In 54 of the years of the 20th century, a banking crisis started somewhere and these crises involved scores of countries. Banking is fundamentally risky.
JPMorgan Chase had a bird's-eye view of Jon Corzine's brokerage - and a history with its compliance chief. The bank must have at least a clue about the missing $1.6 billion.
Lawyers, compliance experts and model builders came up with new credit screens based on estimates of income. This additional step has led to much more cost and much less credit.
Audit committees must follow rules already on the books that charge them with hiring and firing auditors. That includes booting an auditor that allows executives to put banks at risk of failure for their own enrichment.
The Federal Reserve Board is engaging in a well-intentioned effort that is, sadly, still false science based on complex formulas unproven by rigorous validation.
Sales officers and pricing desks frequently misjudge customers' sensitivity to rates and overpay for deposits. Similarly, banks that underestimate duration leave money on the table.
The appeals court ruling is likely to perpetuate the perverse situation in which banks view SEC legal settlements as a cost of doing business rather than a deterrent for fraud.
Some banks must know where the missing customer funds are. Otherwise why would they be confident enough to bid as much as 90% of face value for customer claims?
The Fed has not clearly articulated a rationale for the complicated stress test it selected. It appears that with their selection, the scenario is closer to Armageddon than the Great Recession.
