I agree but i this is still playing the same game, and it's the rules that need changing
There is a system set up which incentivizes your employees to screw over their own company, by taking more risk than they should, frontrunning their own clients, etc. And it necessitates setting up your own internal police (compliance, risk) just to make sure they don't get too out of hand.
There are personal incentives there for the IB people to try to outsmart and get something past risk, or avoid getting caught by compliance, not to try to do what's best for the company or their client
Why? The shareholders & execs were free to impose stricter compliance and risk rules. They chose not to.
As long as you don't have contagion spreading to the rest of the financial system then who cares. The new rules put into place re: bank capitalization after the GFC seem to have worked here. Shareholders & execs are taking the hit, the rest of the banking system doesn't seem to be affected, and everything seems to have worked as it's supposed to in this case.
the reporting on stress testing (that i've seen, at least) implies that added rules like further limiting bank capitalization fall woefully short of preventing another contagion from spreading.
i'm down for letting banks rise and fall on their own merits, but we've not had that since before the 80's at least.
We just went through the deepest, fastest recession since the 19th century. And not a single major financial institution failed or even needed a bailout.
That's pretty firm evidence that banks are more than adequately capitalized. People want to see everything through the lens of 2008, but the difference between banks then and now is night and day.
the circumstances are drastically different, so adequate capitalization is unlikely the reason for that. this was a induced recession from outside forces, not from internally correlated ones like 2008.
There is a system set up which incentivizes your employees to screw over their own company, by taking more risk than they should, frontrunning their own clients, etc. And it necessitates setting up your own internal police (compliance, risk) just to make sure they don't get too out of hand.
There are personal incentives there for the IB people to try to outsmart and get something past risk, or avoid getting caught by compliance, not to try to do what's best for the company or their client