"In our conversations, Kidney reflected on why that might be. The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role. But to Kidney, the driving force was something subtler. Over the course of three decades, the concept of the government as an active player had been tarnished in the minds of the public and the civil servants working inside the agency. In his view, regulatory capture is a psychological process in which officials become increasingly gun shy in the face of criticism from their bosses, Congress, and the industry the agency is supposed to oversee. Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions."
Basically, regulators don't have the balls to go after the big guys.
Sounds very similar to this story[0][1]. If i recall correctly: Ambitious NY Fed employee claims she was fired because she wouldn't soften language in a report; secretly records meetings that show extreme deference to banks. The This American Life version is really great.
But at the bottom of it, there was this thing that he [Eric Holder]
laid out called the "collateral consequences doctrine."
And what "collateral consequences" meant was that if
you’re a prosecutor and you’re targeting one of these big
corporate offenders and you’re worried that you may
affect innocent victims, that shareholders or innocent
executives may lose their jobs, you may consider other
alternatives, other remedies besides criminal
prosecutions—in other words, fines, nonprosecution
agreements, deferred prosecution agreements.
And again, at the time, it was a completely sensible
thing to lay out. Of course it makes sense to not always
destroy a company if you can avoid it. But what they’ve
done is they’ve conflated that sometimes-sensible policy
with a policy of not going after any individuals for any
crimes. And that’s just totally unacceptable.
"Of course it makes sense to not always destroy a company if you can avoid it." So that's the basic implied threat - destruction?
Nice. And this then becomes a brinksmanship game. The act of flauting the law is now coin of the realm.
Enron was taken down by ... the running dogs of CALPERS. "My fund can beat up your fund" so to speak. This is why we can't have affordable housing - the spall from Enron painted the whole state of Texas.
Shareholders don't deserve protection like that. I understand that giant corporations are not particularly run by shareholders, but if someone dumps their money into something and doesn't pay attention to it, it's fine to make them feel the consequences of not paying attention.
I'm confused by this. Shareholders are some of the primary victims being defrauded in these cases.
Enron's accounting gymnastics were precisely to defraud their shareholders. How is that negligence on the part of the shareholder? It's not - it's criminal on the part of the executives.
> Enron's accounting gymnastics were precisely to defraud their shareholders. How is that negligence on the part of the shareholder? It's not - it's criminal on the part of the executives.
Of course it is. Because in that case the perpetrators are the corporate officers and the victims are the shareholders. The shareholders were partially responsible for not choosing better officers, but for that they can only blame themselves.
But there are times when officers choose to harm third parties in furtherance of the interest of the shareholders. They do something illegal because it's profitable. And in that case losing their money is exactly what shareholders deserve for choosing officers with no scruples.
> It's not - it's criminal on the part of the executives.
So if this kind of behavior is prosecuted and severely punished (e.g. lifetime prison sentences) - shareholders would be less likely to be defrauded.
The protect-the-shareholders attitude is entirely oxymoronic here, since it just means that those exploiting the share-holders and the corporation know they are unlikely to face significant consequences and this encourages others to do likewise.
I didn't say it was negligence on the part of the shareholder. They are putting their money under the control of someone else, they should be thinking about risk when they do so. Is it so clear that a series of closer looks at Enron's books would have missed the fraud?
It's also the case that I was thinking more about the companies that are fined and keep operating with all the same officers in place than I was thinking about companies that implode. For example, shareholders of JP Morgan apparently aren't real sad with Jamie Dimon.
The reason why the government has to take action on this is because as a matter of policy, the government coerces people to invest in corporate America. If people were freer to not participate in the stock market casino, then there would be no need to regulate it.
Sounds a bit like a variety of legal realism, roughly the idea that the law is not what's formally written down, but the collection of practices that can be inferred from what people (judges, prosecutors, police, etc.) actually do. If Wall Street practices have become culturally normalized, especially among elites, then they simply get thought of as "legal", regardless of whether they follow the letter of the law, and it appears radical to argue that they should be prosecuted for doing things that are just normal practice and therefore presumptively legal. It looks to many people like you're trying to change the law in that case (the government intervening to overturn normal business practices) even if formally you're just enforcing the law as actually written. Many people in a position to initiate prosecutions shy away from that unless they have strong political backing (e.g. from a popular politician willing to make trust-busting or taking on Wall Street their signature issue).
