Tags: wall street | government | crackdown | politics

UK Telegraph: Crackdown on Banks Is All About Politics

By Michael Kling   |   Friday, 22 Aug 2014 12:30 PM

While some see huge bank settlements over toxic mortgages as belated justice, others say government authorities are engaged in a politically driven crack down.

"On the one hand, we have a situation where the public believes that wrongdoers have been let off the hook; on the other, the U.S. authorities are acting increasingly arbitrarily, lashing out at some individuals and organizations in a highly politicized game," states columnist Allister Heath for The Telegraph, based in the United Kingdom.

In the largest settlement for a single company, Bank of America agreed to pay $16.65 billion for allegedly selling toxic mortgage bonds in the run-up to the 2008 financial crisis.

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The huge Bank of America punishment, as well as an earlier JPMorgan Chase settlement, aren't proportionate to misdeeds committed, Heath argues. Rather than attempts to seek justice, the settlements are efforts to extract as much money as possible from the big banks.

Although banks that misbehaved should be fined and white collar criminals should be punished, there's a huge difference between deliberately defrauding investors and losing money on loans and investments. The later is not a crime and should not prompt the authorities to get involved.

Investors, like buyers, should heed the slogan "caveat emptor," or buyer beware.

They must perform their own due diligence on what they're buying and should not expect to be protected from their own decisions.

"Many of these key principles have become blurred over the past few years, especially in America," Heath asserts.

Meanwhile, Dick Kovacevich, former Wells Fargo chairman and CEO, agrees the BoA settlement is about politics.

"It has nothing to do with justice or restitution to the innocent victims. In fact, more of the money is going to the coffers of the states and various departments than the victims," Kovacevich tells CNBC.

The government should have pursued people who worked at Countrywide and other companies who committed crimes, Kovacevich argues.

"Why are we charging the stock holders instead of going after the people who did wrong? Corporations don't engage in criminal behavior. They don't take advantage of innocent people. People do," he said.

"They are going after corporations because they can. They aren't going after the individual because it takes a long time to do so."

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