Recent Antitrust Push Is Weirdly Narrow, Pretends Telecom And Banking Don't Exist

from the do-not-pass-go,-do-not-collect-$200 dept

As you've probably noticed, there's a big new "antitrust" push afoot in DC. As you may have also noticed, many of these proposals don't actually do a whole lot to reform US antitrust or monopoly problems in any broad way. Scholars for decades have warned that US antitrust enforcement has become feckless, and that we need to rethink how we approach antitrust in a world in which companies often seem to have more and more power over our lives.

The U.S. is dominated by anticompetitive giants in banking, telecom, insurance, health care, air travel, and countless other sectors. And generally, we've historically encouraged them by underfunding our regulators, steadily weakening antitrust enforcement, rubber stamping merger after terrible merger, and replacing competent Judges with bobble head dolls. All under the pretense that doing anything else would be disastrous, while clinging tightly to a consumer welfare standard that sometimes seemed incapable of addressing modern market, labor, and consumer harms.

That's a lot to fix, but with this vast interconnected dysfunction being so profitable, and with so many cross-industry corporations (with bottomless budgets and immense lobbying control over Congress) opposed to real reform and oversight, that doesn't seem likely to actually happen. So instead we've been getting something else. A very selective new wave of "antitrust reform" that focuses exclusively "big tech," while leaving sectors like banking or "big telecom" free to run amok. Despite evidence that those latter sectors actually do things that harm consumers (the supposed standard for antitrust).

The movement to rein in big tech and shore up antitrust enforcement certainly has valid components, based on justified anger at years of dodgy business practices. But this anger has been proven to be exploitable by folks like News Corporation and AT&T. Both companies are looking to saddle their Silicon Valley competitors in online advertising with rules that don't apply to their own businesses, while simultaneously demolishing constraints and oversight of their own sectors (see: net neutrality, the dismantling of FCC authority, or the steady erosion of media consolidation rules protecting small businesses).

Enter Rep. David Cicilline, in charge of the House Judiciary Committee's antitrust panel. He says Democrats have introduced a suite of different antitrust bills in the belief it will keep "big tech" on its heels, making it harder to defeat one centralized bill. He claims that by narrowly targeting specific issues of antitrust it will be easier to get the 10 Republican votes needed to pass the bills with a 60 vote majority in the Senate. But so far there's no indication the obstructionist GOP, whose interest in "antitrust reform" has generally been of the performative populism variety, has any interest in helping out (last I saw the proposals had about 3 GOP votes in the House, just enough to market the effort as "bipartisan").

Meanwhile, many of the bills are oddly selective in what they deem to be a "dominant platform." The Platform Competition and Opportunity Act (pdf), for example, greatly restricts what constitutes a monopolistic offender, making sure to carve out exceptions for telecom giants, Mastercard, VISA, and Walmart. The bill bans companies from owning or operating a business that "presents a clear conflict of interest," but only if the company in question has 50 million monthly active U.S. users and a market cap of over $600 billion:

"...is owned or controlled by a person with net annual sales, or a market capitalization greater than $600,000,000,000, adjusted for inflation on the basis of the Consumer Price Index, at the time of the Commission’s or the Department of Justice’s designation under sec13 tion 4(a) or any of the two years preceding that time, or at any time in the 2 years preceding the filing of a complaint for an alleged violation of this Act."

Again, this very specific restriction omits a lot of companies that are engaging in the same kind of anticompetitive behavior, including many that see overlap in markets dominated by technology giants (telecom). It's also just kind of an arbitrary restriction given that what others value you at isn't necessarily what determines whether or not you're engaging in anticompetitive behavior. The actual, anticompetitive behavior does.

But just looking at the $600 billion valuation threshold gives a sense of just how this line-drawing happened. Under this definition (including the number of US users), it looks like the law only applies to Apple, Microsoft, Amazon, Google (Alphabet) and Facebook. That's it. It seems notable that companies which are also kinda powerful and dominant, but happen to fall just somewhat beneath the threshold, include Visa, Mastercard, JP Morgan Chase, Bank of America, Walmart, Disney... and Comcast, AT&T, and Verizon. How very, very interesting.

It's hard to argue that different rules should apply to Amazon as compared to Walmart. Or that Comcast, AT&T and Verizon should be spared from such antitrust scrutiny, when their control over some markets is clearly a much larger stranglehold than the five impacted companies. It's almost like these bills are designed to be a performative attack on just one sector while pretending otherwise.