Can I use that argument to get out of speeding tickets? It's culturally normalized to go 10-20kph over the limit, and people actually get pissed if you do the limit on the highway.
Where I live (Texas) the de facto norm really does appear to be that you're entitled to add 10 mph (~15 kph) to the posted speed limit, and that's roughly what the police enforce. People get really angry and start writing their politicians if police start frequently writing tickets for less than that, so they usually don't. Some police out in West Texas used to be notorious for setting up speed traps on the highways and enforcing the speed limit strictly (as a source of revenue), so the state legislature actually cracked down on them because people were so angry.
When you consider the real reason you are getting the ticket isn't that you were speeding, everyone else was as well, but that you are an easy money with an out of state plate or maybe the color of your skin wasn't appreciated by the officer. Now, real speeding tickets are given for people who are violating even the extended limits, but for the reality is that legal realism + over arching laws + selective enforcement means that the law actually is that being the wrong skin color or from the wrong location or displaying the wrong political bumper sticker is a ticketable offense as long as the officer doing so is being discrete enough.
I drive 9mph over speed limit and I have not been ticketed a single time in 9 years I am driving. Cultural norm is that speeding 10mph is OK so police ignores some speeding in most locations.
Speeding often has surprisingly low fines. Get caught doing 115 in a 65 mph area in Florida. That's ~1,000$ for a first offence. Second time they revoke your license for a year and more than double the fine, next they revoke it for 10 years and charge you 5k.
My cousin when he was a teenager in Minnesota got a reckless/careless driving offense when he was speeding in his new Camero around the Mall going 80MPH. He lost his license for a year, had to pay a 2K fine, had to go to a defensive driving school course and then had some 50 hours of community service to do on top of it all. He's uncle has repeatedly said he would have been better off just getting a DUI. My uncle maintains the judge was the "hanging" judge type and my cousin's other two speeding tickets didn't help him much.
The funny thing is, he never got so much as a jay walking ticket after that, so the punishment definitely straightened him out.
Here in Ontario there are big signs on the highways that say if you're caught driving more than 50 kph (~30 mph) over the speed limit they take your license and your car (!) right there by the side of the road.
That's news to me! Admittedly, I haven't been on a highway in Ontario in ~2 years, but I definitely never saw signs like that then (of course, I definitely saw people exceeding the speed limit by 50kph on more than one occasion, and given how quickly my uncle made it to my grandparents' house in Ontario the last time he headed over from Montreal, I suspect he may have too ;).
- Canadian raised in the US, spent a fair amount of time in Canada
I've always wondered why production cars for road use can ever go over 100 mph. Put a governor at 65 mph and you never have to both enforcing speeding tickets again. I'm not advocating for this, but if it's so bad they will take away your ability to drive over it why not limit it mechanically?
Then in 10 years, someone, somewhere decides that 90 is acceptable on a specific road. Now all cars with limiters need to be modified. Want to be able to change it remotely? Now you add an attack vector. Throw in a GPS? Now you're asking for additional government monitoring that is mandatory and might be (will be) used for spying purposes.
You could design a GPS speed limiter that doesn't track location, TomTom's had an "overspeed" warning 10 years ago, it would go orange if you went over the speed limit and go red and make a bong noise if you went way over, My old boss used to drive fast so I saw that quite a lot (in the end I told him I wouldn't share a car with him if he didn't stick to the speed limit).
Nissan GT-R's have (at least in Japan, where it is as far as I know mandatory, not sure if they are removed in international sales) limiters that deactivate when they are on a white-listed race track.
You may actually need to go 100 MPH in traffic. Speed limits are 85 in places, and 15 over that may be required to maneuver.
Speed limits on interstate class roads seem pretty dangerous to me - you can watch people thinking "but I'll get a ticket" and backing off at bad times. Of course, I guess of there were no signs with numbers on them they'd drive 115 and kill themselves.
Speed limit on the highway by my house is 70. If you are doing less than 75 during rush hour you will be passed by a stream of cars. I've been overtaken while doing close to 90.
My own experience is that carse indicate something like 10% more speed than the real one. You can check that with a GPS, which gives very precise speed measurements. So maybe 9mph excesive speed will not trigger any radar.
Montana raised the speed limits from 75 to 80mph last summer. I've noticed an odd effect... the traffic is now predominantly moving between 75 to 80mph, not 75 to 85mph.
