One way to look at the reported $13 billion settlement between the Justice Department and JPMorgan Chase is that it’s about time. Five years ago the economy almost cratered because big banks had been finagling the mortgage security market and what happened? Taxpayers had to bail them out because they were too big to fail.
Sure, we got our money back, most of it anyway, but it was galling to see how quickly bank profits recovered even as the rest of the economy continued to stagger. It was further galling to see bankers and their minions in Congress fighting regulations intended to make sure it didn’t happen again.
So, yes. Thirteen billion dollars, $9 billion for the Treasury, $4 billion to help mortgage-holders who got hosed, sounds about right. It’s the largest fine any single bank has ever been levied. You could fund the Interior Department with it, including the national parks, Fish and Wildlife, the Geological Survey, Indian Affairs and still have a billion to play with.
That’s good, particularly for crimes that committed themselves. Nobody is going to prison. The Justice Department reserved the right to bring criminal prosecutions against six former JPMorgan traders, and the bank is obliged to help in those cases. But not if criminal cases are brought against current bank executives.
Also: This is just one bank, albeit the biggest one. Trades made by Bank of America and its Countrywide subsidiary cost Fannie Mae and Freddie Mac, then the government-backed mortgage companies, more money. Last year the Securities and Exchange Commission dropped a similar case it had been pursuing against Goldman Sachs. Wells Fargo seems to have skated, too.
Another problem: Until the terms of the settlement are formally announced, it’s not clear whether the fines will be regarded as “remedial” or “punitive.” The difference is that remedial fines can be tax deductible, meaning taxpayers will underwrite the fines levied to protect taxpayer interests.
Thirteen billion dollars is a lot of money, but consider: JPMorgan Chase booked 2012 profits of $21.3 billion. Profits are up 28 percent in the last four quarters. It has set aside $23 billion to pay legal costs. And on Monday, the first trading day after news of the settlement leaked, its stock price didn’t budge.
It sounds absurd that any corporation can get hit with a $13 billion fine and shrug it off, but that’s what seems to be happening. For $13 billion, JPMorgan Chase bought itself a little peace. Now it can continue business as usual.
The guess here is that the big banks will continue to finagle the system until such time as one of their CEOs goes to prison. The sight of a single Wall Street CEO in an orange jump suit would do more to reduce financial crime than a $13 billion fine.
The redoubtable Sen. Elizabeth Warren, D-Mass., noted Wednesday that the inspector general of the Trouble Asset Relief Program (a.k.a, the bank bailout) had “brought criminal charges against nearly 100 senior executives; obtained criminal convictions on 107 defendants, including 51 jail sentences; and suspended or banned 37 people from working in the banking industry.”
All of these charges were brought against small players. The number of Wall Street executives who have faced criminal charges for undermining the economy is precisely zero.
The CEOs sit far above the trading rooms where deals get cut. They can afford legions of the very finest criminal defense lawyers. Without a paper trail and whistle-blowers, it would be hard to make a criminal case against a big-time bankster.
And then there’s the worry expressed by Attorney General Eric Holder at a Senate hearing last spring: “(I)f you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”
Too big to fail, too big to jail, too big an ownership stake in Congress to face effective oversight. Here’s your $13 billion, boys. Now go away and don’t bother me.
Copyright St. Louis Post-Dispatch. Reprinted with permission.