Edit: I'm mainly thinking of Bloomberg and WSJ. The Economist is better on this one.
No problem if they publicly said they would do this, but this way is precisely the problem of developing countries. You wouldn't think it would happen in America.
For example it makes no mention of the harm caused 10 years ago in 2008, and the causal link between bank behavior and the final disaster.
Instead it is painted as an unrighteous limit to the banks natural path, using hidden tools to curb their growth.
Wsj, Bloomberg etc would assume that profitable growth at any cost is good (except of course at the cost of bad PR).
Regulations and limitations are bad and simply evil barriers to firms manifest destiny.
Don’t put much stock in it.
It would have been significantly better if they announced publicly that JPM was going to have it's growth restricted because of reason X. This would have acted as a deterrent to other banks, sent a message to the public that the banks were indeed being punished, and avoided the image of a secret governance process.
Everyone who reads these publications is well aware of the financial disaster so it doesn't need to be reiterated on every article because the knowledge is assumed.
Most likely, and I say this as an opinion, several of the banks they bought in 2008 were restricted from expanding until their house was in order.
These moves were, with 100% certainty, would have been announced and published at inception.
And no, the meaning of "financial disaster" is VERY different depending on which side of Fin services you stand on.
To many banks and bankers, the debacle is a failure of market participants - the cost of living in such exalted times. More regulation would only hamper future efficiency and delicious growth to shareholders.
For main street, this was a watershed moment where they saw that banks were a force unto themselves.
Their market niche so critical, that letting them continue more necessary than justice - overturning a basic tenet of American expectations (bad firms fail, merit rises).
"too big to fail", is the shadow of "too big to care".
Main street does not read Bloomberg or WSJ, so they tailor their articles to their audience's bias.
The whole "unwritten rule" thing is kinda nonsense. The OCC which was preventing the expansion was chartered to ensure the soundness of the banking system. That is pretty arbitrary and they have the authority to arbitrate on that. That sounds like they can use their discretion.
What you would think would not happen in America is that the government bails out private banks that behaved badly. If it were truly American capitalism they would fail. Banks would then not be able to become so large due to people and banks not wanting to have too much liability with any one institution. So it is inconsistent to have a system where the government cannot use their discretion in the growth of banks, yet be on the line for a huge bailout to stop the economy from collapsing when the banks get too greedy.
[1] https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_t...
That’s just a dishonest characterization. Wells Fargo didn’t “force” their staff to do any such thing. Staff gamed an incentive structure and WF didn’t catch it. “Lapse” is the most accurate characterization.
Threatening ones job unless they sign up X many customers for a product is coercion. Sales quotas are inherently coercive. If you choose to do zero quality control and employees learn cheating is okay then it is bad.
Pro business (especially finance), anti regulation, with little respect or care for regulations and no admission of culpability and harm.
The limits make sense, the secrecy not so much. That guarantees an odd tone for an article to be read by (a) JPMorgan Chase shareholders and (b) Americans who don’t want another financial crisis.
Also can you show where economists are skeptical of government picking winners and losers since the government has been doing it for ages and the economy has been marching on for a long while. In fact, picking winners and losers in the 2008 recession is what led to moving out of the recession.
This response repeats the confusion that I just responded to, and tried to correct.
Note that my post does not actually disagree with enforcement of regulatory authority. I also believe that regulators should enforce their regulations. What I pointed to was something different than this.
>If someone breaks the law and you send that person to jail
But that's not a valid comparison. I think this is where you, and others, are confused.
The judicial branch has the authority to enforce laws for breaking crimes. That's what you're comparing this to.
Regulators also have authority to enforce regulatory law.
But what is happening is that a regulator is arguably not using their regulatory authority appropriately. They are, "behind closed doors," and using "unwritten rules" using their authority to punish a company for bad behavior.
The problems here are of transparency, accountability, fairness, competitiveness, and freedom.
I could agree with you if I believed the regulator can do no wrong, but I don't believe that.
JPMorgan has the resources to fight the regulator in court if it’s exceeded its scope. It happens all the time.
Although I said in the above post that JP Morgan should be held accountable to regulatory law... So the disagreement here seems to be with something I never said.
Should regulators hurt some companies and help others, behind closed doors and for unwritten rules?
That's a different kind of question than should "the courts and police enforce criminal law," which the above user I was responding to was confused about.
That is what the point was.
I can see how reasonable minds can agree on what amount of trust they place in the hands of regulators. Clearly, judging by downvotes, a majority HN believes they should have authority to manipulate markets by picking winners and losers based on determinations of good or bad behavior--and all behind closed doors and outside of written rules. I just simply dont agree with that, as most other economists and Bloomberg news clearly does not, either.
I dont disagree with the end result, I disagree with the method.
Also, you may disagree, but I dont believe you honestly dont understand what I am saying.
A regulator should not pick and choose who to punish, in secret, and for unwritten rules. That's ridiculous, and this kind of secrecy and ambiguity is not an example of good governance, fair treatment, or competitive markets.
In a competitive market where government treat everyone equally (no picking winners and losers) everyone abides by the same rules, transparently. That's not what happened.
In fact, when government decides to meddle in markets in secret and without any written rule or law, this raises fear of exactly that. Probably in this case, the end result seems to be not unjust, but the method is horrible, and I have no idea why they did it this way.
And yes, this kind of market meddling, or "picking winners or losere," is a type of market meddling, not unlike what I linked to.
I would suggest going back over the article to see where your confusion started, and also the posts here, and my other response to you.
I do agree that those rules should be transparent and not "unwritten" though.
As another user here stated, regulatory law needs to be enforced openly and transparently.
It openly admits that various banks we're being constrained due to their notorious bad behavior, but casts those constraints in a passively negative light, and then tacitly celebrates that these bad actors are now less constrained to act badly.