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Disagree pretty strongly with the first few paragraphs here. The vast majority of U.S. and U.K. citizens had jack-all to do with putting the fox in the henhouse; financial regulators are appointed, not elected.

But I agree with a large part of what you're saying. This is, in many ways, a systems problem and not a people problem. Even if it's a people problem at the local level, it's a systems problem at the macroscopic/scale level -- and so it's much more effective to work at the systems level than at the people level.

That's what our regulations attempt to do: put in place systems, checks, and balances, that will prevent bad behavior via incentive structures and pure mechanics. Unfortunately, some of the key systems and stopgaps in place have been vastly eroded in recent years. And I'm not even talking about Glass-Steagall. I'm not even talking about the blatant failures in oversight that allowed the banks to grow as large, as consolidated, as vertically and horizontally integrated, and as systemically important to the economy as they are ("too big to fail"). I'm talking about things like the Citizens United decision, which will only exacerbate these problems in the long run by allowing money to completely influence our political system.

It isn't the U.S. taxpayer who put the fox in charge of the henhouse. It's the fox who purchased the henhouse. That shouldn't be allowed to happen. Instead of playing a game of constant one-upmanship with financial regulations, forever trying to outwit the "financial hackers," we should start by drawing clearer divides between money and politics.

Of course it isn't the common man I'm blaming - he has enough trouble paying the damn electricity bill!

This is not the fault of the common man.

This is the problem of intelligent people doing stupid things for selfish reasons. We (meaning those who understand these systems) must fight and convince the common man that regulation IS good IF the situation calls for it.

People think regulation is bad and capitalism is good. We should convince them that both are great GIVEN the correct situation. I love capitalism - I also love having my electricity stay on and stable (remember Enron energy trading in Northern California people? - dark times (pun intended!).

I merely state that regulation has a PR problem and that the people who have the ability to change that, should.

I agree.

Somewhere in the last 30 years, to your point, the American people were sold the idea that regulation is the diametric opposite of "freedom," that trust-busting is "socialist," and other such nonsense. We need a modern-day Teddy Roosevelt, who can articulate in capitalist terms the importance of regulation and antitrust activity as vitally important to the health of the competitive, free market.

Fact is, the market should have punished the malfeasors in the 2007 financial crash, as it should be punishing the malfeasors in the Libor scandal. Shareholders should be abandoning these banks, and the banks' access to capital should be severely restricted by sheer virtue of nobody's willingness to lend to them (or to lend to them at typical rates). But that couldn't happen in 2007, because, Lehman Bros aside, everyone got propped up, dusted off, and given a fresh coat of paint via taxpayer dollars. Because the banks were "too big to fail," and not bailing them out would have been catastrophic. Because nobody had ever stopped them from growing so big, and so systemically integrated, in the first place.

The failsafes that should have prevented banks from being so directly tied to the macroeconomies of nations were not in place, and are still not in place. There is literally nothing in place right now that will prevent anything about the 2007 crisis from occurring again, and that is deeply troubling.

> Fact is, the market should have punished the malfeasors in the 2007 financial crash, as it should be punishing the malfeasors in the Libor scandal.

Yes, it should have, but the regulators didn't want that to happen.

However, you're missing a very important part of the story. Regulators were part of the problem leading up to these disasters.

In the LIBOR case, UK regulators knew about the rigging and tacitly encouraged it because they thought that the rigging stabilized the market. (US regulators knew about and accepted said rigging.) That's understandable - many of you want them to stabilize the market and the rigging probably did have that effect. However, if you're looking for an honest market....

Things are even worse wrt the 2007 problems. Regulators were in that up to their eyeballs on both the mortgage and securities sides. (In fact, securitization was encouraged by regulators.) Fannie and Freddie were especially bad because they reported bogus stats that threw off everyone's risk analysis.

Until we start punishing regulators and the politicians who push these policies....

Punishing regulators? Sure. What about punishing the people who snuck it by the regulators?

I absolutely cannot stand the libertarian line on this. For decades, it was all "don't regulate the banking sector, you're hurting freedom, they should have the ability to combine investment and consumer banking, don't regulate them", and then when they fuck up the economy?

"Oh, you should have let them fail. That would have been free market."

Great, that's a lot of help. We should've let your ideology destroy the modern economy. You know how much it burned non-libertarians to have to bail those banks out, after listening to all this crap from you guys for decades about how deregulation was the way to go? But we still supported it, because we're adults, and didn't want to flush the economy down the toilet.

