Eric Reguly, writing in the Nov. 15 Globe & Mail, has the right approach to stopping banks’ bad behaviour: if fines and the odd firing are no deterrent to bad bank behaviour, … the obvious answer is shareholder rage. The trouble is, shareholders are not enraged. They have not grabbed pitchforks and torches and stormed CEOs’ houses when the multibillion-dollar fines are paid to secure settlements. Instead, they meekly accept the fines as if they are a cost of doing business, a sleaze tax, if you like.
In some cases, the bank shares actually rise when the fines are announced. The reason? Because in each of the settlements, the fines could have been far worse and, in no case, have the penalties threatened to put the banks out of business. The era of destroying terminally vice-ridden companies is, apparently, long gone. The last time that happened was in 2002, when Arthur Andersen, one of the Big Five accounting firms, was convicted of obstruction of justice for shredding documents in the Enron case. Some 85,000 employees eventually lost their jobs. Regulators and the governments that employ them no longer have the appetite for collateral damage in the form of massive job destruction.
So if fines don’t work, and regulators and government prosecutors won’t put the most corrupt companies out of business, what is needed to clean up the banks? That’s easy. Toss the bastards in jail or close the offending individual bank business for a few months or a year. That would hurt.
Banks’ bad behaviour won’t change until executives do the perp walk – The Globe and Mail.
