[3] [http://www.washingtonpost.com/business/economy/fda-
chemist-p...](http://www.washingtonpost.com/business/economy/fda-chemist-
pleads-guilty-to-insider-trading/2011/10/18/gIQA6wwyuL_story.html)

[4]
[http://epw.senate.gov/public/index.cfm?FuseAction=Minority.B...](http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=2197064b-802a-23ad-49a0-d86c2080b4f8)

[5] [http://abcnews.go.com/GMA/sec-pornography-employees-spent-
ho...](http://abcnews.go.com/GMA/sec-pornography-employees-spent-hours-
surfing-porn-sites/story?id=10452544)

~~~
tpatke
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
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
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...

~~~
dodo53
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.

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

~~~
Roboprog
Perhaps if more of them received the death penalty, it would make the ones
obeying laws look better???

~~~
paulhauggis
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
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
> 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.)

------
Symmetry
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
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.

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Winterhalf
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
Huh?

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

~~~
danssig
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
not without the same sarcasm I think you missed !

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