So here we are in 2012. Still hearing that the banks shouldn't be regulated. They're the "free market". Sure.

Per my understanding, most libertarians are in favor of prohibition of fraud...

Opposing fraud and for the "free market" (aka laissez faire) are mutually exclusive. Just wishful thinking.

On open market requires regulation. For instance, we need contract law, transparency, fair and impartial court system, for the market to work efficiently and effectively.

Are you saying that, for practical reasons, fraud cannot be effectively punished without more regulation than most libertarians would support? This is a coherent claim that may or may not be valid, but I would be interested to hear support of it rather than simple assertion.

On the other hand, if you are asserting that most libertarians oppose a court system in which people can (at least in principle) be tried and convicted when they commit fraud, then I think you are incorrect in your assessment of the position of most libertarians. Even anarcho-capitalists (per the wikipedia article) seem to view fraud as something that can be responded to with force - they just don't want it to be a "government" that does so.

Ok. In the libertarian utopia, who covers the cost of running the courts?

That depends on which "libertarian utopia" you're talking about.

The American Libertarian Party would probably say that the court system is paid for by government revenues from taxes and tariffs like the Constitution says.

Anarcho-capitalists would say that it's paid for by whatever revenue stream Courts, Inc[1] develops; they wouldn't presume to enforce a single business model, you see (I assume).

In the case of "left libertarian" thought, it again depends on the particular society envisioned - I don't really have enough understanding of the various models to give a clear answer, but most left libertarian utopias are even further from our modern situation than the right libertarian ones. Of course, most wouldn't have the financial infrastructure at the heart of this particular case anyway.

This is not to say that I have any high degree of confidence that any of the models discussed or glossed over above would actually work (well or at all), but disagreement does not sanction misrepresentation.

[1] Although I think some of them are opposed to limited liability, so it might or might not be "Incorporated"...

> What about punishing the people who snuck it by the regulators?

You're missing my point - "they" didn't sneak anything by regulators. Regulators (and policy makers) wanted "the market" to do certain things. Those things blew up.

For example, "real" LIBOR values would have spooked the market during 2007 and probably caused the collapse of various banks. What should a regulator tasked with stability do in that circumstance?

Add in the fact that many regulators (and policy makers) are, in fact, tools of the folks they're supposedly regulating, and regulation can't do what you want it to do, especially if you're unwilling to punish regulators and policy makers.

> We should've let your ideology destroy the modern economy.

Now you're just babbling.

Either you want stability, which will require things like the LIBOR "fraud". or you're going to have to let banks fail. You can't have no failures and no fraud. (You can have both fraud and failures.)

As to "too big to fail", surely the same applies to govts as well. After all, regulation is, by definition, systemic risk. If everyone plays by the same rules, you've got a problem when those rules don't work....

> all this crap from you guys for decades about how deregulation was the way to go

The problems didn't come from deregulation. (Besides, there actually wasn't significant deregulation, apart from the repeal of Glass-steagal, which actually helped a great deal during the crisis.)

The problems came from govts "encouraging" (and subsidizing) bad economics to accomplish social goals. They got out of hand in part because GSEs lied.

The regulators, themselves are also bankers. Or have strong tires to bankers. Kind of hard to ask the SEC (for example) to come down hard on say, Goldman, when most of the executive staff at the SEC worked and have their own positions at Goldman.

(I'm only using Goldman as a example).

But the opposite is also true. The best regulator is a experienced regulator. And you get that experience by working in the field.

A better approach is punishment. Look I used to trade (on the CMO floor at Kidder), and the more important thing is not to lose money. If traders (actually everyone in banking) don't lose money nothing changes. I mean, why ruin a good thing, right? Just that simple.

It used to be easier, because before 1999 investment banks were a sort of a partnership - if you lost money the firm lost money. Now so these days. Why even care? Traders take such stupid risks cause it's not their money. And now, we all know, they don't even face any sort of punishment. In fact, most of the banks MADE money, in the form of TARP (and cheap loans from the Fed).

And now we have Libor. No trader has gone to jail. No executive has gone to jail (and I doubt anyone will). The bank (in this case Barclays) might have to pay a fine, which is peanuts compare to their profits.

So what's the message? Steal, loot, lie. And until people are made to pay, personally, it will remain so.

> In fact, most of the banks MADE money, in the form of TARP (and cheap loans from the Fed).

Claiming the banks made money off of TARP is like claiming I made $600k last year because I took out a mortgage. TARP provided loans to banks that were paid back with interest.

