I read yesterday morning in the Japan Times that the JP Morgan settlement is thought to be a blueprint of future settlements. Some recompense to the Treasury, some putative damages to act a deterrent for the future, but a decided lack of culpability in the veritable errrr ummm culprits.

Why, pray tell, is it believed correct by a majority of lawmakers in America that “Gun’s Don’t Kill People – People Kill People”,  yet, the same lawmakers fail to apply similar conviction (no pun intended) to the thought that “Banks Don’t Commit Financial Crime – People Commit Financial Crime”?  It is quite obvious that in the truest sense, a bank cannot (yet) commit a crime, and until such time as HAL or Holly take over the reins and execution of bank trading and management, there are individuals, and responsible managers, and their Managers (upper-case “M”) who, should be culpable. Yet, in 2013 America, if one pays enough, it seems the perps and perp-enablers and perp-encouragers and perp-incentivizers can walk free.

The question as to “why” there exists a paradox of culpability is a rhetorical question. The answer is  rather obvious: the legislature and its lawmakers have been captured, which leads to laws and standards of convenience, rather than consistent logic. In the game of political rock-paper-scissors, money trumps philosophical consistency each and every day.

While I am admittedly both curmudgeonly and, at times cantankerous, and I am known to be periodically nostalgic, none of these are behind my belief that partnerships-of-old, as compared to publicly-listed joint-stock companies, throttled behaviour in ways that were palpably superior, precisely because there was a semblance of culpability – at the very least to one’s partners. And if you weren’t a partner, you can be certain that the culpable partner would insure potential tumors under his remit were excised, as such a cancer would impact both his partnership and therefore his children’s patrimony. I am of course, using this as an example, and I am not suggesting banks return to a partnership model. But it is important to question precisely what message is being sent by the decided lack of personal culpability, directly, by line managers, and their senior managers. Yes, their Senior Managers. In most areas of the law (it has been pointed out to me on more than one compliance-related occasion)  ignorance is no excuse.

So “Pay Away” your sins, while a palliative to the Treasury, is no cure. Only the bona-fide prospect of sharing a cell with a father-raper, near-total asset seizures vs. to most individuals what now appears to be eventual repayment of an interest-free loan (if caught) and a possibly blot on one’s employment record (which BTW others less pure-minded may see as a virtue). In practice, this must mean more than  selling out a few of your subordinates to take the rap, and make it go away. Like cancer, if you don’t get it all, it will return, metastasize, and kill the host. And to be clear: WE are the host.

Category: Legal, Technology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “Half-Assed”

  1. chartist says:

    I mentioned to a colleague at a financial newsletter company that I had to take a ethics course as part of my MBA curriculum. He said he took a similar class at the Wharton School. He said the professor said, if you’re going to steal, steal big so that the banks were to embarrassed to shed light on the incident.

    • rsbelovich says:

      There is a time for limited liability in the formation of small businesses. The investor risks their initial capital and can walk with no further liability. When the same principles are applied in larger organizations where the risk capital is practically non-existent, the rule gives way to abuse. Thanks for speaking up on this point Barry. This is an area of corporate law which is ripe for reform.

      • rd says:

        I think they have written several thousand pages of law and regulations reforming this in carrying out Sarbanes-Oxley and Dodd-Frank. It appears to be so reformed that nobody knows how to actually use the reformed laws to find an illegal act.

    • Iamthe50percent says:

      Sounds like Wharton ethics all right.

  2. constantnormal says:

    Luckily, like cancers, they are self-correcting conditions. We have had several instances of amoral, outa-control financial industries in the past, and they have always self-corrected (in the lunatic, Greenspanian free-market version of “correcting”), the most recent two examples having been the demise of the S&L industry in the early 1980s (remember Savings and Loans? they used to dabble in mortgages), and the collapse of the entire American/global economy in the 1930s.

    Never fear, a correction is on the way. We just don’t know how long it will take to arrive, or what industry will take the place of the current financial industry afterward.

    The Powers-That-Be have had their chance to repair the situation, and having declined that opportunity, Mr Market and the Handmaiden of Chaos will now take a shot at it. We may not like the form that the repair will take, but we had our chance to select a more palatable repair, and opted for the disease instead.