The Amazing Variety of Bank Misconduct

June 28th, 2016 by Phil Mattera

vt_logo-full_1Since the beginning of 2010 major U.S. and foreign-based banks have paid more than $160 billion in penalties (fines and settlements) to resolve cases brought against them by the Justice Department and federal regulatory agencies. Bank of America alone accounts for $56 billion of the total and JPMorgan Chase another $28 billion. Fourteen banks have each accumulated penalty amounts in excess of $1 billion, and five of those are in excess of $10 billion.

These are among the key findings revealed by Violation Tracker 2.0, the second iteration of an online database produced by the Corporate Research Project of Good Jobs First. The database, which initially focused on environmental and safety cases, has now been expanded to include a wide variety of offenses relating to the financial sector along with cases against companies of all kinds involving price-fixing, defrauding of consumers and foreign bribery. Banks and other financial companies account for about half of the new cases but more than 90 percent of the penalties.

With the expansion Violation Tracker now covers 110,000 cases from 27 regulatory agencies and the DOJ with total penalties of some $270 billion.

Along with the new database, we are releasing a report called The $160 Billion Bank Fee that focuses on a subset of the data: mega-cases — those with penalties of $100 million or more — brought against major banks by the Justice Department and agencies such as the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency and the Securities and Exchange Commission. Private litigation is not included.

We found 144 of these mega-cases that had been brought against 26 large U.S. and foreign banks. Along with Bank of America and JPMorgan Chase, those banks with $10 billion or more in penalties include: Citigroup ($15.4 billion), Wells Fargo ($10.9 billion), and Paris-based BNP Paribas ($10.5 billion).

Many of the mega-cases address the toxic securities and mortgage abuses that gave rise to the 2008-2009 financial meltdown but there are also numerous other offenses that have received less attention. The cases and penalties break down as follows:

  • Toxic securities and mortgage abuses: $118 billion
  • Violations of rules prohibiting business with enemy countries: $15 billion
  • Manipulation of foreign exchange markets; $7 billion
  • Manipulation of interest rates: $5 billion
  • Assisting tax evasion: $2.4 billion
  • Credit card abuses: $2.2 billion
  • Failure to report suspicious behavior by Bernard Madoff: $2.2 billion
  • Inadequate money-laundering controls: $1.3 billion
  • Discriminatory practices: $939 million
  • Manipulation of energy markets: $898 million
  • Other major cases: $3.8 billion
  • TOTAL: $160 billion

Of the 144 mega-cases, 120 were brought solely as civil matters. The other 24 involve criminal charges, though in two-thirds of those cases the banks were able to avoid prosecution. The latter include 10 cases with deferred prosecution agreements and six with non-prosecution agreements. The banks that have pleaded guilty to criminal charges include: Citigroup, JPMorgan Chase, Barclays, BNP Paribas, Credit Suisse and Royal Bank of Scotland.

While these cases serve to illustrate the magnitude and amazing variety of bank misconduct, it remains to be seen whether they have succeeded in their intended purpose: to get the banks to clean up their act.

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