That would be an instance of fallacious reification[1]. Legal realism would say that the law is not enforced based on whether or not you obeyed the speed limit. The cop's whim, bias, and whatever organizational pressures bear down on them all contribute to your ticket. The statute itself is only a small part of the law.
I think I've even seen it in print (in some of those newspaper articles, like "Ask law enforcement questions"), but definitely from discussions with them, but Washington State Patrol's "stated" policy for speeding (at least on highways) is "Under 10 Over" and they won't target you.
Anybody who's been anywhere near the Seattle metro area knows what a bloodbath the speed traps are.
Targeted or not, they like to do insanely stupid things like park their cruisers on the shoulder of a bridge, inches from the lane of travel, lights off, at night, trying to "ambush" people.
The west side of the state is nothing compared to the east. The WSP on the east side of the cascades pull people over whenever they need some revenue, regardless of their speed. They are filthy thieves shaking down anybody that looks vulnerable. When I drive to Seattle, you can anticipate seeing the WSP approximately every 20 minutes the entire way across - until you hit the west side of the cascades, in which case you'll only see them occasionally up and down I-5. They are monsters and I'd be fine getting rid of them entirely. They are not making the roadways of Washington any safer and do not represent the values of the people of this state.
It's interesting you say that because I've had the exact opposite experiences.
I drive from Mercer Island to Spokane every weekend, and I commute from Puyallup to Mercer Island every day for work.
Going to work I'll see anywhere from two to five WSP, but usually traffic isn't moving fast enough for them to ticket. (Although, most mornings they have one or two people pulled over in the bend just in I-5, just a couple minutes north of the Tacoma Dome.)
Driving across the state I've only been pulled over once (near Ritzville). I won't say how fast I was going, but it was fast enough that right when I saw the headlights on her patrol car I immediately pulled over and waited for her to give me a ticket. (Which she did, and she knocked it down to something a bit more reasonable, money wise.)
Now when I drive across the state I just throw my cruise control on at ~83 MPH (the extra three because it helps me get ahead of those cars whose speed "drifts" from 75-85 and back again, which is very annoying). Usually I'll drive past two or three officers who just sit there and watch me fly by at thirteen over.
IMHO the worst are the county sheriffs near the Chelan area. Those guys will ticket you for 51 in a 50.
I tend to agree. Granted, my first speeding ticket was coming back from the Gorge (rookie mistake, but at least I was not drunk and/or high!), but the cops are EVERYWHERE in the metro area. Last time I was there, I rented a car in downtown Seattle to go see the tulips, and saw 8 speedtraps, each with a cruiser clocking people with laser and multiple moto chase units, up and down I-5, in the 8 hours I had my rental car. I can go MONTHS in the SF Bay Area without seeing a single speed trap.
Eastern WA is just so much less populated.. maybe they stand out more, but they're not as common IMO. Granted, your speed will be higher when you DO get busted, and there are definite speed trap downs like Ritzville and Colfax, but I never found it to be anywhere near as bad as the metro areas.
And yeah, they can just fire all those assholes. They're absolutely terrible and do nothing to promote road safety -- it's the exact opposite.
Well, 520 used to not have any SPACE for cops. Occasionally they'd hide out at the little cutout for the bridge maintenance people. I'm not sure how this has changed, didn't they widen the bridge or something? Maybe there's more space for cops now.
In many jurisdictions there is a tacit understanding between police and residents that 9mph over the freeway speed limit will not get you pulled over, 10mph+ is fair game.
You probably couldn't use that in court to get out of a ticket, but as a matter of enforcement a massive amount of speeding is routinely tolerated.
Effectively that's how the law is enforced anyway. I've never seen someone pulled over for doing <= 10 over the limit on a highway. On large highways you can typically get away with going <= 15 mph over.
I've gotten a hefty ticket for 7mph over. This was on a rural road with wide shoulders and broad turns. The spot where I was busted is a really long straightaway with absolutely no driveways or other sources of entering/exiting traffic. The road would be perfectly safe if the limit were 65mph rather than 55mph.
You probably won't "see it" until it happens to you. Highway patrol is managed for revenue generation rather than public safety.
If you're ever going through Southern Utah, between Vegas and SLC, don't do it... my last ticket was for 6mph over. Pretty pricey, for what it was at that.
I totally get that piece, but I feel like in some ways it is meant as an attempt to deflect conversation away from what is stated to be a factor:
"The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role."