Actually up front you are correct. BUT the banks also used those loans (which by the way, were granted with VERY favorable terms at VERY low rates) to pay bills due to other banks

Take AIG for example.. Banks made billions on payouts from AIG. Where did the money for those payouts come from? Us. The American taxpayer. So not only did the banks get their bad debts marginalized (at our expense. example: look at the sale of Bear Stearns to JP. Who assumed most of Bears' junk debt in that deal.. that's right, the tax payer.); they also got cheap cash at cheap rates; and all the inter-banks fees were paid.

In other words, the whole mess was a giant shell game. I have no doubt that some bankers knew exactly what they were doing during the whole mess. They played the Fed, Treasury and us.

And the got away with it. And they will again.

Make no mistake, the game is rigged. And not in your (the masses) favor.

   Regulators were part of the problem leading up to these disasters.

aka regulatory capture http://en.wikipedia.org/wiki/Regulatory_capture

   Until we start punishing regulators and the politicians who push these policies...

Hate the game, not the players.

The correct answer is, and has been, to have a balance of powers. The forging of the US Constitution has been described as an "orgy of mistrust". Having mutual antagonists playing off each others, preferably in a three way fight, is the best medicine devised thus far.

Source - the emails with Torch, show that he was concerned about what was going on, not tacitly approving. Curious what you are referring to?

> Because the banks were "too big to fail," and not bailing them out would have been catastrophic. Because nobody had ever stopped them from growing so big, and so systemically integrated, in the first place.

If these banks are too big to fail (and thus shouldn't exist), what does that imply about large state govts (such as CA) and the US federal govt?

Note that regulation is, by definition, systemic risk.

If it is a problem of intelligent people doing stupid and selfish things then it seems to me that blame on them ought to be antagonistic and personal. Necessarily so.

I pretty much agree with everything you wrote except that your original comment seemed to suggest a view that the finance industry are unwilling conspirators. In my opinion they deserve vilification.

"This is the problem of intelligent people doing stupid things for selfish reasons."

I'm gonna disagree. What these people are doing is very much the smart thing to do. They make huge, I mean HUGE amounts of money by doing just these sort of things, and yet what was the risk for them? Even those people who are directly implicated by this scandal will probably just have to pay some fines, or maybe even be forced to resign! Dear god how will they survive? Oh that's right, they'll survive off their massive net worth that they stole.

I personally support a minimum sentence of life in prison. Not because I hate them or anything, no, it's a matter, as everyone says, of incentives. In any other crime the magnitude affects the sentencing, and these guys colluded and stole money in the billions, maybe trillions of dollars. If they don't all end up in prison, what does that say to any future banker criminals? It says: steal as much as you want, because even if you get caught there's really nothing we can do about it.

I'm going to pull the following statement out of my ass, but I'm willing to bet it's probably true:

"There are already laws punishing theft and fraud in America."

The law doesn't apply to everyone in the same way. Making a new severe law to punish Wallstreet crime sounds exactly like the kind of thing that will have no lasting effect. These bankers pay our politicians, inject themselves into regulatory bodies, lobby for lower oversight/more exemptions, they know how to get around this stuff.

This problem needs to be tackled on an infrastructural level. We need some basic state-owned utility banks in America, that'd be a start, something like they've got over in Germany:

http://en.wikipedia.org/wiki/KfW

In one sense you are very right, on the other I think this is a very wrong way of thinking of these things.

At some point liberal economics-philosophy became very uncomfortable with the whole concept of ethics, norms, conventions and such. Slightly ironic as Smith was (IMO) a moral philosopher primarily (eg "The Theory of Moral Sentiments") with "economics" being a supplementary way of understanding right & wrong.

When you view the word entirely from an economics/incentives/meta-institutions I think you are giving up on some things that are extremely important. Societal norms, shame, morality: these are a natural and integral part of how human society works. Laws and regulations are important too, but one cannot replace the other. There is a problem with diffusion of responsibility combined with corporate mandates and institutional mentality eroding how people behave.

Taking the cold incentives view, you look at employment for example as an agreement fully captured in a contract with no further responsibilities on either side. It's negotiated based on market prices. That's true in one sense, but looking at employment that way does not capture a lot of crucial nuances. Treating it that way is not a natural way for humans to interact and will not achieve the best results, psychologically or economically. You need employees to be intrinsically motivated, believe in the company, belong, be obligated. They expect respect and care and empathy and responsibility from the employers. This is very basic and it plugs into parts of human behavior that are older than money and older than humans as a species.

