Big Bad Numbers

Trey Smith

Bank of America: $11.9 billion; JPMorgan: $5.44 billion; Wells Fargo: $4.35 billion. These are the fines the banks have paid so far in settlements to the government for wrongdoing amid the financial crisis, recorded as part of ProPublica’s loose, ongoing effort to order the major facts and figures of the disaster.

Of course, to begin to tell whether these penalties come anything close to fair, they have to be considered against each bank’s existing assets. According to Investopedia, Bank of America held $2.26 trillion in valuables in 2010. JPMorgan counted $2.29 trillion, and Wells Fargo had a measly $1.26 trillion in the bank. Those figures stand in addition to the tens of billions each group carries in equity.

And as it’s said below, the SEC permitted banks to pay the settlements quietly, without declaring themselves innocent or guilty.
~ from Banks Pay Bupkis for Roles in Crisis via TruthDig ~

Big numbers can be deceiving when NOT viewed in context.

For example, if you cracked open the morning newspaper and read that JP Morgan had agreed to pay a fine of $5.44 billion, most people would consider that amount L-A-R-G-E. That figure would lead most people to think that JP Morgan was hurting big time and had learned their lesson for sure.

It's easy to understand why the average bloke might think that. One billion is a number that most of us genuinely can't conceptualize. The person who averages $50,000 in wages per year and who works for 45 years until retirement will bring home an aggregate gross of $2.5 million -- which is LESS THAN one percent of $1 billion. So, it is near too impossible for us really to wrap our minds around such large numbers.

But here's the thing: A $5.44 billion fine for a corporation that has $2.29 trillion in assets (not even factoring in equity) is miniscule. It is less than peanuts. That fine represents 0.2% of those assets. That is the equivalent of the person making $50,000/year being fined $100 for their major role in bringing the world economy to the brink of collapse!

Let's say that you received a ticket from the state police for speeding. You were clocked at 75 mph in an area where the speed limit is posted at 40 mph. In Washington State, the fine is $182.

But it is decided that lucky you -- deemed an extra important person -- gets the JP Morgan rate. So, you must only pay a fine of 0.2% of the $182. How much will you pay for endangering people's lives? Thirty-six pennies. That's no misprint -- $0.36.

Does anyone honestly think that 36 cents will serve as an inducement for you to quit speeding?

Heck no! You will speed whenever you feel like it and laugh out loud each time you must fork over your pocket change.

When put in this context, the big banks are getting away with a legalized form of robbery. They are paying chump change for destroying people's lives. Even worse, because the agreed to fines are so paltry, we can rest assured that they will continue to commit the same kinds of sins over and over and over again.