Bigger, Boring-er, Bossier

The big banks have changed in many ways. Listen to their chief executives. Look at their businesses. Dive into their balance sheets. Much suggests that the largest lenders are no longer the unstable giants that cratered the global economy a decade ago.

But banking is also a powerful industry that knows how to resist change. The Dodd-Frank Act of 2010 was Congress’ attempt to make banks stronger and better behaved. While the legislation overhauled much of what banks do, much remains the same.

Heading into 2008, the biggest firms simply weren’t made to withstand a storm. They didn’t have sufficient capital, the financial cushion that absorbs losses. Common equity, the amount shareholders have invested in a company, is a good measure of that cushion.

Common equity is now a greater proportion of the top 10 firms’ assets, or the loans, securities and trading positions on their balance sheets, according to company filings and an analysis by The New York Times.

Capital wasn’t the only weak point in 2008. The big banks were also dangerously dependent on short-term borrowing like commercial paper and repo loans to finance their lending and trading. That type of borrowing dried up when Lehman Bros. went bankrupt and investors got spooked, crippling the broader financial system. Large banks have cut back on their use off this borrowing, according to figures from the Federal Reserve.

The biggest financial institutions have only gotten bigger. This increases the likelihood that taxpayers will be called on again to rescue these behemoths if they get into serious trouble.

And despite complaints that the new regulations would hamper growth, banks rake in huge profits. Jamie Dimon, the chief executive of JPMorgan Chase, the largest U.S. bank, suggested this year that a new golden age of banking was underway.

In 2008, none of the 10 largest financial firms had female chief executives; the same is true today.

Dimon still runs JPMorgan Chase. The incoming chief of Goldman Sachs could be mistaken for the departing one.

But chief executive pay is down. In 2006, the last year before tremors started to hit the banking system, the chief executives of the top 10 U.S. financial firms earned $36.3 million on average. In 2017, their average compensation was $20.3 million.

Under President Donald Trump, deregulation is again de rigueur. The Consumer Financial Protection Bureau, set up after the crisis to prevent abusive lending practices, has been defanged. Regulators have started to chip away at capital rules. And they have loosened the Volcker Rule, a landmark post-crisis regulation that bars banks from trading for their own profit.

Since the financial crisis, U.S. banks have paid out roughly $175 billion in legal settlements, mainly for deceptive mortgage practices before the crisis, according to data compiled by Keefe, Bruyette & Woods.

But banks were involved in plenty of other types of wrongdoing, like the manipulation of a key benchmark known as Libor, the rigging of foreign exchange markets, the aiding of tax evasion and the failure to crack down on money laundering. Most of these had little to do with the financial crisis, and some of this misconduct took place after 2008. As Wells Fargo’s recent scandals show, some bankers are still abusing their customers.

In an affidavit filed last year as part of a shareholder lawsuit, a former manager of a Wells Fargo branch (which the company called “stores”) described some of that abuse.

The branch manager, Ricky M. Hansen Jr. of Scottsdale, Arizona, was fired after contacting the bank’s ethics hotline about illegal accounts he had seen being opened by his co-workers.

Hansen’s boss, John Vasquez, had warned him not to call the hotline, saying those people were “a pain to deal with.” Vasquez was later promoted to district manager.