Its hard to capture in an equation or a model. It's even hard to capture in a "theory" of psychology, sociology, history or whatever. So, there's a tendency by people trying to understand things to ignore these crucial elements. That's absurd. A society from a household to a company to a country cannot function based on individuals narrowly and coldly following their self interests (even though you can prove that they do).

More importantly, no "law" can work if the only reason anyone follows it is fear of punishment.

I'm not purely incentive (that would be much too simple :).

We must use any and all tools at our disposal to ensure the correct working order of valuable systems - such as finance (proper allocation of capital to risk is a great thing!).

Exploiting human desire, psychology, biases, irrationality and behaviour to create robust systems is a great idea! The are just some of the many tools that we have at our disposal to protect ourselves from abuse by "nasty" agents. This then allows us to move forward towards a more prosperous, robust and stable society in the future.

What I don't like is treating the symptoms (these financial hackers if you will :), instead of the cause (improperly checks and balances at centres of power).

Bring on the shame and the like - I'm all for it. But we should at the very least focus on fixing the causes (exploits in the system) rather than the hackers that exploit them (just like in security research).

I'm sorry if It sounds like I was straw-manning you. I was replying to the general approach and I guess that is a straw man.

BTW, I often take a similar opinion to the one you iterated. You can probably see in the comment, I'm on the fence. I agree that yelling about ethics is very silly and won't change a system. Changing rules and working with incentives is the way that we, as societies, run by institutions can fix things.

On the other hand the mentality we are cultivating (in ourselves) by thinking this way is nihilistic and (poignantly) silly.

Anyway, if we are examining institutions, the corporation might be one to put under the glass. While corporations are an innovation (in law of all things!) that has created incredible wealth, it's also pathological. At least it generates pathologies in people. It narrows a company (group of people)'s duties to investor profits. That's not normal for humans. Humans are made to balance a wide set of "interests" and understand them intuitively. I don't mean to imply that signing a piece of paper suddenly makes a business pathological but internalizing the implied mentality does. That's happening on a global level.

Very well put. And, as hard as it is to capture all those nuances in an equation or a model, the biggest problem is that there are too many theorists, and common people, believing that the "real market" is the one that comes out of the theory - with its completely unrealistic homo economicus - and not the real markets, those which develop in the real world and are so much more complicated, non linear, and working on human reactions.

A theory can be useful in dealing with complex situations. But believing that the theory can become the reality is the same mistake that marxists made.

Thanks

Homo economicus is real. Economics is useful and its really important (though imperfect) way f understanding the complex interactions between people all over the world.

The problem is that we are not homo economicus. We are Homo Sapiens. Europeans & Mexicans & Italians and Londoners. Some of us are even Americans. We are also brothers and lovers and criminals and parents.

Homo Economicus is a a description of a certain set of homo sapiens character traits.

Economics is useful, I never said the contrary, but how is homo economicus "real"?

real in the sense that people make rational economic decisions. This is especially true when you see things aggregated.

@netcan allow me to disagree. People make part of their choices partially basing them on rational reasoning (and, even for that part, mostly based on incomplete data and often faulty logic). But just check what works in marketing and you'll see how limited that rationality really is.

I think we might be talking past each other.

I mean "exists" in a pretty weak sense. If you present people with complex economic choices, they make rational choices and maximise their economic utility. IE if they are using second hand computers running hacked up linux to play movies on their TV and a good, cheap alternative presents at a lower price, most will eventually switch to that.

Describing them as such allows us to predict their behaviour.

And yet, if you're interested in studying these "moral effects" rigorously, you'll attempt to model them mathematically. Not necessarily with from-first-principles equations -- sometimes the big data / machine learning approach is best. Plenty of (most? all?) economists understand the need to model human irrationality in order to properly predict economic behavior, but if you ask me the solution is not to somehow adopt a less rigorous humanities approach to economics, like you seem to be implying.

The problem with having a no-trust rules-only society is it would be terribly inefficient and things would grind to a halt. Every day you take actions and make decisions that rely on trusting others. In general people do not steal and cheat at every opportunity, and treating the world that way would be counter-productive. Taking the argument to the extreme, if you trust no one, you must have no expectations of any privacy as that is the only way to really be sure that people aren't acting differently than you would like them to. If everyone else is being watched you better believe you will also be watched. The cost of this regulation and surveillance would be obscene and the pace of progress would grind to a halt.

