In general, banks that break regulations don't result in people going to jail because individuals take action to avoid personal responsibility for anything. There are literally hundreds of thousands of pagers of them, nobody really understands them, and regulators decide which ones to take seriously according to the political winds of the day.
At top banks a major purpose of the regulatory department is to make sure nobody can be blamed for anything. Banks would rather pay billions of fines because no executive is going into engage in a more coherent compliance regime if it means risking jail for something nobody understands. It is common at certain commercial banks to deliberately engage in ignorance, at the risk of being find very large sums, simply to avoid the discovery risk--of regulators being able to pin blame on someone who raised some concern.
Recently the regulators have been hinting executives will be held responsible for systemic failures in their bank. Bankers have been responding by ensuring full compliance with regulations. Just kidding, nobody knows how to fully comply with bank regulations. Bankers have generally responded by ceasing high-risk activity completely. For example, there are tens of thousands of Somali refugees in the US. To my knowledge there is no commercial bank that will help them send money home to their families. Somalia is simply too high risk.
>In general, banks that break regulations don't result in people going to jail because individuals take action to avoid personal responsibility for anything. There are literally hundreds of thousands of pagers of them, nobody really understands them, and regulators decide which ones to take seriously according to the political winds of the day.
It's more to do with a lack of prosecutorial oversight and a lack of political will than a lack of laws being broken. If Obama wanted to, he could toss Sarbanes-Oxley at the bank executives - they wouldn't even have to prove that they knew about the fraudulent and criminal behavior underneath in order to make those charges stick.
The mere fact that they turned a blind eye would be enough to put them in an orange jumpsuit.
The regulators have been talking about getting tough for two years but still show no signs of actually doing it (typical Obama play). I doubt they will unless Bernie enters the white house. Obama's not going to risk his cushy retirement of paid speaking gigs at Goldman Sachs.
> literally hundreds of thousands of pagers of them, nobody really understands them
BaselII[+] and friends are relatively clearcut and are designed to prevent credit meltdown. The rules and reporting requirements are baked into Bank software and dataflow. Auditors will spank you with fines, and will revoke your accreditation for serial offences. This can force an involuntary acquisition.
> there are tens of thousands of Somali refugees in the US. To my knowledge there is no commercial bank that will help them send money home to their families.
That is the result of draconian anti-terrorism laws and has nothing to do with regulations around credit reserves.
You seem to be concerned around over-regulation, however the article is clearly arguing the opposite: "Deregulation has allowed perverse incentives into the very fabric of global finance."
I was replying to the poster who was wondering why people don't go to jail when banks break the law.
I was making the charitable assumption he was talking about banks that were breaking laws. Most of the significant regulatory actions taken against banks do not involve Basel capital requirements. With regards to the financial crisis, simply being bad at running a bank isn't a crime.
While we're on the subject, political leaders and voters do not really understand the distinction here either. Capital requirements are separate from, for example, anti money-laundering, but in the eyes of voters it's all more regulation against the evil banks.
At top banks a major purpose of the regulatory department is to make sure nobody can be blamed for anything. Banks would rather pay billions of fines because no executive is going into engage in a more coherent compliance regime if it means risking jail for something nobody understands. It is common at certain commercial banks to deliberately engage in ignorance, at the risk of being find very large sums, simply to avoid the discovery risk--of regulators being able to pin blame on someone who raised some concern.
Recently the regulators have been hinting executives will be held responsible for systemic failures in their bank. Bankers have been responding by ensuring full compliance with regulations. Just kidding, nobody knows how to fully comply with bank regulations. Bankers have generally responded by ceasing high-risk activity completely. For example, there are tens of thousands of Somali refugees in the US. To my knowledge there is no commercial bank that will help them send money home to their families. Somalia is simply too high risk.