11 ms·

Big Banks Face Another Round of U.S. Charges

49 points by orin_hanner 12y ago

Someone1234 12y ago
Another round? When was the first round. The banks have been caught with they hands in the cookie jar at least half a dozen times in the last ten years and nothing at all has been done about it (either from the US or UK side).
- comatose_kid 12y ago
  That reflects popular sentiment, but it's not correct: http://blogs.wsj.com/moneybeat/2014/06/23/a-list-of-the-biggest-bank-settlements/ http://blogs.wsj.com/moneybeat/2014/06/23/a-list-of-the-bigg...
  - not_that_noob 12y ago
    Popular sentiment is correct in this case. No one went to jail for reckless behavior that they had good reason to believe was wrong. Instead, they got to keep their bonuses to buy their mansions. Oh and in one final insult, the settlements with the banks will eventually be paid for out of bank revenues - which of course is generated by the public. I'm sure the bank execs are high fiving each other over that maneuver in the backyards of their private Connecticut uber-mansions.
    - res0nat0r 12y ago
      > No one went to jail for reckless behavior that they had good reason to believe was wrong. Unfortunately most of what the banks did that caused the 2008 crisis was not against the law.
      - not_that_noob 12y ago
        Yes, see my previous comment. Bankers gave political contributions and laws were rewritten. And regulators were weakened.
      - jessaustin 12y ago
        IMHO the far larger injustice is that the federal treasury bailed them out. I'm OK with Goldman Sachs assholes living outside a prison; it's the taxpayer-funded luxury in which they live that really bugs me.
        forthefuture 12y ago
        I only know about AIG, but the government bailed them out with a 14% interest rate with money they got from China at a 3% interest rate. The bail out was probably the most profitable thing the US government has ever done.
        jessaustin 12y ago
        Why wasn't the rate 50%? Why not 70%? It's not as though anyone else was stumping the cash. (Here's a hint: despite "how it all turned out", this deal was extremely risky at the time. That's why no one else stepped up. I thought they liked "capitalism"; why didn't they see what the market would have borne?) Neither is it as though the bailout was in any sense beneficial to the economy, because now all traders have priced an even more enormous automatic "Uncle Sam's Insurance" policy into all future deals these reptiles put together. AIG had to lump it or leave it, because they didn't own the last three Treasury secretaries. GS should have been in the same spot. That they weren't, is the epitome of self-dealing. Fuck that.
- pessimizer 12y ago
  They've been pretty good at prosecuting financial institutions that ripped off other financial institutions. It's the public that they don't care about.
- spinchange 12y ago
  Came here to mention what's linked to in @comatose_kid's response. There have been some really huge settlements with many/most of the banks, but it's happened so long after the fact, it's kind of out of the limelight. Obama's DOJ really hasn't gotten a lot of political mileage out any of it at all.
  - toomuchtodo 12y ago
    If they want political mileage, settlements are useless. You'll need to dismantle organizations, similar to what happened to Arthur Anderson after Enron.
    - anigbrowl 12y ago
      That would generate political mileage with the left, but probably generate howls of 'socialism!' from the right, since the systemic nature of the financial crisis and the widespread abuses would mean multiple institutions being dismantled or split up. Financial crimes are generally slow and difficult to prosecute because of the vast quantity of documentation that has to be sifted through for evidence, so when you look at the DoJ's financial fraud page you see a bias towards smaller firms - not necessarily because they're weaker legally, but simply because it's easier to pinpoint individuals (eg some of the insider trading prosecutions). Another issue specific to the financial crisis is that in some cases large firms erred by being negligent and/or overconfident in their market strategies, resulting in huge losses and/or bailouts, but they imprudent rather than mendacious and their conduct did not cross the line into criminality. In a normal market those firms would have gone out of business and things would have been resolved through civil lawsuits, which was what happened with Lehman bros. and Bear Stearns. But in the financial crisis so