Is it not dumb to kill the goose that lays the golden eggs just because it laid a bad one?

Sir, John Kay asks correctly: What purpose is achieved when taxpayers, by fining state-funded hospitals, in effect fine themselves? “It is natural but wrong to blame executives” October 21.

I would go further still by asking: What is the reason to fine corporation that generate jobs in such a way that it weakens them? Instead of in cash, is it not better to have those fines paid in shares… the current shareholders may not like to get diluted, but it is always better to dilute the wealth of the owner of the goose that lays golden eggs than the goose itself.

And of course, if you need clarification, the goose here stands for banks and for Volkswagen.

@PerKurowski ©

If you fine a bank, request payment in shares, not in cash against their equity, which is societal masochism.

Sir, you write: “The modern dependence upon credit for growth is too great for the capital that supports it to be treated casually”, “Shareholders punished for the sins of the trader” May 22. I am glad to see that you now at long last warn about the negative should-be-expected-unexpected consequences that fines can have. I have written to you several letters on this but, as usual, as your policy, these have been ignored.

I hope you now recommend what I have been recommending for quite sometime, namely the option for the authorities to collect those fines in newly issued bank shares, and which could then be resold some years later to the markets.

To collect fines from banks, in cash, against their equity, is basically societal masochism.

http://teawithft.blogspot.com/search?q=fines

@PerKurowski

$56bn in bank fines equals $1.1tn less in bank lending…minimum

If you take that 5% capital (equity) leverage ratio they want to impose on banks in the US (in Europe only 3%) that signifies an allowed leverage of 20 to 1.

In this respect when Martin Arnold reports on December 27 “Penalties for lenders leap to record $56bn”, and as these penalties go against equity, I read $1.1tn less in bank lending… minimum... and this 2014 only... judicial masochism!

With all the QEs and other stimulus efforts going on; and all the increase of capital requirements for banks going on, the question remains: why on earth were these fines not forced to be paid out in fully paid in voting shares to be resold to the market?

Current bank fines paid in cash is judicial masochism. Fines should instead be paid in voting shares.

Sir, I very much agree with Daniel Zuberbühler’s in that a much more constructive way of sanctioning the banks for misdeeds would be to increase their capital requirements, “In banking capital punishment works better than torture”, July 3. Clearly to punish banks with bribes that go against their capital, precisely when we most need them to be better capitalized so as take on their lending functions, amounts to something like judiciary masochism.

But if populist prosecutors insist on taking that route then I have also proposed sometime ago that the fines should paid by having the perpetrator issue voting shares… which the government needs to unload in the market within a specified period. That would indeed be a better way to punish what needs to be punished, without punishing ourselves.