Senators Press Justice Dept. On Prosecutions Of ‘Too Big To Jail’ Banks

A bipartisan duo of senators sent a letter to the Department of Justice today to press Attorney General Eric Holder on the lack of prosecutions for employees and executives of the nation’s largest banks in the wake of financial crisis. The letter from Sens. Sherrod Brown (D-OH) and Chuck Grassley (R-IA) questioned Holder about “whether the ‘too big to fail’ status of certain Wall Street megabanks undermines the ability of the federal government to prosecute wrongdoing and impose appropriate penalties.”

“Wall Street megabanks aren’t just too big to fail, they’re increasingly too big to jail,” Brown said in a release. “Already, the nation’s six largest megabanks enjoy what amounts to taxpayer-funded guarantee by virtue of their size, making it harder for regional and community banks to compete. Now, these megabanks may also enjoy some impunity when they violate the law by laundering money or illegally foreclosing on homeowners. Wall Street should pay the full price of its wrongdoing, not pass the costs along to taxpayers.”

“Unfortunately, we’ve seen little willingness to charge these individuals criminally,” Grassley added. “The public deserves an explanation of how the Justice Department arrives at these decisions.”

Last month, Grassley criticized the “get out of jail free card” that has been given to the nation’s largest financial institutions, which have largely avoided serious prosecution since the financial crisis. Prosecutions for financial fraud hit a 20-year low in 2011. Many of the fines the banks have paid are tax-deductible, a problem Brown is currently seeking to remedy.

“Unfortunately, many of the settlements between large financial institutions and the federal government involve penalties that are disproportionately low, both in relation to the profits which resulted from those wrongful actions as well as in relation to the costs imposed upon consumers, investors, and the market,” Grassley and Brown wrote in the letter, adding that the perception that large banks are too big to face real prosecution “undermines the public’s confidence in our institutions and in the principal that the law is applied equally in all cases.”

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Latest Foreclosure Settlement Panned By Critics For Letting Banks ‘Sweep Past Abuses Under The Rug’

Federal regulators yesterday announced an $8.5 billion settlement with 10 of the nation’s biggest banks over various foreclosure abuses. According to the Office of the Comptroller of the Currency, “The sum includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments.”

This settlement — which comes in addition to the $25 billion foreclosure fraud settlement crafted last year — is meant to provide redress to homeowners who had to deal with “independent” foreclosure reviews that were not so independent. But Rep. Elijah Cummings (D-MD), for one, believes that the settlement gives banks a pass on their contemptible behavior:

“I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered,” said Rep. Elijah E. Cummings, D.- Md., a member of the House Committee on Oversight and Government Reform and a vocal critical of the government regulators handling of the mortgage crisis.

Other housing and fair lending advocates agree. “For many people this will be the end of the line,” said Diane Thompson, an attorney with the National Consumer Law Center. “This is a much lower number for the banks compared to what they were at risk for.” “The regulators have decided to replace the fox in the henhouse with the wolf,” added John Taylor, president of the National Community Reinvestment Coalition.

“We commend regulators for their ongoing efforts to hold financial institutions accountable for misdeeds during the foreclosure crisis, but the payments in this settlement represent a mere fraction of the total harm inflicted on borrowers and communities,” said Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress. The last foreclosure settlement was gamed by the banks, who counted aid they were providing anyway towards their settlement total.

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Banks Get Delay In New Rule, Keeping Taxpayers On The Hook For Risky Trades

Regulators have decided to delay rules that would have required Wall Street banks to isolate some of their risky derivatives trading in entities not backed by taxpayers. Banks will now have until at least 2015 to comply with the rules, Bloomberg News reports:

JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Bank of America Corp. won a delay of Dodd-Frank Act requirements that they wall off some derivatives trades from bank units backed by federal deposit insurance.

Commercial banks including the Wall Street firms may get as long as an additional two years — until July 2015 — to comply with the rules, the Office of the Comptroller of the Currency said in a notice yesterday. The provision was included in Dodd- Frank, the 2010 financial-regulation law, as a way to limit taxpayer support for risky derivatives trades…The so-called push-out provision of Dodd-Frank requires that equity, some commodity and non-cleared credit derivatives be moved — or pushed out — into separate affiliates without federal assistance.

“The procrastination of both regulators and the banks on this portion of Dodd-Frank has been pretty amazing,” said Marcus Stanley, policy director for Americans for Financial Reform. “The swaps-pushout provision is a really important part and something that absolutely should be a central part of the regulatory framework.” As economists Jane D’Arista and Gerald Epstein wrote, “the intent is to remove risky activities from the core banking functions that are essential to the economy and to ensure that those risky activities will not trigger the need for a bail out to prevent systemic collapse in the future as they did in the 2008 crisis.”

This is hardly the first rule from the Dodd-Frank financial reform law to get bogged down in delays. The Volcker Rule — also meant to rein in risky bank trading with dollars backed by the government — has been delayed, and House Republicans want to push back its implementation even further.

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Banks Paid Nearly $11 Billion In Fines In 2012

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