Well the jury’s in. And the results are not good.
It appears we are more lenient towards white-collar financial crimes than ever, with fewer financial crimes cited and lesser fines/settlements paid.
In our present administration, fines and settlements against corporations have plummeted and prosecutions of individuals are falling to record lows.
In the last administration the Department of Justice, albeit still too lenient on the financial institutions that had committed fraud, at least consistently required that the banks acknowledge their bad acts (although it was not a legal admission of guilt). That practice has now ceased.
Overall the message is: get a free ride, defraud the public and you’ll get your hands lightly slapped and that’s it. Certainly, a future ticket to ride.
As I have said many times, “there is no accountability in banking or in government.” I told World Finance there exists an “incestuous” revolving door relationship between Wall Street banks and their regulators. And the situation still prevails and in fact is worse than ever.
A recent case in point involves two U.K.-based banks, Barclays and Royal Bank of Scotland (RBS). According to Jesse Eisinger, writing in ProPublica, the Justice Department recently overruled staff prosecutors to reduce the settlements sought against the Royal Bank of Scotland and Barclay’s Bank.
In fact, for the Royal Bank of Scotland, charges that were to have been pursued as a criminal case are now being pursued as a much less serious civil one.
Both cases involved accusations that the banks misled buyers of residential mortgage-backed securities before the 2008 financial crisis which led to investor losses totaling $73 billion.
Even though the settlements are for far less, Sarah Sutton, a DOJ spokesperson claimed the Barclays and RBS settlements held the banks accountable for serious misconduct, and that the penalties recovered from the banks were fair and proportionate compared with those previously obtained from other banks.
According to Ms. Sutton, “they were largely negotiated by career attorneys in the Department and U.S. Attorneys’ offices with the support and collaboration of Department leadership.”
What’s the story here?
Both these banks, as have many others, are playing the revolving door game and have hired former high-level DOJ officials who are presently at prestigious DC law firms.
This conflict of interest is prevalent and lends itself to biased decisions.
As far back as 2016, Senator Elizabeth Warren called out the DOJ and then-Attorney General Eric Holder for ignoring 11 Congressional Commission Criminal referrals, including my own.
Senator Warren stated, “It has been almost a decade since the subprime mortgage market began to collapse and the individuals and corporations responsible for the resulting financial crisis have still not been held responsible. It is not too late to do so; and I urge your office to act quickly to open an investigation into the process by which the DOJ handled FCIC referrals of corporate and individual misbehavior that harmed millions of Americans.”
Fast forward to 2019. Her pleas were ignored, the “behaviors” continue, and the administration does not hold wrongdoers accountable.
The fact remains, Wall Street got slapped on the wrist and no one has gone directly to jail! Extracting settlements paid by shareholders is not the same as holding the wrongdoers accountable. The Justice Department and the Securities and Exchange Commission, in spite of their promises to hold the TBTF accountable, have failed miserably. The evidence has certainly been there, as I can personally attest to.
The revolving door practice which prevails in government today is exacerbating the issues, not solving them.
There has been no accountability, and it looks as if there will be none soon. So, my question is, if we see there is little to no accountability, how many more corporations and financial institutions will take advantage of the present leniency?
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
