I've worked in regulatory enforcement related jobs, its BS

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I have worked for 8 years in two areas of banking that exist because of government regulations.

Most of my time has been spent on the "Dodd Frank Stress tests", otherwise known as CCAR/DFAST in the business. I have also worked in money laundering detection, and that was a Patriot Act requirement. CCAR/DFAST is a Democrat initiated legislation and money laundering was G W Bush/GOP.

The purpose of the CCAR/DFAST stress tests is to see if a bank can survive an economic downturn and not fail. In the corporate world, "failure" means negative shareholder value. At zero shareholder value, the shareholders walk away and default on the obligations. For banks, our main obligation is actually the depositors money.

So on one level, it makes complete sense! The difference between a ponzi scheme and a bank is pretty slim - if banks lend too much or the loans are too risky, you can't get your money out when you want it.

Great right! Well another regulatory agency (SEC) introduced "CECL" - these agencies don't coordinate by the way. CECL does a very similar thing. It doesn't make sense to have CECL and CCAR/DFAST. CCAR/DFAST is definitely enough, a slightly improved CECL would also be enough. Having both does not make sense.

For the money laundering stuff, I had deep issues with what we were doing. We used statistical models to flag potential money laundering and then actual human beings would review those flagged. Of those flagged, only 1% were escalated to the next level. The people looking at them never knew if what they flagged was actual money laundering.

I had deep problems with it because they were applying these models to every transaction. I think its somewhat "close to the line" to run these models on every customer. I do not believe everyone should be treated as a suspect. To me, it was like how cops now run license plates of everyone around them while driving around. Its something that makes me a little bit sick even if I kindof admit its OK.

The dumb thing about money laundering detection is money laundering itself is at an all time high, but they don't use banks because they know we have the models that detect it.

Our CCAR/DFAST regulations are outright stupid. Here is the problem with these regulations. At first, they make a lot of sense and cause changes that are actually good. For example, the regulation increased the scrutiny on how banks are using statistical models, which data they are using, and their internal controls.

But the thing with that is that its a one off. Once you do things like put your code in a central repository, you don't do it again. When I first started in this field a lot of banks were not using any standards at all and the regulations make sense.

Now we are nearly 15 years after the regulations were put into place and the same regulators are still there. Only now they have to justify their continued existence. They continually issue whats called "findings" that often make no sense. The purpose is so we can respond to them, and they can go, "ok see we did something."

Its stupid. I'd say the first few years of my career really inspired confidence in the regulations. But lately, they seem pointless. The CECL requirement is sufficient, there is no need to have multiple federal regulators regulating the same thing.

Here are our regulators as of this moment, and they can all issues "findings" that we need to address.

FRB - Federal Reserve Bank (fun fact, this one is actually owned by the industry, and I'd say they are the best regulator, dealings with them have always been non BS)

FDIC - Federal Deposit Insurance company (these ones are idiots and hire the worst people to write findings. I read them and go, did a toddler write this??)

OCC - Office of the Comptroller of the Currency - I rarely hear from them. But, when they do issue a finding its a really big deal.

SEC - Securities and exchange commission


When a finding is issued, our managers turn into giant as*holes and it generally makes people want to quit and find a career in something non regulatory related. We can too! The problem is, the pay in this field is slightly higher because they have to pay more to make people deal with this stuff.

If I ever got to advocate for it, I would totally advocate for the elimination of a lot of this. That would probably mean people like me are laid off in droves. But I'm ok with that.

Why do you think they are like that?

Also, were they always that bad, or did they get worse since 2017 (when Trump took office) and/or since 2021 (when Biden took office)?