Too big to arrest
Americans who watched their retirement savings evaporate in the 2008 financial meltdown, and then watched their tax money paid as bonuses to investment bankers, waited in vain for a "perp walk" on Wall Street. Most of the big banks involved in the fiasco not only were too big to fail; their executives were too big to arrest.
The Securities and Exchange Commission, other federal regulators and New York banking regulators have collected substantial fines from many of the institutions. But the press releases also have become very familiar, especially the phrase ". . . agreed to pay X number of dollars, but admitted no wrongdoing."
Last week U.S. and British regulators broke new ground when they leveled a total of $1.3 billion in fines against J.P. Morgan Chase for the infamous "London Whale" case, in which the bank's London-based trading office priced some derivatives in a way that masked losses that eventually came to more than $6 billion.
Fines included Office of the Comptroller of the Currency, $300 million; the U.K. Financial Conduct Authority, $221 million; and the Federal Reserve and SEC, $200 million each. The bank also agreed to pay $389 million in penalties and restitution to settle claims that it unfairly had charged customers for credit-monitoring.
The bank also was required by regulators to acknowledged that it had violated federal securities laws, a highly unusual feature of the settlement that should be common practice.
Such acknowledgements not only establish a record, but act as an incentive to enact reforms that ensure investors and customers that regulators seek not only fines, but honest business practices.