I think the reaction here is appropriate. There are laws that were broken. This is not scapegoating, it is punishing behaviour as should be expected. Yes reforms may be needed, and they should certainly be considered and I am sure they will be, but punishing those who knowingly broke the law and abused power for personal gain cannot be considered scapegoating, or punishment of any criminal activity must be considered scapegoating as it means society simply gave them too much power and trusted them too much to allow that activity to happen.

Note I didn't say no trust. I merely said watch incentives and balance of power.

I also didn't say every decision.

It's a balance. You have drivers licenses to ensure a standard of safety and trust - but after that you leave people alone (risky if driver's do bad things). It's a tradeoff.

However in this case, society has seen it fit to give a few individuals too much power, without placing the correct checks and balances upon them. This creates a situation that allows "nasty" agents to exploit it for their own benefit.

Don't blame the hackers. Blame the system designer (a security researcher told me this).

You must assume, upon creation of a system, untrusted and "nasty" agents and deal with them (at some cost). This is how cryptographers and security researchers work to ensure our safety. Maybe we should get them to look into this problematic mess (they love finding flaws in systems :D).

It's easy to blame Hitler for the Holocaust (which was a despicably evil thing). But you must also consider how one could've stopped a situation from developing such that an artist drop out could end up seizing control of an industrial powerhouse.

If you say don't blame only the hackers, I agree. But the hackers that - knowingly and selfishly - violated the law must be punished, not given a free pass because it was the fault of the system.

Then you should also improve the system; the two things aren't mutually exclusive.

Ah but you see here is the kicker (and I totally understand your point).

When designing systems you must severely reduce the ability of "nasty" agents to take advantage and exploit you for personal gain.

We should also enforce standardized punishment for those that successfully exploit the system.

LIBOR left the gate wide open! That's 10x more important than punishing any one person that just walked in (and they should be punished - I don't disagree). But focusing on the people is the wrong mental attitude to adopt.

I keep hearing things like "So and So has $100 million dollar salary and he should be punished for bringing the house down". I really want to hear things like - "Who the bloody hell let this happen in the first place?".

That's all I'm saying. Punish hackers all you want but if you want true robustness you must rectify the exploits present in the system.

Ok, agreed that fixing the system (which isn't itself an easy thing) is more important. But punishing the perpetrators of the actual crimes isn't only important for this single problem; it is also very important as both an example for others that could be tempted, and an encouragement to honest people. The OP was against the justifications that are put forward to somehow save those people, not against also changing the system.

"I feel that a lot of the blame heaped upon the finance industry is unnecessarily antagonistic (and personal)."

This is clearly a response to the defensive, entitled, and holier-than-thou attitude the financial industry had in the wake of the 2008 crisis, not to mention the lack of consequences to finance directors or serious financial reform. They closed ranks, hard, which by necessity elevates the level of the attacks against them, which therefore seems antagonistic.

Tried talking to a banker about this stuff in 2009? Impossible to have a discussion not rife with blame-shifting.

I agree that social systems should be designed to minimize the amount of damage corrupt individuals can do. But that doesn't mean we shouldn't blame the corrupt individuals for their behavior. The author mentions regulatory capture and specifically refutes it as a defense for bad behavior. I also don't think it is possible to build a complex social system that doesn't rely on trust. I suggest reading "Liars and Outliers" (http://www.schneier.com/book-lo.html) if you're interested in this stuff. I enjoyed it a great deal.

This is because no matter how "noble" people say they are (they may be sincere!) - abuse will inevitably become rampant - it is human nature.

We have this thing called "prison" which is supposed to curb those abusive tendencies when they get out of hand. We seem to be underutilizing this resource in our handling of financial fraud.

Of course it's a systemic problem. But individuals are components of that system. If you don't punish people who engage in fraud, you remove a valuable disincentive against fraud. So while the system as a whole needs to be reformed, making individuals take personal responsibility for wrongdoing is part of that.

Analogy wise -

We didn't let the foxes in the hen house, the hens asked and got more freedom to manage the coop. They invited hens and animals from other farms over used them to run an abbatoir. Our imagination can't believe it, so we talk of foxes.

I agree with most of your points, except that the umbrage directed at the Fin industry is too personal or heated.

I think most people who are intelligent, can't fathom the level of the atrocity being committed here.

For Libor, they are being accused of flat out fraud. Fraud so utterly blatant that it was normal for the industry.

And Barclays is one of the 'good banks' - its getting off of on good behavior.