That's not to say that all the proposals in all the bills lack merit or benefit. I think at least one part of the Merger Filing Fee Modernization Act does something important: namely shoring up lagging FTC funding in an era where the agency is being asked to do more and more with a fraction of the staff and resources of their international counterparts. Recall a major reason the telecom lobby neutered net neutrality and FCC oversight is that they knew enforcement responsibilities would fall to an FTC without the resources, staff, or authority to do the job properly.

But given the tight restrictions of most of the proposals, I'm still left wondering just how much input into these bills media/telecom policy and lobbying folks had as authors built in compromises for the sake of "bipartisanship." Telecom giants like AT&T and Comcast have spent the last three or four years successfully convincing many DC policymakers that Silicon Valley giants are the only dominant giants worth worrying about. Rupert Murdoch has been playing similar reindeer games. Pretending "big tech" monopolies are the only monopolies that need immediate fixing benefits both, and exploiting legitimate public anger at big tech isn't particularly hard right now on either side of the aisle.

US Antitrust most definitely needs reform, but it's unlikely we'll obtain it through legislation so compromised for the sake of "bipartisanship" that it views the issue through a pinhole. Or via bills heavily shaped by telecom and media monopolies that want to be excluded from meaningful oversight. The appointment of Lina Khan does suggest a government awakening to the narrowness of the consumer welfare standard in the Amazon era. But like so many issues (climate comes quickly to mind) passing meaningful legislation will first require cleaning up Congressional corruption, and that still seems well over the horizon.

Filed Under: antitrust, banking, big tech, telco, valuation

DOJ To End Operation ChokePoint; Porn Stars Free To Bank Once More!

from the strange-times dept

You may recall that in 2014 we wrote about a strange occurrence having to do with Chase Bank refusing to provide its banking services to Teagan Presley, a rather well known adult film actress. When it became clear that Presley wasn't the only performer to whom this was happening, it initially looked as though banks were engaging in a form of slut-shaming of adult film actors. It turned out, however, that it was the federal government doing the slut-shaming, with the emergence of the Department of Justice's Operation Choke Point. This DOJ policy that was developed to combat financial fraud somehow bled over the stencil lines and became a sort of banking morality police, encouraging banks to cut off services to industries like adult film, fireworks retail stores, and sellers engaged in what the DOJ deemed to be "racist materials." It's worth highlighting that all of these industries and actions, whether you like them or not, are legal, yet the DOJ was essentially attempting to extra-judiciously scuttle them through secretive federal policy. That should have terrified everyone, but didn't, and so the program went on.

Until recently. The justice department recently announced that Operation Choke Point will be ended.

The move hands a big victory to Republican lawmakers who charged that the initiative — dubbed "Operation Choke Point" — was hurting legitimate businesses. In a letter to House Judiciary Chairman Bob Goodlatte (R-Va.), Assistant Attorney General Stephen Boyd referred to the program as "a misguided initiative."

“We share your view that law abiding businesses should not be targeted simply for operating in an industry that a particular administration might disfavor,” says the letter, obtained by progressive activist group Allied Progress and later provided to POLITICO by Goodlatte's office. “Enforcement decisions should always be made based on facts and the applicable law. We reiterate that the Department will not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities,” it adds. A nearly identical letter was sent to Sens. Thom Tillis (R-N.C.) and Mike Crapo (R-Idaho).

We tend to stay away from partisan politics here at Techdirt, but I cannot write this post without pointing out the oddity that is an Obama-era policy preventing adult film stars from getting banking services and a GOP administration then restoring them. Obviously, per Boyd's letter, there are many more industries that were persecuted that are more in the realm of typical conservative fodder, but it seems that the DOJ is ending the operation in full and is doing so as a matter of principle. Good principle, it should be noted, because attempting to punish lawful businesses through banking back-deals is an especially scummy way to do government. Several applauding members of the government rightly point out that temporary presidential administrations ought not be able to choke out (their word, not mine) legal businesses at their whim and fancy.

Goodlatte and House Financial Services Chairman Jeb Hensarling (R-Texas), along with Reps. Tom Marino (R-Pa.), Blaine Luetkemeyer (R-Mo.) and Darrell Issa (R-Calif.) praised the department in a joint statement.

“We applaud the Trump Justice Department for decisively ending Operation Choke Point," they said. "The Obama Administration created this ill-advised program to suffocate legitimate businesses to which it was ideologically opposed by intimidating financial institutions into denying banking services to those businesses."

Now, some of these industries themselves are industries we may not want to applaud. Some of us have severe issues with payday loan companies, for instance, and some of us surely don't care for the adult film business. But if they're legal, and they are, this sort of thing is no way to deal with these industries.

Filed Under: banking, businesses, doj, operation choke point, porn stars

Holy Crap: Wells Fargo Has To Fire 5,300 Employees For Scam Billing

from the how-do-you-miss-that dept

This story is crazy. Late yesterday it was revealed that banking giant Wells Fargo had to fire 5,300 employees over a massive scam in which those employees created over 2 million fake accounts to stuff with fees in order to meet their quarterly numbers. The Consumer Financial Protection Bureau also fined the company $185 million ($100 million to the CFPB, $35 million to the Office of the Comptroller of the Currency and another $50 million to Los Angeles). Oh and it needs to pay back around $5 million to the customers it screwed over. The CFPB provides some crazy details:

Opening deposit accounts and transferring funds without authorization: According to the bank’s own analysis, employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers. Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts. This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals. Consumers, in turn, were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.

Applying for credit card accounts without authorization: According to the bank’s own analysis, Wells Fargo employees applied for roughly 565,000 credit card accounts that may not have been authorized by consumers. On those unauthorized credit cards, many consumers incurred annual fees, as well as associated finance or interest charges and other fees.

Issuing and activating debit cards without authorization: Wells Fargo employees requested and issued debit cards without consumers’ knowledge or consent, going so far as to create PINs without telling consumers.

Creating phony email addresses to enroll consumers in online-banking services: Wells Fargo employees created phony email addresses not belonging to consumers to enroll them in online-banking services without their knowledge or consent.

The thing is, if 5,300 employees were a part of this, this was not some random scam. This was a bank-approved plan to goose their numbers. It seems like among the 5,300 employees, management should be in serious trouble as well. What's really astounding about all of this is that it took this long for the practice to come to light. As the CFPB notes, end users were impacted by this, and you'd think that complaints would have made it clear that this was a problem much sooner. Or is that people are just so used to getting screwed by their bank that they let it slide? The CNN report notes that Los Angeles had sued Wells Fargo over this practice last year (hence LA being a part of the settlement fines), but having such a widespread scam going on is somewhat astounding.

And, of course, it raises questions about what other banks are doing similar things as well. We've seen this kind of activity in the telco space at times with cramming, but that was generally third party scammers, where the telcos just looked the other way. This was full-time Wells Fargo employees doing the scam itself, and the bank apparently either encouraging it or just looking the other way from upper management.

Filed Under: banking, billing, cfpb, scam
Companies: wells fargo

DailyDirt: Saving For A Rainy Day

from the urls-we-dig-up dept

Physical cash seems to be a bit less popular than it once was. Some European countries are even contemplating completely digital currencies to combat the potential side effects of negative interest rates (i.e. people taking out all of their savings as cash). At the same time, Bitcoin and other cryptocurrencies could provide other means of payments without dealing with physical cash. So are we ready for a cashless society? (No, probably not for some time.) However, digital currencies could take away the importance of centralized banking, bit by bit. Perhaps some older forms of savings will make a comeback.

• A sou-sou is a kind of informal savings club where a small group of people agree to contribute cash regularly and distribute lump sums on a schedule. This kind of arrangement is not uncommon for immigrants or people who can't build credit with centralized banking systems. [url]
• Lending circles or Rotating Savings and Credit Associations (ROSCAs) is the academic term for a savings club like a sou-sou. Related savings vehicles are also called a huay, tanda or chit fund -- and some organizations are helping to document the transactions of these informal groups so that more formal credit histories can be established. [url]
• The tontine is an old kind of retirement fund (or financing scheme, actually) that was much more popular over 100 years ago. People would contribute money to a tontine with many other investors, get regular distributions... and each member's distributed share would increase as members died off (hopefully due to old age), so the longer you lived, the more you could profit. A new kind of tontine could be revived to replace the pensions and annuities that people nowadays don't seem to be participating in. [url]

Hold on. If you're still reading this, head over to our Daily Deals to save an additional 10% on any item in our Black Friday collection -- using the code: 'EARLY10' -- just through this Sunday, November 22nd.

Filed Under: alternative banking, annuity, banking, bitcoin, cash, chit fund, credit history, cryptocurrency, financing schemes, huay, investing, lending circle, p2p lending, retirement fund, rosca, rotating savings and credit associations, savings club, sou-sou, tan

French Stock Market Regulator Hits US Blogger With $10K Fine For Publishing Opinion On French Bank's Leverage Ratio

from the France-still-not-making-much-effort-to-shrug-off-the-'crazy'-tag dept

Everyone gather 'round as I regale you with a tale of stock exchange regulation and global finance bloggers!

Wait! Come back!

I'm sorry. Before your eyes glaze over again, let me entice you with a better opening sentence.

An American market blogger found himself on the receiving end of a 8,000 euro fine for quoting another blogger. In real money, that works out to an almost $11,000 fine. And all for quoting another blogger's best guess on a French bank's leverage ratio.

Mike "Mish" Shedlock is a US blogger who covers global markets and his story begins this way.

On August 15, 2011, I posted BNP Paribas leveraged 27:1; Société Générale Leveraged 50:1; Sorry State of Affairs of U.S. Banks; Global Financial System is Bankrupt

In that post I quoted Jean-Pierre Chevallier on his Business économiste monétariste béhavioriste blog, that BNP Paribas leveraged: 27!

I also cited Chevallier's Société Générale leveraged: 50!

Société Générale took exception to the numbers and came up with its own set of numbers. According to SG, its leverage was 9.3%.

Chevallier revamped his math after SG's initial noisemaking and Shedlock issued an addendum to his own post.

Société Générale disputes the numbers and new calculations using the banks' numbers are 28:1 or perhaps 23:1 not 50:1 as noted on Forex Crunch.

My position has not changed much. Something is seriously wrong at Société Générale. Banks do not plunge out of the blue on rumors. I do not know the precise leverage, but shares are acting as if Société Générale has severe capital constraints (which of course they will deny) and/or other major problems.

That only seemed to irritate SG more. It contacted the SEC and basically informed the American regulatory body that whatever numbers it's presented were to be taken as fact. The SEC passed this complaint on to Shedlock, adding (paraphrased by Shedlock) "French banks [are] notorious about filing frivolous complaints."

Shedlock received a few more letters (in French) which urged him to respond to the complaints (but only in French), which he duly ignored. Later, a French blogger compiling his own post on the issue (entitled: Gross Delirium: The AMF sanctions bloggers rather than financial corporations!) contacted Shedlock and offered his assistance. One of Shedlock's friends broke down the French bank's complaints into plain English.

The French authorities accuse Chevallier of 'knowingly disseminating false information' about SocGen and you to have disseminated it further on 'Chevallier's urging', although you should have known better and it was your duty to check if his numbers were right (that is the basis for fining him 10,000 and you 8,000 euros).

The French blogger's post pointed out that Chevallier didn't "falsify" anything. He merely used a standard calculation for leverage ratios, one that disregarded "risk weighting" of various assets. Shedlock himself found a Wall Street Journal article that put SG's leverage ratio at 23-24 times its equity, still considerably higher than SG's own figures.

None of this mattered to the French bank, which accused the bloggers' calculations of possibly "influencing" its share price. While the SEC may have passed on the complaint with an eyeroll, the AMF, which regulates the French stock market, took the accusations at face value and issued fines to both bloggers. Not that the AMF is going to have much luck collecting these fines. Chevallier is appealing the verdict and suing AFP (France's largest newspaper) for making "false and defamatory accusations." Shedlock, conversely, is doing nothing.

The Witch hunt is now over and I was fined nearly as much as Chevallier. It's absurd enough to fine someone for a quote, and even more so when the facts are accurate.

The AFM has no jurisdiction over me, so they won't collect. As a US citizen living in the US, I am not subject to the absurdities of French laws, or French witch hunts. All they get from me is a vow to never go to France.

Good idea, considering French law apparently provides regulatory bodies with the power to fine bloggers for publishing their opinions on French banks, even when these opinions are backed up by reasonable calculations. And Shedlock is almost certainly protected under the SPEECH Act, which protects Americans against foreign judgments that would violate the First Amendment here. There doesn't seem to be much "regulation" going on in this situation. (And any French legislation that touches on the internet is routinely terrible.) Conceivably, SG could leverage itself Lehman-style and financially beat into submission anyone who points out this fact by running and complaining to the nearest subservient "authority."

Filed Under: banking, blogging, france, free speech, jean-pierre chevallier, leverage, mike shedlock, mish, quotes, regulations
Companies: bnp paribas, societe generale

Who Would You Rather Trust: Bankers Or Regulators?

from the do-we-have-to-pick-one? dept

A simple model of banking regulation and, like, counter-regulation goes something like this:

• Regulators are conservative and dumb, and want to safeguard banks from bad risks even at the cost of preventing good risks,
• Bankers are aggressive and smart, and want to take lots of good risks even at the cost of taking some bad risks, and
• Sometimes bankers can find people to put up with their shit and sometimes they can’t.

“Put up with their shit” is meant in the broadest sense – Can banks defeat Dodd-Frank? Brown-Vitter? Is Lloyd Blankfein a hero or a villain? Jamie Dimon? Etc. – but one particularly interesting question is, if you’re trying to do trades that evade or bend or optimize or whatever regulation, will someone do those trades with you? You could write a history of recent finance with the answer to that question: in 2007 you could chuck all of your mortgage risk off-balance sheet via securitizations, in 2008 you … could not, and in 2013 if you’re looking for someone to provide regulatory capital relief all you have to do is call a Regulatory Capital Relief Fund. Six years peak-to-peak, same as the S&P.

You could probably use words like “bubble” in characterizing that cycle but I prefer the approach taken in this new NBER paper by Guillermo Ordoñez of Penn (free version here), both because it mathematically formalizes that basic model of regulation and counter-regulation in an interesting way, and because it is congenially cynical. As he puts it, “banks can always find ways around regulation when self-regulation becomes feasible, and it is indeed efficient for them to do so.” Bankers, of course, always think that it would be efficient for them to find ways around regulation. They only do so when they can find someone to trade with them.

The gist of the formalization is that banks can invest in “safe,” regulator-approved assets; in “superior risky” assets, which have a higher return than the safe assets for the same risk but which are not blessed by regulators¹; or in “inferior risky” assets which have a higher upside but more risk than risky assets and are mainly a way for banks to implement moral hazard. Good banks want to invest optimally and care about the future, bad banks don’t care about the future and sort of maximize moral hazard. How they invest depends on economic fundamentals: if things are good then they invest optimally because there’s no need to take excessive risks; if things are terrible then they want to take excessive risks.²

Banks are constrained by two things. One is reputation: investors will trust a bank with a good reputation – that is, an observed history of taking good risks – and will fund it using unregulated shadow banking. The other is economic fundamentals, which investors can observe too: if fundamentals are bad and everyone knows banks will take excessive risks, then everyone demands the safety of deposit insurance (and regulation):

Why do investors agree on participating in shadow banking if they understand that banks are trying to avoid regulation that provides a safety net against excessive risk-taking? A potential answer is that indeed regulation and capital requirements are useless. However, if this were true, why would investors run from shadow to traditional banking when they become concerned about the quality of collateral?

I argue that reputation concerns lie at the heart of both the growth and the fragility of shadow banking. Shadow banking spurs as long as outside investors believe that capital requirements are not critical to guarantee the quality of banks’ assets, since reputation concerns self-discipline banks’ behavior. When bad news about the future arise, reputation concerns collapse because reputation becomes less valuable, and investors stop believing in the self-discipline of banks, moving their funds to a less efficient, but safer, traditional banking.

Like I said I find this paper very congenial but that’s in part because I feel like some people won’t. It rests in part on the assumption that bankers can observe superior-versus-inferior risky assets, and that regulators can’t. This is pretty intuitive – bankers are paid (more!) to make optimal investing decisions, regulators are paid (less!) to prevent risky investing decisions – and perhaps empirically supported – but, y’know, bankers are wrong sometimes too.

Also fun is Ordoñez’s proposal for a solution that steers between the dangers of unregulated banking and the inefficiency of blunt-instrument regulation:

Another, ideal but unfeasible solution, is to just give a high subsidy to all banks, regardless of their reputation φ, conditional on their repayment of the loans [i.e. conditional on their not defaulting] …. This naturally increases the cost of default for all banks and then allows for more self-regulation. This solution has the same effects as an exogenous increase of μ [i.e. expected economic conditions], but how does one finance these widely available subsidies?

Hahaha that’s “the best way to make banks safer is to give them such huge subsidies that surviving and getting the subsidies is more appealing than taking the risk of failing and losing the subsidies.” That seems … politically challenging,³ and so Ordoñez has some other proposals.⁴

I don’t know, I stopped there. Today’s bank lobbying – against increased regulation, higher capital requirements, and reduced too-big-to-fail subsidies – seems pretty uninspiring after that, doesn’t it? The real challenge would be convincing regulators that what’s needed are bigger and better subsidies for banks. I’m sure somebody’s working on that.

Sustainable Shadow Banking [NBER, ungated February version]

1. This is the condition “bankers are smarter than regulators.”

2. That is:

For all fundamentals [below some minimum threshold] banks take excessive risk, even if … reputation suffers a lot from taking risks. Intuitively, future prospects are so poor that reputation concerns are irrelevant. Similarly, for all fundamentals [above some maximum threshold] banks invest optimally, even if … reputation does not improve from investing optimally. Here, future prospects are so good that firms are afraid of defaulting and getting a zero continuation value.

3. Though also, like, true? Cf. Gary Gorton on how banks historically accepted regulation in exchange for a “franchise value” coming from their monopoly on banking activity, and how shadow banking erodes that franchise value, as in this summary:

The second insight of Gorton’s on which this paper builds is the importance of statutory franchise value for the business model viability of at least some kinds of regulated financial entities. Where competition from unregulated entities is permitted, whether explicitly or de facto, capital and other requirements imposed on regulated firms may shrink margins enough to make them unattractive to investors. The result, as in the past, will be some combination of regulatory arbitrage, assumption of higher risk in permitted activities, and exit from the industry. Each of these outcomes at least potentially undermines the original motivation for the regulation.

4. Viz. to have bad-reputation banks pay for the subsidy (since they can’t shadow-bank anyway) and give it to the good-reputation banks (who do shadow-bank), which I don’t really understand (how does the regulator measure reputation?) but whatever that’s a minor quibble.

Other posts from Dealbreaker:

• Banks Not Especially Eager To Start Handing Out Mortgages To People With Credit Scores In The Low 400s Yet
• Ringleader Of Insider-Trading “Fight Club” Didn’t Want Any Sarcastic Comments With His Inside Information
• Expert: You Can Only Fire As Many Employees As You Have, And If You Do, You Will Have To Hire Others

Filed Under: banking, regulators, trust, wall street

DailyDirt: Cheaters Sometimes Prosper...

from the urls-we-dig-up dept

If you're going to commit a crime, there's a certain amount of logic to trying to pull off the biggest crime you can. Why risk going to jail over a relatively small amount of money? If you can get away with a multi-milion dollar heist, you only have to do it once (if you're not too greedy). And if you get caught, you might have the resources to escape the authorities. Here are just a few examples of some scams that might have demonstrated that crime can pay.

• In 2012, Italian police arrested 8 people related to a scheme involving $6 trillion (yes, trillion) in fake US Treasury bonds. According to US authorities, these kinds of documents are part of a growing trend of "fictitious instrument fraud" where fake securities are used as collateral in a scam aimed at unwitting investors. [url]
• How often do traders misplace a decimal point on purpose? David Miller would have made a killing buying 1.625 million shares of AAPL (instead of 1,625 shares!) if the stock beat its estimates, but Apple's shares actually fell... oops. [url]
• The London interbank offered rate (aka Libor) is a global benchmark for financial instruments worth over $300 trillion -- and it's part of one of the largest and longest-running banking scams in history. Traders at several large banks colluded to manipulate Libor for years... because bankers were trusted to report honest numbers. hmm. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

Filed Under: banking, cheaters, crime, fraud, libor, scams
Companies: apple

Angry Spaniards Crowdfund Money To Try To Bring Former Banking Boss To Court For Bank Collapse

from the crowdfunding-justice dept

Francisco sent over an interesting story of how a bunch of people in Spain were able to crowdfund a bunch of money in an attempt to bring Rodrigo Rato, the former chair of one of Spain's largest banks, Bankia, to justice for driving the bank into the ground until it had to be bailed out. In just one day, they were able to blast past the €15,000 they were seeking.

I have to admit that I'm interested in this as an outlet for populist outrage, but I do wonder how effective it really is. An English version of the site claims they plan "criminal and civil actions against members of Bankia's Board of Directors," and they "demand prison and seizure of assets." While they can file civil claims, criminal charges have to come from the government. So the goal is to use the money not just for filing a civil suit, but also to hire independent investigators and auditors to work towards building enough details and evidence that it forces the government to file criminal charges as well. This seems like a project that has a ridiculously high likelihood of failure.

Separately, while I tend to agree that the banks were run by some insanely greedy people who did many questionable things, I think it's going a little mob-like "burn him!" crazy to try to pin the problems on a single person. The global economy is still a mess, and the European economy is in turmoil, with Spain being a big part of that. In other words, there are larger economic issues at play here that go beyond just one banker, even if it turns out that he was a really bad banker.

Either way, though, I am fascinated to see how crowdfunding evolves over time, and the unique ways people use it -- and this is certainly a unique plan.

Filed Under: bailout, banking, crowdfunding, europe, rodrigo rato, spain
Companies: bankia