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?

* Regulators might be unofficially blackballed from companies in return for doing their jobs too well.

* If regulators hurt the industry they're regulating, it means fewer jobs will be available for them when they switch to the private sector.

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.

> Holding bankers accountable would not "hurt the industry."

Does losing money hurt an industry?

Can overregulation hurt an industry?

> SEC lawyers generally don't go to banks--they go into private practice law firms. Those firms make money when banks get in trouble.

Yes, they make money from banks when banks get in trouble.

We are talking about enforcement here. Putting bankers in jail instead of imposing a large fine on the corporation saves the banks money.

> Yes, they make money from banks when banks get in trouble.

Sure, but in an environment of weak enforcement where banks never get into trouble, there isn't any money to make.

>>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.

I think Goldman would pay more to hire an sec investigator with balls. They'd be the ones causing problems and worth buying.

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.