Emphasis on "have certainly played a role." The moment I hear that, I ask why the hell we aren't focusing the conversation there and keeping it there. Guarantee a lot of the "lack of balls" has to do with worrying about future security in the form of campaign contributions and private-sector jobs.
How about we solve for that problem first and see if they still lack balls when they are no longer worried about their financial future being directly tied to those they are supposed to police.
Who at SEC is elected? How does the prospect of going into a private sector job (usually at a law firm which makes money from banks getting in trouble), dissuade anyone from taking down a big Wall Street player?
Holding bankers accountable would not "hurt the industry." The health of the industry is driven by non-government market factors. Indeed, aggressive enforcement means more private sector job opportunities for regulators. SEC lawyers generally don't go to banks--they go into private practice law firms. Those firms make money when banks get in trouble. The recent financial collapse was actually good for financial litigation departments. Looking at it another way: the amount of demand in antitrust litigation is much lower these days than it was 30 years ago when the DOJ was much more aggressive about antitrust enforcement.
I just don't think the narrative about regulators going easy because they're hoping for a sweet gig at Goldman is consistent with what happens or even a theoretical analysis of peoples' incentives.
Ultimately, it's politics. Bill Clinton implemented massive deregulation in the financial industry. Regulation is seen as an illegitimate intrusion into the market's operation. So long as that is the case, regulators will avoid being aggressive for fear of provoking a political backlash.
>>We are talking about enforcement here. Putting bankers in jail instead of imposing a large fine on the corporation saves the banks money.
Maybe you live in a different reality, but in ours, the massive reputation hit the bank would suffer from having its employees go to jail would be tremendously more costly than meager fines that they can just shrug off.
Sure, but it's a zero sum game. The change in reputation of one bank won't affect the overall demand for banking services. From the point of view of the regulator trying to snag a private sector job, it doesn't matter. The same amount of banking business will continue to be done--if Bank A takes a hit Bank B will have more work and more jobs.
Consider that the OP is about Abacus, a financial product created by Goldman Sachs at the request of a speculator. If more exotic products like that are tainted by evidence of systemic corruption and the possibility of having to spend time in court, then customers may well choose to park their money in boring stock or bond index funds, which give the banks a much smaller cut. So it's not a zero sum game.
Federal agencies are ultimately responsible to Congress and the President. The recent (last 20 years) trend towards deregulation and lax enforcement (IMO) starts at the top but most visibly manifests in the actions or inaction of regulators like the SEC.
The effect of campaign contributions is unmeasurable at this writing. If we want to allow public service by government lawyers to be a farm system for big finance houses, then we can continue to underpay them.
The movie "The Big Short" has a brief scene with reference to this that you reminded me of and I highly recommend the movie. In the scene one of the main characters is discussing with his brother's ex who is an SEC regulator and she says something to the affect of "the regulators are a revolving door of industry insiders and you aren't going to get looked at when applying for the cushy bank job if you're known as the stickler regulator."
In Canada, there's a "saying" with the big Yelcos like BRM or Rogers: if they need a law passed, one of their VPs resigns and joins the CRCT (FCC equivalent). That'd explain how they pass laws like the one that mandated that competing DSL providers couldn't price services lower than Bell or offer uncapped data.
The same is said here but our current FCC chairman actually has some balls and was actively involved the past few years helping fight for net neutrality (though sadly at first being on the side of the ISPs)[0] which was kind of mind blowing.
This explanation is just an attempt at hiding the actual problem: the revolving door between the public and the private sector, specially in the banking industry. Of course you don't want to be the one sending Lloyd Blankfein to prison. No way you are going to get a lofty job at a bank after that.
This is the one case where regulators would have massive popular support, specially in an election year when two very popular candidates (well, three if you believe Hillary's latest statements) are calling for stronger measures against the people responsible for the "Great Recession".
Would it work if we made the revolving door less attractive?
For instance, could we pay the regulators enough for it to become attractive? Over time, maybe being a regulator will become the end goal of new grads.
Combining higher pay with putting various legal limitations on people who move between the two sides to combat the conflict of interest would certainly help.
Judges typically get paid less than many of the lawyers who argue in front of them, but there's still plenty of lawyers who want to take a paycut to be judges, and not much action in the other direction. Why? Because judges have really high status.
I was thinking that if the regulators are paid more, get a little more power (not sure if they already have enough power) and start to bust some bankers, get some publicity, then that might eventually lead to more status.
"Here are some possible theories of the financial-regulatory revolving door:
...