many institutions were over-leveraged, and so many markets were moving in sync with each other (eg Europe and US both having huge housing bubbles) that the options were government stepping in to backstop the financial industry as a whole or the collapse of the payment system, which would have been a disaster. Getting back to politics, my read of the US landscape is that about 20% of the US electorate leans to the left and wouldn't object to hanging all the bankers. About 30% leans to the right, and they've convinced themselves that the whole financial crisis was caused by Those Bums on Welfare and the Democratic party who forced the banks to give money to TBoW. The other 50% of the electorate is more fact- than narrative-driven and while they have misgivings about who should bear responsibility for the crisis they're also more pragmatic and primarily concerned about economic stability. There's a danger in this, insofar as many of the socioeconomic conditions that led up to the crisis remain unresolved or have even worsened in some respects, which means greater political tension and potential for crises; on the other hand revolutionary change is notoriously difficult to manage which is why no developed country has so far attempted to grasp that particular nettle.
- not_that_noob 12y ago
  Bankers contribute substantial amounts to political candidates. Ex-bankers run the agencies that are supposed to oversee the banks. And they have quietly in the name of encouraging competition rewritten laws to strip away protections. In other words, it is now perfectly legal to grab cookies from the cookie jar. Is it any surprise nothing has been done? I used to be more neutral till the secret recordings of Carmen Segarra came out - http://www.propublica.org/article/so-who-is-carmen-segarra-a-fed-whistleblower-qa http://www.propublica.org/article/so-who-is-carmen-segarra-a... The fed regulators in question were recorded being eager to be deferential to the very banks they were supposed to regulate, and the very banks that had caused this crisis. And oh, a surprising number of ex-regulators ended up working for the banks they previously regulated. What a coincidence.
jobu 12y ago
"Prosecutors have explained publicly that banks would earn credit for exposing their misbehaving employees or face charges for protecting them." Hopefully they offer extra credit for exposing C-Suite level involvement. Also, where was this deal when the Fed was investigating toxic asset fraud?
- thefreeman 12y ago
  Doubtful. Also ftfa: The charges will most likely focus on traders and their bosses rather than chief executives. This seems akin to the drug enforcement policy of targeting the users. Which has been shown to be completely useless.
Hario 12y ago
I'm with Richard Stallman on this. http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/ http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-... Banks have way too much power in both our politics and economy. We have to change that.
- jxm262 12y ago
  Thanks for the interesting read. I'm not 100% certain splitting the companies up would be the best alternative, but this definitely makes me ponder a bit. It makes sense to split up, but who would make the actual call? The shareholders? I'm assuming any CEO figure of the company would prefer to keep it growing so they can maximize their collective resources rather than splitting among smaller ones. Or maybe I'm missing some other incentives?
- jessaustin 12y ago
  If RMS and NNT agree on something [splitting up dangerously large corporations], how can anyone disagree?
parennoob 12y ago
These bankers have indirectly stolen millions of dollars from people. Why are they not going to jail for hundreds of years? Why is there even talk of a settlement? That is only going to incentivize similar behavior.
hackuser 12y ago
It's interesting, and troubling, that so many still trust these institutions: * Banks that have been caught repeatedly both intentionally defrauding people and acting with extreme incompetence (and who knows who often they haven't been caught). Yet most customers, from individuals and to large corporations continue to trust the banks with their money and to take the banks' advice. * They trust LIBOR and similar services as accurate and fair, when they've been tampered with repeatedly. * They trust the financial markets as safe, fair places to invest, despite the problems above and others that pervert markets directly, such as high-frequency trading. * They trust the 'Free Market', a good idea in concept but in execution