Ignored? The lesson was pretty clear: fuck up on a grand scale, and we'll soak the tax slaves to bail you out. I'd say they learned that lesson well.
These companies share holders were wiped out. That's exactly what happens with other businesses in bankruptcy. Well, other than Bear and Merrill stockholders getting a small percent instead of zero. That was a necessity because an investment bank really can't operate through a traditional Chaper 11 bankruptcy.
So if you own a bank, you can't be confident that you'll get bailed out when you fuck up on a grand scale.
But there is an issue of industry wide fuck ups and their effect on everyone else. Banks have a very unique feature in that when their competitors falter, they falter with them. In 2008, you have banks with no exposure to the toxic assets having huge issues with liquidity.
The bail outs may cause moral hazard for that sort of counter-party risk. For example, if you are Goldman Sachs maybe you don't ask too many questions about AIG insurance because you figure the government will make good on it either way.
This is a very complicated issue.
It's no surprise then that bankers are the ones clamoring loudest for interest rate hikes. Bill Gross, Lloyd Blankfein, Robert Shiller, insurance & pension execs are all begging Yellen to raise rates while the people in charge of companies that actually sell physical goods are telling her to hold off.
Matt Taibbi has written a lot of good stuff about this, as is Yves Smith, the blogger behind Naked Capitalism.
[1] https://en.wikipedia.org/wiki/Richard_S._Fuld,_Jr. [2] https://en.wikipedia.org/wiki/Repo_105
http://www.vanityfair.com/news/business/2012/02/jon-corzine-...
At top banks a major purpose of the regulatory department is to make sure nobody can be blamed for anything. Banks would rather pay billions of fines because no executive is going into engage in a more coherent compliance regime if it means risking jail for something nobody understands. It is common at certain commercial banks to deliberately engage in ignorance, at the risk of being find very large sums, simply to avoid the discovery risk--of regulators being able to pin blame on someone who raised some concern.
Recently the regulators have been hinting executives will be held responsible for systemic failures in their bank. Bankers have been responding by ensuring full compliance with regulations. Just kidding, nobody knows how to fully comply with bank regulations. Bankers have generally responded by ceasing high-risk activity completely. For example, there are tens of thousands of Somali refugees in the US. To my knowledge there is no commercial bank that will help them send money home to their families. Somalia is simply too high risk.
It's more to do with a lack of prosecutorial oversight and a lack of political will than a lack of laws being broken. If Obama wanted to, he could toss Sarbanes-Oxley at the bank executives - they wouldn't even have to prove that they knew about the fraudulent and criminal behavior underneath in order to make those charges stick.
The mere fact that they turned a blind eye would be enough to put them in an orange jumpsuit.
The regulators have been talking about getting tough for two years but still show no signs of actually doing it (typical Obama play). I doubt they will unless Bernie enters the white house. Obama's not going to risk his cushy retirement of paid speaking gigs at Goldman Sachs.
BaselII[+] and friends are relatively clearcut and are designed to prevent credit meltdown. The rules and reporting requirements are baked into Bank software and dataflow. Auditors will spank you with fines, and will revoke your accreditation for serial offences. This can force an involuntary acquisition.
> there are tens of thousands of Somali refugees in the US. To my knowledge there is no commercial bank that will help them send money home to their families.
That is the result of draconian anti-terrorism laws and has nothing to do with regulations around credit reserves.
You seem to be concerned around over-regulation, however the article is clearly arguing the opposite: "Deregulation has allowed perverse incentives into the very fabric of global finance."
I was making the charitable assumption he was talking about banks that were breaking laws. Most of the significant regulatory actions taken against banks do not involve Basel capital requirements. With regards to the financial crisis, simply being bad at running a bank isn't a crime.
While we're on the subject, political leaders and voters do not really understand the distinction here either. Capital requirements are separate from, for example, anti money-laundering, but in the eyes of voters it's all more regulation against the evil banks.
For example, when you write your own game, you can come up with any rules you want. You want goats to fly -- sure, you got flying goats. Some characters have more stamina than others? -- just tweak some config file.
Well, it is not dissimilar for those in power -- they are making the rules. If they stop liking the laws, they'll just lobby to change them. Therefore asking "but how many of them are in jail" doesn't make much sense. Why would they put themselves in jail?
That is: Your post assumes that (unnamed) people broke the law. Let's not assume that. Let's either prove it, or not throw innuendo around.
Since last time the general public have taken the brunt of the crisis, what kind of lesson did we want the bank to remember ? The article should really be titled, "7 years after the crisis, how the public and politicians ignored the lesson of the crash".
"Banks ignore lessons politicians tell voters that the banks should have learned, while remembering the lessons the politicians actually taught them"
Angry, ineffectual parent: You haven't learned your lesson son. You remember last time you messed up and got away with a bunch of stuff (stuff you made lot of money off of)?
Kid: (Smirking) yeah
Parent: You remember I almost punished you real bad?
Kid: (Smirking) yeah
Parent: Well, you fuck up again. I might almost punish you even worse. I might almost make you really sore. You understand?
Kid: (Smirking even more) yeah, I understand.