2. Regulators want to get higher-paying jobs at banks, so they try to be diligent, fair, competent and zealous, so that the banks are impressed by them and hire them.
3. Regulators want to get higher-paying jobs at banks, so they are hard on banks in ways that force the banks to hire lots of ex-regulators -- to understand complicated rules, say, or to work as monitors for regulatory settlements.
4. Regulators want to get higher-paying jobs at banks, so they are hard on banks in general, hoping that the banks will hire them to just shut them up."
Written by Matt Levine, who has 3x the experience working as Associate and Vice President at Goldman Sachs than he had working in the public sector.
I'm usually pretty skeptical, but reading an article on "how hard regulators are on banks" from someone who worked at Goldman Sachs in the 2007-2011 period, I had to chuckle.
Arnold Kling used to work for one of the housing agencies as an economist. He's on record repeatedly as saying that the Great Recession might as well have been the design goal of housing policy since George Romney.
Tss. After seeing how weakly regulators push exchanges like CME to prevent legitimate and proven spoofing, it's pretty clear that "backed up by their bosses" goes all the way up the chain.
Side comment: The GS head of technology recently left there to go to an at-best-mediocre options brokerage recently, which I recently left. Not gonna lie, that makes my suspicio-meter go off after seeing the shenanigans they did there.
Side note again: Another thing that pushes my supsicio-meter pretty far is seeing secret service, Harry Reid and a very well known name in HFT walk into an office and talk to each other for an hour.
I don't want to come to any direct conclusions, but "People are shitty" comes close.
Sounds more like the people at the top of the chain having different incentives and thus neutering the people further down who actually wanted to get their job done.
Or more to the point, if you are overseen by congress, which is in the pocket of these big banks, then regulatory action can be dangerous to your career.
"Get big government out of my business!"
"These regulations are killing my business!"
"People are going to go overseas and do the same thing!"
It's not just congressmen too. Even the public can be turned against the regulators with a steady drip of anti-regulation rhetoric from the newsmedia.
100% right. Before people start looking at those guys they should look at themselves. A lot of people in corporations do things they don't agree with or find ethically questionable but since the boss says so they will do it. "The fish stinks from the head". This is not isolated to government.
It's the same story everywhere. As long as there is hierarchy (which we do need in some form in most organizations) then there will be incentive for people to do things they personally disagree with due to the conflict of interest that arises.
It seems like one of the hardest problems to solve in our society because it seems to be so tied to our nature. I can recall doing things in grade school I knew was wrong but felt obligated to do because my peers and those I looked up to do too. While that isn't the same exact situation, the dynamics at play are the same. What can be done to combat this innate in-group/out-group behavior more effectively in our organizations and society?
Good or bad is not that clearly to distinguish. Going with the group is certainly the easiest path but on average it's probably also the right thing to do.
Or, alternatively, in this case there was no good case as some SEC lawyers suggested. It seems strange to me to suggest that assembling a security of mortgage bonds so that one party could short it while another could go long it is a crime. That is what Goldman is supposed to do !
There was no good case because, as the article explains in quite a lot of detail, the team was instructed not to interview anyone in any position of responsibility at Goldman/Paulson. It also explains, in quite a lot of detail again, how Goldman was not simply "assembling a security of mortgage bonds." There was quite likely intentional fraud involved.
I read it differently. My take away was that the SEC didn't have the _evidence_ to go after anyone but Fabricci.
However, I really don't understand how Goldman would have profited from aiding Paulson & co. Goldman set up a security that let people bet for or against the housing market. It's similar to Vegas letting people bet on a sports match. Why would Vegas fix the game that other people were betting on? It's not like Goldman made more money because Abacus paid out to Paulson vs. the Germans.
> My take away was that the SEC didn't have the _evidence_ to go after anyone but Fabricci.
"Nor had they questioned top bankers in Goldman’s mortgage businesses or any of the bank’s senior executives. Even more surprising to Kidney, the agency had not taken testimony from John Paulson, the key figure at his eponymous hedge fund."
An investigator that doesn't ask questions will have a hard time finding evidence.
They get very large fees for "securitizing the deal", or being the ones who turns a bunch of loans into something that can be traded. In the case of very complicated deals, it can be several percent for a transaction that is low-risk for the bank since they've already identified both sides of the trade.
They don't have the upside. They already have the power to do almost anything to a bank. The top ranks of most big banks already spend most of their time worrying about the next inspection.
