(1) There's so much money at stake for individual players. (2) There's so much
complexity in the laws and rules. (3) There's so much reluctance at the
top to make fundamental changes.
This spring has seen a veritable festival of revelations of illegal, stupid, and dishonest behavior by some of the largest banks in the world. There's the massive trading loss at JPMorgan, originally quoted at $2 billion, now up to $5.8 billion at latest count. There's the laundering of drug and terrorism money by HSBC. And, most spectacularly, there are the admissions of LIBOR-rigging at Barclays, and ongoing investigations at many other banks.
Note that JPMorgan, HSBC, and Barclays were all supposed to be "good" banks that made it through the crisis wearing halos compared to the supposed "bad" banks like Citigroup, Bank of America, and RBS.
This has prompted a new spate of articles asking what, if anything, can be done to bring these behemoth banks under control. Recently, Gary Becker and Richard Posner -- two of the intellectual giants behind the conservative law and economics movement and the market-first, deregulatory culture of the late 20th century -- asked if banking is "unusually corrupt." For both, the (implicit) answer is yes. Becker blames the enormous amounts of money at stake.* Posner blamed the attractions of high leverage and government guarantees, and because of the opportunity to make large amounts of money in the short term.