Said most times in a combination of outrage and of resigned acceptance, that saying was that some banks were “too big to fail.”
That these institutions had let us down by their greed and arrogance and, often, outright fraud, was widely recognized. So too, though, was that if they went down, so would the entire economy. So the government had no choice but to bail them out with taxpayers’ cash.
A new phrase is now beginning to creep into the language. It’s “too big to jail.”
Its source is the fact that week after week news stories report that such-and-such a bank has made some humungous financial settlement in compensation for its past misdeeds.
Just a month ago, Bank of America agreed to pay $11.6 billionBank of America agreed to pay $11.6 billion (all figures U.S.) for making mortgage loans it knew its clients could never repay and for breaking the foreclosure rules so it could seize the houses of clients behind in their payments.
That same month, Standard Chartered paid out $327 million after admitting it had broken American sanction laws against Iran, Burma, Sudan and Libya.
By no means are the culprits only American institutions. Germany’s Deutsche Bank is trying to deal with charges that it hid $12 billion in paper losses to avoid a government bailout.
The Swiss bank, Wegelin, small but with 272 years of history behind it, has just shut down after admitting it helped American customers escape taxes on $1.2 billion in assets.
The truly humungous case is that of some 20 banks — American, British, German, Swiss, French — that for years have been fiddling a key international interest rate known as Libor to suit their corporate interests. The first to take the hit, Britain’s Barclays, has settled for $450 million.
It all looks encouraging. The villains are being called to account.
But only up to a point — and that as much as anything a technical point. No one has done time for any of these misdeeds. No one has even had to endure the humiliation of a court appearance.
And it gets worse. Most of these grandiose settlements are a lot smaller than they seem because the institution can write off the costs as a business expense. The best, and worst, example is not a bank but British Petroleum, which earned a $10 billion tax windfall by writing off all its cleanup costs in the Gulf of Mexico.
Once again, this time without their realizing it, taxpayers are paying both for the original misdeeds and for the penalties imposed for their occurrence.
Change is starting to happen, or may be. At present, when banks pay penalties, a key part of their settlements is that they are not required to admit to any wrongdoing.
A New York state attorney, Preet Bharara, though, now requires an admission of past guilt as part of any settlement. “We have a responsibility to speak the truth, to get at what actually happened,” he says.
Bharara matters for a reason besides his personal high-mindedness. His boss who hired him in 2000 was a federal prosecutor named Mary Jo White. She’s now President Barack Obama’s choice for the next head of the U.S Securities and Exchange Commission
Too much shouldn’t be expected. White-collar crime is always exceedingly difficult to prove, especially in the instance of large financial institutions that can afford the highest-priced lawyers and accountants.
But the wind is starting to blow from a different direction. As may strengthen it, bankers today occupy about the same spot in public opinion as used car dealers once did — Canadian bankers, it must be added, as a conspicuous exception, so far at any rate.
Original Article
Source: thestar.com
Author: Richard Gwyn
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