Holding banks accountable
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U.S. Attorney General Eric Holder would like you to think that large financial institutions are not â€śtoo big to jailâ€ť. The Justice Department has been investigating two foreign institutions, Franceâ€™s BNP Paribas and Switzerlandâ€™s Credit Suisse, for months, looking to bring criminal charges against a bank for the first time in decades. This week, it finally seems like they areÂ closing in.
Though the Justice Department is cloaking its investigation in theÂ rhetoricÂ of the financial crisis,Â Binyamin AppelbaumÂ notes that these cases, in fact, have nothing to do with it.Â BNPÂ is being investigated for doing business with blacklisted countries like Sudan and Iran, and routing some of the transactions through the U.S. Credit Suisse is accused of helping U.S. citizensÂ evade taxes.
The Credit Suisse case isnâ€™t even that new. Itâ€™s been around since at least 2009, when UBS settled with the government over similar allegations. While UBS got away with a $780 million fine, Credit Suisse is now facingÂ $2 billion in finesÂ and a guilty plea. The bankâ€™s CEO, Brady Dougan, who got aÂ 26% pay increaseÂ last year, is also beingÂ urged to quit. â€śIf Dougan had been smarter about this, Credit Suisse almost certainly could have settled this case without the bank having to plead guilty to anythingâ€ť, writesÂ Jonathan Weil.
The banks are attempting to deal with the problem in a couple of different ways: In December, Credit Suisse set up aÂ special holding company, where it dumped all accounts that might fall under investigation (which prosecutors may or may not beÂ willing to charge). If the parent company is hit with an indictment, it may not be legally allowed to operate in the U.S. anymore. BNP is taking a more direct approach:Â begging. Executives from the bank traveled to New York and WashingtonÂ last weekÂ to let prosecutors know that a â€śguilty plea could wreak havoc on BNP and the broader economy well beyond Franceâ€™s bordersâ€ť.
If criminal charges do come, â€śbanks could lose one of their best negotiating tactics: revving up fear of financial calamityâ€ť, writesÂ Joel Schectman. But itâ€™s actually unclear whether criminal charges would be fatal to a big bank, writesÂ Matt LevineÂ – and the Justice Department knows this:
The logic seems to be that prosecutors have no real idea if criminal charges would bring down a bank, so they’ll just play around for a bit and see what happens. Start with BNP Paribas. Get a criminal guilty plea. If that puts it out of business, sparks a financial panic, and puts its 190,000 employees out of work then, you know, oops! Don’t do that again.
But hey, â€śHolder wants his legacy to be that of an enforcerâ€ť, saysÂ Allie Jones, and time is running out. â€”Â Shane Ferro
On to todayâ€™s links: