It is easy to question the role of financial activity. After all, between January 2012 and December 2014, financial institutions paid $139bn in fines
to US enforcement agencies. More fundamental is the contrast between
the 7 per cent average share of the financial sector in US gross
domestic product between 1998 and 2014 and its 29 per cent average share
in profits.
Alas, it is also possible to extract rents in markets. The financial sector with its complexity and implicit subsidies is in an excellent position to do so. But such practices do not only shift money from a large number of poorer people to a smaller number of richer ones. It may also gravely damage the economy.....
The harms take two forms. The first is direct damage: an unsustainable credit-fuelled boom, say. Another is indirect damage that results from a breakdown in trust in a financial arrangements, due to crises, pervasive “duping”, or both. The harms take two forms. The first is direct damage: an unsustainable credit-fuelled boom, say. Another is indirect damage that results from a breakdown in trust in a financial arrangements, due to crises, pervasive “duping”, or both.
So what to do about it? Increase sense of morality in finance and reduce incentives for misconduct. Get rid of too big to fail and to big to jail.
see the complete story here.
I think the answer is to increase morality by increasing punishments. If the punishment outweighs the benefits then maybe people will be less inclined to play the markets and extract rents.
ReplyDeleteI just don't know how much punishment could be increased for it to finally get through to these corporations that what they're doing is wrong. It seems that no amount of money is too big to actually make a dent in them. They pay outrageous billion dollar fines to the government and then they eventually go right back to what they were doing. At some point I think they need to be allowed to fail and be jailed. I know it's aggressive, but maybe we just have to cleanse Wall Street.
ReplyDeleteAt some point there needs to be fear of the punishment. Obviously there is no fear, otherwise this behavior wouldn't be habitual. I have to agree with Shelby's "harsh" suggestion. If incidence's such as the financial crisis won't teach a lesson, maybe the most strict possible form of regulation will.
ReplyDeleteI agree with others commenting on this post. Nobody is fearful enough, so harsher punishments/regulations need to be put in place, otherwise this issue is going to continue to spiral out of control.
ReplyDeleteI agree with all the other previous commentators. I think there needs to be harsher punishments or strict regulations, where large companies have less incentives to manipulate policies to their own benefits. However, I think the only way to do that is to reexamine the current government structure system, where things such as lobbying, creating loop holds in policy or influencing of political officials once they are in office. I think when these things are examined or possibly fixed that would in turn increase the effectiveness of regulations and consequences for breaking them (i.e., harsh punishments).
ReplyDeleteI agree with everyone above that if there are not harsh enough penalties/regulations that individuals will not be fearful enough to not engage in this kind of activity. If we do not put these harsh penalties or strict regulation in place then this issue will continue to exist because these individuals will continue to engage in these activities due to the reward they believe they can receive.
ReplyDeleteI will have to agree with the above comments that there is a need for strict regulations, so that corporations/ large companies have less power to play with our policies. These activities will continue to create more inequality and more noncompetitive markets if harsh punishment are not taken.
ReplyDelete