Little Sympathy for Big Banks

It’s no fun to be a banker these days.

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It is not just the increased regulation. It’s the lack of trust.

“At what point does this stop?” asked Gary Lynch, the former director of enforcement for the Securities and Exchange Commission who has gone on to jobs with many leading Wall Street firms and is now global general counsel at Bank of America. He was referring to the escalation in penalties being levied on banks, culminating in the $13 billion JPMorgan Chase was forced to pay for a series of transgressions.

Speaking at a banking industry conference last month in New York, Mr. Lynch recalled that he had been working at Morgan Stanley in London before he returned to this country in 2011 to join Bank of America. He had thought, he said, that by then â€" three years after the collapse of Lehman Brothers set off the financial crisis â€" anger at banks would have declined.

He was wrong: “It was worse.”

Bankers don’t feel very popular in Europe, either. In Germany, Jürgen Fitschen, the co-chief executive of Deutsche Bank, the largest bank in the country, is furious with Wolfgang Schäuble, the German finance minister, for saying that “banks still show great creativity in evading regulation.” That meant, he said, that it was necessary to keep pushing on new bank regulations.

“It’s irresponsible to comment in such a populist manner,” Mr. Fitschen complained.

Deutsche Bank’s latest brush with regulators sounds positively puny by JPMorgan standards. It was forced by the European Union to pay 725 million euros â€" nearly $1 billion â€" for its role in fixing and manipulating the Libor rate.

Mr. Fitschen evidently views those sins as irrelevant now, explaining that it is wrong to think “things haven’t changed since 2008 or 2009.” Actually, the Libor violations at some banks continued until at least 2011, although we don’t know whether that was true at Deutsche as well.

It was only 11 years ago that the S.E.C., outraged by accounting fraud at Xerox, levied a $10 million fine. That was a record, recalled Steve Cutler, who was the commission’s director of enforcement at the time, speaking on the same panel as Mr. Lynch at the banking conference sponsored by The Clearing House, an organization of large banks.

“We should all be concerned that there doesn’t seem to be a natural end point to how high fines could go,” said Mr. Cutler, who is now the general counsel of JPMorgan and was involved in negotiating the $13 billion settlement. “One hundred million dollars is still meaningful,” he added, in what might be labeled wishful thinking.

It may not be easy to be sympathetic to the big banks, but it is easy to understand their surprise and frustration. They have gone from being viewed as national champions â€" proof of a country’s standing in the world â€" to being seen as a potential source of national disaster. Iceland and Ireland went broke because they had to, or chose to, bail out their irresponsible banks.

That no top bankers went to jail may be proper â€" it is not a crime to make stupid mistakes, and much of what happened in the years before the financial crisis was more foolish than venal â€" but it grated to see few of them fired while those who stayed went back to collecting multimillion-dollar bonuses.

Eric H. Holder Jr., the attorney general, did not help when he said last spring that the Justice Department had to keep in mind that filing criminal charges against a large bank could “have a negative impact on the national economy, perhaps even the world economy.” He quickly backtracked, but the perception was reinforced.

It seems likely that the reaction to his first statement played a role in causing the government to demand JPMorgan pay so much money.

This week five United States regulators â€" the Federal Reserve, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Commodity Futures Trading Commission and the S.E.C. â€" jointly issued new rules on the Volcker Rule passed as part of the Dodd-Frank law in 2010.

The regulators had some choice in details, because the rule, as passed by Congress, is a contradiction in terms. It bans “proprietary trading” by banks, or trading for their own gain, but carves out exceptions for “hedging” and “market making.” Define them broadly enough, and almost nothing would remain of the rule. Define them narrowly enough and the exceptions could be meaningless.

Floyd Norris comments on finance and the economy at nytimes.com/economix.