As far as regulators go, there is not much more fear and respect and obedience they can get.
So why make an example of anyone when day-to-day regulators are the big I ams
A sort of reverse Regulatory capture has been achieved. The regulators are calling the shots, but don't see the need to dig deeper.
The best analogy I can give is if Lord Ventinari from disc world were running 30's Chicago - Al Capone has been tamed, does not rock the boat and only kills his "own kind". Why should cleaning up the city and arresting Capone be a priority - he is under control.
I like discworld novels but I am not sure I want to live innsuchba compromised society
Matt Levine's theories nearly all suggest we should end the 'revolving door' because it leads to conflicts of interests - either by making regulation harsher or less harsh, rather than impartial.
If regulators really are harsh so banks hire them "to get them of their backs", presumably banks have an expectation that this works, causing in the long run, softer regulation.
The alternative theory that regulators are incentivised to be diligent and fair so banks will hire them on that basis is... not compatible with most people's understanding of the financial sector's culture.
Then you end up with career bureaucrats who have no idea what is going on regulating banks. Similar think led to crushing regulation in many areas of American life in the 1960's and 1970's. Deregulation of those industries led to innovations like UPS and FedEx that weren't legal before.
> Basically, regulators don't have the balls to go after the big guys.
Wouldn't you? The regulators receive direct or indirect instructions. They can see what happens when they choose not to listen. So why bother playing hero? Real life is not hollywood. You can always make the opposite argument no matter how flawed might be e.g. "hey! this guy is killing corporate America whilst the entire world is the midst of a crisis! It's crazy right?", you know how many bellow 50k/year households will buy that argument? It's crazy ;-)
This is a government policy, whether is good or bad depends on which side of the fence you stand. It's bad for the majority and for the rule of law, but who cares.
Panama papers is not a "leak" it was a hack by the NSA and only released a bunch of info on Panama based shell companies that are largely BRIC nations, none the US - and that it is a PSYOP to get a bit of anger against specifically others to protect US financial hegemony...
The only country to prosecute bankers/Wall Street - the PM resigned after he got caught doing the same thing.
It's revenge and a pre-emotive attack - but one that kind of lost control.
Watch the Panama papers doc to see how In The 2013 doc PBS' "the warning" the DOJ literally stonewalls against all questions regarding going after Wall Street.
The whole system is absolutely a corrupt greed ponzu scheme.
What happened those three vids, please, and give me your opinion.
Still, if Bernie did manage to get elected, that would be a clear message to the SEC that the public supports a more vigorous enforcement policy.
Even if all he does is make Hillary very nervous before losing the primary to her, I would hope that would still get the SEC's attention as well as hers.
We thought the same about Obama and then he turned 180 on us.
Bernie has a history favoring weapon makers from his own state as well as going after people using his logo, so we can be pretty sure that given the opportunity it will not all be as wonderful as he promises.
And who knows what they have collected about him in the meantime. There must have been a reason why Obama turned 180 so suddenly, as soon as he was in office.
The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role. But to Kidney, the driving force was something subtler.
The only "subtler" thing is that corrupt actors of this sort need to manufacture vague and appealing alternatives to plain-old-corruption in order to look themselves in the mirror.
> Basically, regulators don't have the balls to go after the big guys.
The other component to this, is that regulatory compliance becomes a significant barrier to entry for new firms. Incumbents end up gaining even more organizational power as market power increases, and competition on price and service quality decreases.
Goldman Sachs has even mentioned this as an advantage on earnings calls. The regulatory burden on the financial industry is insurmountable for a new entrant.
What if it's simply bribes and he won't say it because they will eat him alive? "Tarnished concept of government blah blah" sounds great to those who love the concept while not exposing this guy to libel lawsuits from the people put by this concept into positions to take the bribes.
It's a political process in which officials are intimidated by their bosses from pursuing justice. Regulators don't have guns big enough for the big guys; they can't play the game of thrones.
"In our conversations, Kidney reflected on why that might be. The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role. But to Kidney, the driving force was something subtler. Over the course of three decades, the concept of the government as an active player had been tarnished in the minds of the public and the civil servants working inside the agency. In his view, regulatory capture is a psychological process in which officials become increasingly gun shy in the face of criticism from their bosses, Congress, and the industry the agency is supposed to oversee. Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions."
Basically, regulators don't have the balls to go after the big guys.