How can Billion Dollar Fines be Little More Than Water off a Duck’s Back?

indexNew Orleans   I hate to admit it, but to me a billion dollars still seems like a whole lot of money.  Unfortunately, I’m afraid saying so makes me hopelessly hide bound and old school.

            Why?

            Because the government seems to be passing out billion dollar fines like candy to banks, utility companies, oil companies, automobile manufacturers, and others and it seems to have no discernible impact on their behavior whatsoever.  I’m sure you’ve noticed the same thing.  The government takes a victory lap, a couple of months or maybe a year goes by, and the same corporate culprit is doing the same perp walk to the ATM to pay out another billion dollar fine.  Billion dollar fines seem to have replaced the space on corporate balance sheets where they once wrote “goodwill,” and now it’s an item called “reserve” for a future expenditure for bad behavior.  Cheating consumers has simply become a mundane part of corporate culture.  Rapacious capitalism is no longer an insult, but a rally cry.

            How many gazillions has Bank of America now paid out for example due to the mortgage mess and their acquisition of Countrywide?  It hardly matters it seems as they get ready to pay another $800 million because they couldn’t keep themselves from selling non-existent products to their credit card holders.  One financial institution after another these days from HSBC to storied European banks are lining up to pay huge, billion plus fines for laundering money for Iran and other countries under sanctions by the international community.  JP Morgan Chase, only a few years ago was basking in arrogance with financial folks hanging on Jamie Dimon’s every word, but the number of fines it has paid for cheating and stealing from its customers makes him seem like the boss for a serial criminal mob.  Citicorp is running around in crisis having failed a “stress test,” not because they want to get a good grade on Wall Street it seems, but largely because they may be the only big bank fine payer not able to increase the dividend to their investors, and of course having somehow lost $400 million through their Mexican subsidiary they are claiming fraud, and the government is investigating, what else, but money laundering to drug cartels in that country.

            But speaking of a criminal enterprise, how about Wall Street itself?  I’m more than half-way through Michael Lewis’ new book called Flash Boys, where the real story is about the billions that some companies are making and that all of the big banks are abetting of front-running stock trades through high-frequency trading , which is of course totally illegal,.  And, yes, the FBI is now investigating, and the SEC is embarrassed, and the Attorney-General of New York State is letting subpoenas rain down like tickertape on Wall Street, but all that means is that the outcome of this latest scandal is likely to be, yes, you know, more fines!   An analysis of super-investor Warren Buffet’s portfolio over the last 5 years says he has even underperformed the Standard & Poor’s 500 stock index.  Friends, if he can’t beat the house on Wall Street in the biggest gambling casino in the world, you know on one else has a fair chance.

What’s the answer?  If it’s not fines, is it jail?  Hardly, since the big whales only offer up the small fry to do time. 

It’s time to clean house, but it looks like the walls are so rotten and the foundation is so shot, that it’s gut rehab time, but from top to bottom there doesn’t seem to be anyone willing and able to take on the job.

What a heckuva a mess!  Seems like if we have five dollars we might as well hide it in our shoe and take our chances on street crime, since no one seems able to stop Wall Street crime.

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Is it Possible that Judges are Finally Fed Up with Banks Breaking Bad?

FIGHTING-FORECLOSURE-PHOTOToronto   After years of big banks essentially flipping off their customers and borrowers fighting foreclosures in no small measure because banks were more than willing to take the money and run on the government’s bailout, but were heedless of the damage they were doing to their borrowers’ lives and communities, Gretchen Morgenston in the New York Times reported several cases of judges finally being in on the game and being as sick of it as the rest of have been for years.

I particularly loved the case she cited where a judge has ordered Wells Fargo to produce a corporate resolution signed by its CEO and board saying that they have knowledge and approve of the conduct of their lawyers.   Having dealt with the two-faces of Wells Fargo for years in instance after instance where they seem willing to do anything to keep from settling now matter how egregious the bank’s conduct is, I loved the report that the judge raised the issue in that case of the huge gap between the bank’s advertising and their predatory, corporate culture.

In another case she cited a judge who ordered Bank of  America and its services to stop harassing a borrower who had successfully gone to bankruptcy court to clear the debts on their mortgages, though the harassment of the bank’s agents continued nonstop and unabated.   The judge ordered the bank pay the borrowers $10,000 per week until it stopped.   Eventually that family will be able to buy a new house with cash, because the bank doesn’t seem to know how to stop.

Though she didn’t mention it, the fact that the arrogant JP Morgan Chase and its CEO Jamie Dimon also have to come up with billions because they thought they were a law unto themselves is also gratifying.

Maybe the feds and the judges will finally crawl out of the pockets of the bankers and give us some justice. As for the bankers, they best get the message, because they were lucky in this mess not to have to do time, but with their record of misbehavior continuing, it seems like it’s only a matter of luck and timing that more of them are not behind bars, and that’s the fire next time.

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