Justice is getting lost as the federal government shakes down banks, doing back-room deals that ensure no one goes to jail, according to
MarketWatch's Howard Gold.
In a scathing opinion piece, veteran columnist Gold said that in the latest installment of the too-big-to-fail bank saga this week, Citibank will fork over $7 billion for misleading investors about mortgage securities, but suggested anyone waiting for criminal prosecutions should not hold their breath.
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“It’s an endless loop. Threaten to bring criminal charges, haggle for months and then announce a giant settlement costing the bank’s shareholders billions,” Gold wrote.
“And yet spare the financial institution itself from criminal indictment and avoid jury trials, convictions and possible jail time for the people who allegedly committed those crimes in the first place.”
The process has been a bonanza for the Justice Department. According to the Financial Times, U.S. and foreign banks have paid over $100 billion in fines and penalties to U.S. authorities since 2007.
In the case of BNP Paribas, Gold said the bank was charged with helping clients bypass sanctions and do billions in business with the outlaw states of Iran, Cuba and Sudan.
“I’m no lawyer, but having served on a couple of juries, I’m sure even the most dim-witted jurors would understand what it means to knowingly funnel money to governments that commit war crimes and genocide,” Gold wrote. “It’s not like explaining collateralized loan obligations to high-school dropouts, one of DOJ’s biggest excuses for not prosecuting bankers after the financial crisis.”
Instead of prosecuting bankers, the government is getting a big payday for its coffers. Gold said about half of the $8.9 billion settlement from BNP will go to federal government-related entities: $508 million to the Federal Reserve; and $3.8 billion split evenly between two “forfeiture funds,” run by DOJ and the Treasury.
Another $2.2 billion from the Paribas monies will be spent according to the discretion of New York state lawmakers and the governor, who are also getting their cut of the largesse.
“If this whole feeding frenzy looks unseemly, that’s because it is. Lost in the shuffle is a central idea of our judicial system: Punishing individuals deters future crimes. The lesson banksters can draw from all this is, 'Hey, if we screw up or even break the law, we’ll walk and the shareholders will pay.' ”
In
The New York Times, business columnist Floyd Norris wrote, “The banks have paid tens of billions of dollars to put this mess behind them, and no doubt their bosses have many regrets. But I doubt they really believe they did anything illegal, or at least think they had no real choice at the time.”
The Charlotte Observer reported previously stalled mortgage settlement talks between the Justice Department and Charlotte-based Bank of America have resumed. The bank recorded $4 billion in legal charges in its latest quarterly earnings report.
The Observer said the bank has offered a settlement totaling at least $12 billion, from a combination of cash and consumer relief, but the Justice Department has been demanding $17 billion.
There was no mention of who, if anyone, might be held accountable. Meanwhile, shareholders, presumably including pension funds, 401(k) mutual fund holders and others who own Bank of America stock directly or indirectly, may feel the latest big charge in future earnings results.
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