Wall Street gets fined

by philg

The Wall Street firms will pay $1.4 billion for their sins of the 1990s, under a settlement reached yesterday.  It seems that they instructed their analysts to recommend buying the stocks that their investment bankers were taking public (for a fixed 7 percent share of the proceeds that seems to have been as unaffected by competition as the 6 percent collected by realtors).  This happy marriage resulted in an explosion of profits for Wall Street throughout the 1990s.


How discouraged from defrauding investors are they going to be in the future?  According to the New York Times, Citigroup paid $400 million or 0.2 percent of their organization’s value (about $200 billion according to finance.yahoo.com).  Merrill Lynch paid $100 million or about 0.25 percent of its market capitalization.


Let’s figure out what this would be like for the average American family, whose median wealth was $63,000 in 2001 (before the economy collapsed).  0.2 percent of $63,000 would correspond to one of the family members being fined $126, less than one-third the cost of the average speeding ticket (including insurance hikes) in the U.S.

16 thoughts on “Wall Street gets fined”

  1. There once was an Englishman named Hobbs

    who said “Americans will lose their jobs;

    Their Democracy will fail,

    For the pigs at the pail – – – – – ”

    (I need a last line here)

  2. I think we should all just go and rip off our friends, families, and investors. I mean hell, we can make a boat load of cash and only pay…a speeding ticket? Thats nice!

  4. Another fair comparison would be to compare income to the fines. For instance, Citigroup earned $4B last quarter, so this is 10% of their quarterly earnings or 2.5% of their annual income. That would be $1250 for a family with an average income of $50,000 (yeah, I know that is too high but I am too lazy to get the correct figure).

    Don’t know about you guys, but I don’t want to give the govt or anyone else 2.5% additional tax for any reason.

    Of course, the firms did break the law…

  5. By the way, the fine is about 4% of Merrill’s earnings.

    (Disclaimer in case of compuational errors: All calculations done off the top of the head and not with any mechanical or electronic assistance)

  7. These fines are a joke.

    They should be based on the following formula: First, add up what the illegal profits were, and confiscate that. Then, add on a punitive fine (the existing fines would actually work great as a measure for the punitive fines).

    Denying the firms the ‘fruits of their misconduct’ is just antitrust 101. These fines hardly amount to a slap on the wrist.

  8. “In an attempt to understand blog software, standards, and culture, I’ve started my own: http://philip.greenspun.com/blog/ (at Harvard Law School because that’s where blog pioneer Dave Winer is). ”

    Ok; Dr Phil, would you mind if I sub-blogged in your blog ?

    I will try to add content and stay out of the way .

  9. I, russ conner, do hereby claim to be the contributor
    of three useful and heretofore nonexistent words to
    my beloved English language with all right and title
    thereto , namely , just for the credit of their invention.

    1 – audionym – pron. aw’de o nim – n., rt., Mod E.
    i.e., audio nym (1)Words which sound the same but
    are spelled differently and have different meanings.

    2 – demockeracy –pron. de mock’ ur a sy – n., rt., Mod E.
    i.e., democracy vs. mockery thereof syn.
    oligarchy; kingship.
    (1)Any political system which claims to be based upon
    the consent of the governed , while in fact being run by
    an oligarchal and/or , dictatorial elite .

    3 – phuc – pron. fuk’ – adj., rt., Ang Sax , Mod E.
    i.e., fuck sexual intercourse – – n/a; var.
    exclamatory; phuu-uuck ; adj; phucn;phucd; adv.;
    p.t. phucd;
    adj., (1)useless (2)of inferior quality (3)settled in the
    negative ;i.e.,”he’s phucd”. (4)of superior quality;i.e.,
    “phucn UNBELIEVABE !!

    I leave the third word open for further definintions and
    clarifications .

  10. I, russ conner, do hereby claim to be the contributor
    of three useful and heretofore nonexistent words to
    my beloved English language with all right and title
    thereto , namely , just for the credit of their invention.

    1 – audionym – pron. aw’de o nim – n., rt., Mod E.
    i.e., audio nym (1)Words which sound the same but
    are spelled differently and have different meanings.

    2 – demockeracy –pron. de mock’ ur a sy – n., rt., Mod E.
    i.e., democracy vs. mockery thereof syn.
    oligarchy; kingship.
    (1)Any political system which claims to be based upon
    the consent of the governed , while in fact being run by
    an oligarchal and/or , dictatorial elite .

    3 – phuc – pron. fuk’ – adj., rt., Ang Sax , Mod E.
    i.e., fuck sexual intercourse – – n/a; var.
    exclamatory; phuu-uuck ; adj; phucn;phucd; adv.;
    p.t. phucd;
    adj., (1)useless (2)of inferior quality (3)settled in the
    negative ;i.e.,”he’s phucd”. (4)of superior quality;i.e.,
    “phucn UNBELIEVABE !!

    I leave the third word open for further definintions and
    clarifications .

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