appears to be a rigged marketplace, where the powerful win and if they don't, they get bailed out. Do you still invest your savings in the financial markets? Do you have debts whose rates are tied to LIBOR? If Goldman Sachs offered to advise your company, would you trust them? Most people, knowing all of the above, still say yes. I think in part that's because there aren't many alternatives and in part it's due to lifetimes of of habit. These problems must be hurting trust and I imagine many people eventually will realize the disconnect at some point -- maybe in reaction to some big event -- and pull out. The point of regulation is to make markets safe, which prevents fraud and attracts more investment. It's good for everyone. It seems like many in the financial industry, and the knee-jerk anti-regulation crowd, have lost sight of that.
- nodata 12y ago
  What alternatives do you personally use?
  - DMac87 12y ago
    (Not original poster, but some suggestions) : - Use a local credit union as opposed to big national bank. Yes, there may be minor inconveniences in service, but in this day of online banking, they should be minimal. - Invest with a financial advisor you know and trust, who will pick up the phone when you call and explain things to any level of detail you desire (or who will bring in experts to do so if you won't). Barring that, invest in index funds for broad asset class exposure with low fees. - Don't believe / vote in / listen to anyone (economist, politician or otherwise) who touts "free markets" without further explanation of how that market's regulators & insiders will work.
tibbon 12y ago
These companies (bank in specific) often repeatedly do these type of things trying to get away with m/billions in profit. When caught, the penalties just aren't enough to dissuade them from it. They probably get away with it most of the time, so there is no incentive to do otherwise. I really wish we would push for real penalties (jailtime, as we have done in the past during bank scandals) or even entire shutdown of the companies when they act unethically.
- rqebmm 12y ago
  This was only true up until recently. In the last year B of A and JP Morgan settled for $17b[1] and $13b[2] respectively. Each settlement was more than their net income for the preceding year. That hurts. A lot. Furthermore, the settlements since 2008 have largely not precluded the banks from facing criminal charges[2]. The Justice department needs to get these initial settlements out of the way before they can pierce the corporate veil and pursue criminal action against individuals and these giant banks unsurprisingly have spent lots of money and lawyers dragging these investigations out for the last 6 years. I'm ever an optimist, but I think it's inevitable that some criminal charges are still coming. Those charges will likely fall on scapegoats, but still. [1]http://www.masslive.com/business-news/index.ssf/2014/08/bank_of_america_weighs_17_billion_settle.html http://www.masslive.com/business-news/index.ssf/2014/08/bank... [2]http://money.cnn.com/2013/11/19/investing/jpmorgan-mortgage-settlement/index.html http://money.cnn.com/2013/11/19/investing/jpmorgan-mortgage-...
  - uncoder0 12y ago
    A bit pedantic but, at the bottom of [2] it says Net Income for JP Morgan was $21b for 2012 and the settlement for $13bn was in 2013. Looks like BoA's amount was indeed over their previous years net income. Is one years net income really enough? How many billions are the american tax payers on the hook for due to their behavior? They're also getting free money from QE which doesn't seem that punitive. Admittedly I don't know all that much about finance or monetary policy. On your other point it would be interesting to see if a new Justice department under someone other than Holder does anything differently. Does anyone know the length on the statue of limitations of the sort of crimes they're accused of criminally?
jafaku 12y ago
Better call Bitcoin.
wahsd 12y ago
So they'll be barred from doing business as a corporate form of prison, and barred for live, i.e., all eternity, from doing business related to currency or finances, right?
whyenot 12y ago
How about going after some of the human beings who directed and profited from all this illegal activity instead of just milking banks for more money. This country is so screwed up. We send in a SWAT team when someone is growing okra in their backyard (apparently it looks like marijuana from a helicopter) yet let the rich and connected get off scot free after stealing billions of dollars.

