It's not picking winners and losers in any sense of that phrase. They are literally punishing the bank for bad behavior and that's to be expected from what a regulator should be doing. If someone breaks the law and you send that person to jail you're not picking winners and losers in any way. You're meting out discipline as needed to punish the bad behavior and try to make it so that it doesn't happen again.

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.

>t's not picking winners and losers in any sense of that phrase. They are literally punishing the bank for bad behavior

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.

Regulators enforce laws too... They are the banking police.

JPMorgan has the resources to fight the regulator in court if it’s exceeded its scope. It happens all the time.

Banking is an industry with regulatory oversight/law, but that does not mean regulatory law or authority are the "banking police."

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.

You said the judicial branch enforced laws which is incorrect. The judicial branch cannot bring charges. The police do, which may or may not end up in court. Here it was the banking police.

Ok, the judiciary does not technically enforce criminal law, but applies and interprets them. But that is a technicality of language which neither refutes nor reinforces the point I was making: this is not an example of criminal law being enforced. This is a case of regulatory law/oversight.

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.

Again... you're injecting some sort of belief that they are manipulating markets and picking winners and losers when there is no such evidence of either of those statements being true including none in the article itself. You're stating that that punishing an organization for fraud is manipulating the market. It seems that you're cloaking that odd argument under the 'behind closed doors' and 'outside of written rules' aspect when they are not connected in any way. One has been created out of whole cloth and the other might actually be pretty valid. You're also hand-wavingly saying 'most other economists' don't agree with that organization policing fraud which multiple others have said (and myself) doesn't seem accurate while not providing any evidence that economists believe that. I'm not sure why you're taking this stance honestly as you're not giving any proof or evidence for any of it.

If you are punishing one organization for bad behavior 1) in secret and 2) without expressly breaking any written rules (the article says they broke "unwritten rules") then this is going beyond enforcement of regulatory oversight.

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.

You could also use this argument to imply we should have allowed banks to fail in the mortgage crisis.

What we should have done is saved the banks only to break them up. And it's not too late to do just that.

Yep. "too big to fail" is just too big, period.

In fact, at that time, mainstream economists expressed the same concern which I am expressing now: gregmankiw.blogspot.com/2008/12/

This is not the same concern you're expressing unfortunately. You're arguing elsewhere that the government punishing outright fraud is manipulating the market and choosing winners and losers. I see nothing about that at your link and nothing that defends your belief in that. He's saying that the fed and the government should step in and make decisions about trying to buoy the market, which is what you want them to do when the economy might go belly up so that people don't all lose their jobs and riot and starve. I do see that it's where you got the phrase 'government should pick winners and losers' from however but the context is vastly different than what the original article we're commenting on is about.

I dont disagree that JP Morgan should not be punished. I already explained that. You're confusing some things. Another example of your confusion is you mentioned here that the government is punishing fraud; but in reality, they punished them in secret for "unwritten rules" which were broken.

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.

In a competitive market government should treat everyone equally by the same rules. Big banks do not exist in a competitive market as they are heavily shielded from competition, protected from failure, and massively subsidized by the government. As such they should be required to adhere to far more stringent rules.

I do agree that those rules should be transparent and not "unwritten" though.

I think we are not in disagreement here.

How did you go from "punishment for multiple crimes and regulatory violations" to "picking winners and losers"? Economists typically think laws governing fraud should be enforced.

Laws should also be transparent. If there is a crime, the punishment should be known in advance and be imposed openly. How else will it act as a deterrent?

But that's not what happened. The law was an "unwritten rule" which was enforced in secret.

As another user here stated, regulatory law needs to be enforced openly and transparently.