This is just rapacious greed, fraud, and abuse at a scale that the word definitions come across as weak.

-----------------

Link for interest

Morgan Stanley's stab at what the fines might look like/via FT alphaville - http://ftalphaville.ft.com/blog/2012/07/12/1081181/some-more...

> We need to stop trusting people - period. This is why, at least in the US, we have 3 branches of government, so that each one will check the other out of self-interest and balance possible abuse/corruption (not perfect - but pretty darn good!).

I think you have the right intuition, but you don't go far enough. The root problem in finance is that people have turned over to government the power to control money. There is too much trust in government officials and in the banks that fund them.

Government's ability to control money has resulted in fiat money that is constantly being devalued, encouraging people to make risky investments and to take on debt. This has been very profitable for government, which has ready access to low-cost funding. Fiat money has also been very profitable for banks, which through the "magic" of fractional-reserve banking, have been able to loan with interest money they can simply create.

The solution is to take away the power to control money from government. Let people decide what they will use as money and they will choose money that maintains its value. They will also invest in institutions that do not use fractional-reserves and other risky schemes and thus are not subject to bank-runs.

A US politician that is talking about real reform is Ron Paul. The bill that would allow currency competition is The Free Competition in Currency Act. It's about one page long. http://www.govtrack.us/congress/bills/112/hr1098/text

Give people the freedom to choose their money, let them choose to invest it in the institutions of their choice, and problems like the Libor scandal will stop being so important. The people who committed fraud will be prosecuted. Damages will be paid. Reputations will be damaged. People will choose to bank elsewhere. No problem.

By trusting government to control money, fraud in the few institutions favored with a bank charter becomes a very important issue. It doesn't have to be.

Indeed... We need to go back to feudalism where we can sell our hacking skills in exchange for slavery to our VCs for 8 years. After the 8 year mark we can finally start drawing a salary instead of just getting room and board and catered lunches.

The reason for fiat money is to allow for venture capital and allow new people (immigrants, new births) room in the economy. Granted what has gone in recent times clearly gives certain people more leverage and ability to escape punishment when they play outside the rules. Something should be done about that, but going back in time to feudalism isn't going to solve the problem.

Surplus wealth, not fiat money, is necessary for investment. Investment is just surplus wealth that is spent to increase future production rather than for the present. This surplus wealth can be invested by the people through their voluntary savings, or can be extracted by deceit and force with fiat money. Deceit because people don't realize that they can buy less than they produce because their money is worth less. And force because people are forced by legal tender laws to use and accept debasable money.

Ok James Madison, but we have 200 years of economic data and reasons for the fiat money. You're hand waving and claiming that it's an evil without acknowledging that it solves some pretty fundamental problems. People aren't poor now because their vast wealth has been decimated by inflation. It's because we are doing more with less and commoditizing the types of work they were doing.

> People aren't poor now because their vast wealth has been decimated by inflation. It's because we are doing more with less and commoditizing the types of work they were doing.

Efficiency in production makes society as a whole richer, not poorer. For example, programming computers to drive cars will ultimately enable a lot of taxicab drivers to do other things to help society that they couldn't do before because they were busy driving. When self-driving cars become widespread, society will benefit because it will have the same benefits of transportation that the taxicab drivers used to provide as well as the new goods and services the former drivers are now providing. The fallacy that machinery reduces wealth and employment is debunked in longer form by Henry Hazlitt in Economics in One Lesson. See http://www.fee.org/library/books/economics-in-one-lesson/#0.....

That's great but go to the rural south where people are dirt fucking poor. Average is an inane statistic by itself--just because in aggregate we are richer because we can afford a $200 meal in Nor Cal doesn't mean that wouldn't be a boon to feed a family at the bottom elsewhere.

Anyone else got suggestions?

Break up the banks.

I keep thinking that it really is this simple. All the problems of recent years are problems of scale. In a world of thousands of banks landing to each other in a big market, you can simply measure the rates instead of trusting a handful to come up with LIBOR. In a world with thousands of banks, a handful would have gone under from bad exposure to real estate volatility and spooked the rest into being more conservative, instead we had to wait for Lehman to fail to realize how bad things were.

There's no social or economic value to the BofA & Chase-sized monsters that I can see. Just chop them up and put an incentive in place (extra tax beyond a certain revenue, say) that encourages them to spin off more banks.

I see it pretty much the same way. All of the talk is just putting too fine a point on it. The benefit to society for having banks so large is negligible compared to the costs.