49 points by orin_hanner 12y ago

Another round? When was the first round. The banks have been caught with they hands in the cookie jar at least half a dozen times in the last ten years and nothing at all has been done about it (either from the US or UK side).

comatose_kid 12y ago
That reflects popular sentiment, but it's not correct: http://blogs.wsj.com/moneybeat/2014/06/23/a-list-of-the-biggest-bank-settlements/ http://blogs.wsj.com/moneybeat/2014/06/23/a-list-of-the-bigg...
- not_that_noob 12y ago
  Popular sentiment is correct in this case. No one went to jail for reckless behavior that they had good reason to believe was wrong. Instead, they got to keep their bonuses to buy their mansions. Oh and in one final insult, the settlements with the banks will eventually be paid for out of bank revenues - which of course is generated by the public. I'm sure the bank execs are high fiving each other over that maneuver in the backyards of their private Connecticut uber-mansions.
  - res0nat0r 12y ago
    > No one went to jail for reckless behavior that they had good reason to believe was wrong. Unfortunately most of what the banks did that caused the 2008 crisis was not against the law.
    - not_that_noob 12y ago
      Yes, see my previous comment. Bankers gave political contributions and laws were rewritten. And regulators were weakened.
    - jessaustin 12y ago
      IMHO the far larger injustice is that the federal treasury bailed them out. I'm OK with Goldman Sachs assholes living outside a prison; it's the taxpayer-funded luxury in which they live that really bugs me.
      - forthefuture 12y ago
        I only know about AIG, but the government bailed them out with a 14% interest rate with money they got from China at a 3% interest rate. The bail out was probably the most profitable thing the US government has ever done.
        jessaustin 12y ago
        Why wasn't the rate 50%? Why not 70%? It's not as though anyone else was stumping the cash. (Here's a hint: despite "how it all turned out", this deal was extremely risky at the time. That's why no one else stepped up. I thought they liked "capitalism"; why didn't they see what the market would have borne?) Neither is it as though the bailout was in any sense beneficial to the economy, because now all traders have priced an even more enormous automatic "Uncle Sam's Insurance" policy into all future deals these reptiles put together. AIG had to lump it or leave it, because they didn't own the last three Treasury secretaries. GS should have been in the same spot. That they weren't, is the epitome of self-dealing. Fuck that.
pessimizer 12y ago
They've been pretty good at prosecuting financial institutions that ripped off other financial institutions. It's the public that they don't care about.
spinchange 12y ago
Came here to mention what's linked to in @comatose_kid's response. There have been some really huge settlements with many/most of the banks, but it's happened so long after the fact, it's kind of out of the limelight. Obama's DOJ really hasn't gotten a lot of political mileage out any of it at all.
- toomuchtodo 12y ago
  If they want political mileage, settlements are useless. You'll need to dismantle organizations, similar to what happened to Arthur Anderson after Enron.
  - anigbrowl 12y ago
    That would generate political mileage with the left, but probably generate howls of 'socialism!' from the right, since the systemic nature of the financial crisis and the widespread abuses would mean multiple institutions being dismantled or split up. Financial crimes are generally slow and difficult to prosecute because of the vast quantity of documentation that has to be sifted through for evidence, so when you look at the DoJ's financial fraud page you see a bias towards smaller firms - not necessarily because they're weaker legally, but simply because it's easier to pinpoint individuals (eg some of the insider trading prosecutions). Another issue specific to the financial crisis is that in some cases large firms erred by being negligent and/or overconfident in their market strategies, resulting in huge losses and/or bailouts, but they imprudent rather than mendacious and their conduct did not cross the line into criminality. In a normal market those firms would have gone out of business and things would have been resolved through civil lawsuits, which was what happened with Lehman bros. and Bear Stearns. But in the financial crisis so many institutions were over-leveraged, and so many markets were moving in sync with each other (eg Europe and US both having huge housing bubbles) that the options were government stepping in to backstop the financial industry as a whole or the collapse of the payment system, which would have been a disaster. Getting back to politics, my read of the US landscape is that about 20% of the US electorate leans to the left and wouldn't object to hanging all the bankers. About 30% leans to the right, and they've convinced themselves that the whole financial crisis was caused by Those Bums on Welfare and the Democratic party who forced the banks to give money to TBoW. The other 50% of the electorate is more fact- than narrative-driven and while they have misgivings about who should bear responsibility for the crisis they're also more pragmatic and primarily concerned about economic stability. There's a danger in this, insofar as many of the socioeconomic conditions that led up to the crisis remain unresolved or have even worsened in some respects, which means greater political tension and potential for crises; on the other hand revolutionary change is notoriously difficult to manage which is why no developed country has so far attempted to grasp that particular nettle.
not_that_noob 12y ago
Bankers contribute substantial amounts to political candidates. Ex-bankers run the agencies that are supposed to oversee the banks. And they have quietly in the name of encouraging competition rewritten laws to strip away protections. In other words, it is now perfectly legal to grab cookies from the cookie jar. Is it any surprise nothing has been done? I used to be more neutral till the secret recordings of Carmen Segarra came out - http://www.propublica.org/article/so-who-is-carmen-segarra-a-fed-whistleblower-qa http://www.propublica.org/article/so-who-is-carmen-segarra-a... The fed regulators in question were recorded being eager to be deferential to the very banks they were supposed to regulate, and the very banks that had caused this crisis. And oh, a surprising number of ex-regulators ended up working for the banks they previously regulated. What a coincidence.

jobu 12y ago

"Prosecutors have explained publicly that banks would earn credit for exposing their misbehaving employees or face charges for protecting them." Hopefully they offer extra credit for exposing C-Suite level involvement. Also, where was this deal when the Fed was investigating toxic asset fraud?

thefreeman 12y ago
Doubtful. Also ftfa: The charges will most likely focus on traders and their bosses rather than chief executives. This seems akin to the drug enforcement policy of targeting the users. Which has been shown to be completely useless.

Hario 12y ago

I'm with Richard Stallman on this. http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/ http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-... Banks have way too much power in both our politics and economy. We have to change that.

jxm262 12y ago
Thanks for the interesting read. I'm not 100% certain splitting the companies up would be the best alternative, but this definitely makes me ponder a bit. It makes sense to split up, but who would make the actual call? The shareholders? I'm assuming any CEO figure of the company would prefer to keep it growing so they can maximize their collective resources rather than splitting among smaller ones. Or maybe I'm missing some other incentives?
jessaustin 12y ago
If RMS and NNT agree on something [splitting up dangerously large corporations], how can anyone disagree?

parennoob 12y ago

These bankers have indirectly stolen millions of dollars from people. Why are they not going to jail for hundreds of years? Why is there even talk of a settlement? That is only going to incentivize similar behavior.

hackuser 12y ago

It's interesting, and troubling, that so many still trust these institutions: * Banks that have been caught repeatedly both intentionally defrauding people and acting with extreme incompetence (and who knows who often they haven't been caught). Yet most customers, from individuals and to large corporations continue to trust the banks with their money and to take the banks' advice. * They trust LIBOR and similar services as accurate and fair, when they've been tampered with repeatedly. * They trust the financial markets as safe, fair places to invest, despite the problems above and others that pervert markets directly, such as high-frequency trading. * They trust the 'Free Market', a good idea in concept but in execution appears to be a rigged marketplace, where the powerful win and if they don't, they get bailed out. Do you still invest your savings in the financial markets? Do you have debts whose rates are tied to LIBOR? If Goldman Sachs offered to advise your company, would you trust them? Most people, knowing all of the above, still say yes. I think in part that's because there aren't many alternatives and in part it's due to lifetimes of of habit. These problems must be hurting trust and I imagine many people eventually will realize the disconnect at some point -- maybe in reaction to some big event -- and pull out. The point of regulation is to make markets safe, which prevents fraud and attracts more investment. It's good for everyone. It seems like many in the financial industry, and the knee-jerk anti-regulation crowd, have lost sight of that.

nodata 12y ago
What alternatives do you personally use?
- DMac87 12y ago
  (Not original poster, but some suggestions) : - Use a local credit union as opposed to big national bank. Yes, there may be minor inconveniences in service, but in this day of online banking, they should be minimal. - Invest with a financial advisor you know and trust, who will pick up the phone when you call and explain things to any level of detail you desire (or who will bring in experts to do so if you won't). Barring that, invest in index funds for broad asset class exposure with low fees. - Don't believe / vote in / listen to anyone (economist, politician or otherwise) who touts "free markets" without further explanation of how that market's regulators & insiders will work.

tibbon 12y ago

These companies (bank in specific) often repeatedly do these type of things trying to get away with m/billions in profit. When caught, the penalties just aren't enough to dissuade them from it. They probably get away with it most of the time, so there is no incentive to do otherwise. I really wish we would push for real penalties (jailtime, as we have done in the past during bank scandals) or even entire shutdown of the companies when they act unethically.

rqebmm 12y ago
This was only true up until recently. In the last year B of A and JP Morgan settled for $17b[1] and $13b[2] respectively. Each settlement was more than their net income for the preceding year. That hurts. A lot. Furthermore, the settlements since 2008 have largely not precluded the banks from facing criminal charges[2]. The Justice department needs to get these initial settlements out of the way before they can pierce the corporate veil and pursue criminal action against individuals and these giant banks unsurprisingly have spent lots of money and lawyers dragging these investigations out for the last 6 years. I'm ever an optimist, but I think it's inevitable that some criminal charges are still coming. Those charges will likely fall on scapegoats, but still. [1]http://www.masslive.com/business-news/index.ssf/2014/08/bank_of_america_weighs_17_billion_settle.html http://www.masslive.com/business-news/index.ssf/2014/08/bank... [2]http://money.cnn.com/2013/11/19/investing/jpmorgan-mortgage-settlement/index.html http://money.cnn.com/2013/11/19/investing/jpmorgan-mortgage-...
- uncoder0 12y ago
  A bit pedantic but, at the bottom of [2] it says Net Income for JP Morgan was $21b for 2012 and the settlement for $13bn was in 2013. Looks like BoA's amount was indeed over their previous years net income. Is one years net income really enough? How many billions are the american tax payers on the hook for due to their behavior? They're also getting free money from QE which doesn't seem that punitive. Admittedly I don't know all that much about finance or monetary policy. On your other point it would be interesting to see if a new Justice department under someone other than Holder does anything differently. Does anyone know the length on the statue of limitations of the sort of crimes they're accused of criminally?

jafaku 12y ago

Better call Bitcoin.

wahsd 12y ago

So they'll be barred from doing business as a corporate form of prison, and barred for live, i.e., all eternity, from doing business related to currency or finances, right?

whyenot 12y ago

How about going after some of the human beings who directed and profited from all this illegal activity instead of just milking banks for more money. This country is so screwed up. We send in a SWAT team when someone is growing okra in their backyard (apparently it looks like marijuana from a helicopter) yet let the rich and connected get off scot free after stealing billions of dollars.