Too Good To Be True

Two Giant Banks, Seen as Immune, Become Targets


April 29, 2014, 8:40 pm

Federal prosecutors are nearing criminal charges against some of the world’s biggest banks, according to lawyers briefed on the matter, a development that could produce the first guilty plea from a major bank in more than two decades.

In doing so, prosecutors are confronting the popular belief that Wall Street institutions have grown so important to the economy that they cannot be charged. A lack of criminal prosecutions of banks and their leaders fueled a public outcry over the perception that Wall Street giants are “too big to jail.”

The new strategy underpins the decision to seek guilty pleas in two of the most advanced investigations: one into Credit Suisse for offering tax shelters to Americans, and the other against France’s largest bank, BNP Paribas, over doing business with countries like Sudan that the United States has blacklisted. The approach applies to American banks, though those investigations are at an earlier stage.

First, I’ll believe it when I see it.

Second, where are Bank of America, Citigroup, Goldman Sachs, JP Morgan, or Wells Fargo?  Is this just a protectionist assault of foriegn owned institutions?

Why Only One Top Banker Went to Jail for the Financial Crisis

By JESSE EISINGER, The New York Times Magazine

APRIL 30, 2014

American financial history has generally unfolded as a series of booms followed by busts followed by crackdowns. After the crash of 1929, the Pecora Hearings seized upon public outrage, and the head of the New York Stock Exchange landed in prison. After the savings-and-loan scandals of the 1980s, 1,100 people were prosecuted, including top executives at many of the largest failed banks. In the ’90s and early aughts, when the bursting of the Nasdaq bubble revealed widespread corporate accounting scandals, top executives from WorldCom, Enron, Qwest and Tyco, among others, went to prison.

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The credit crisis of 2008 dwarfed those busts, and it was only to be expected that a similar round of crackdowns would ensue. In 2009, the Obama administration appointed Lanny Breuer to lead the Justice Department’s criminal division. Breuer quickly focused on professionalizing the operation, introducing the rigor of a prestigious firm like Covington & Burling, where he had spent much of his career. He recruited elite lawyers from corporate firms and the Breu Crew, as they would later be known, were repeatedly urged by Breuer to “take it to the next level.”

But the crackdown never happened. Over the past year, I’ve interviewed Wall Street traders, bank executives, defense lawyers and dozens of current and former prosecutors to understand why the largest man-made economic catastrophe since the Depression resulted in the jailing of a single investment banker – one who happened to be several rungs from the corporate suite at a second-tier financial institution. Many assume that the federal authorities simply lacked the guts to go after powerful Wall Street bankers, but that obscures a far more complicated dynamic. During the past decade, the Justice Department suffered a series of corporate prosecutorial fiascos, which led to critical changes in how it approached white-collar crime. The department began to focus on reaching settlements rather than seeking prison sentences, which over time unintentionally deprived its ranks of the experience needed to win trials against the most formidable law firms. By the time Serageldin committed his crime, Justice Department leadership, as well as prosecutors in integral United States attorney’s offices, were de-emphasizing complicated financial cases – even neglecting clues that suggested that Lehman executives knew more than they were letting on about their bank’s liquidity problem. In the mid-’90s, white-collar prosecutions represented an average of 17.6 percent of all federal cases. In the three years ending in 2012, the share was 9.4 percent.

Why Wall Streeters Don’t Go To Jail

Linette Lopez, Business Insider


(H)ere are five things you need to know about what Eisinger found in his reporting.

  1. There’s a pendulum swing thing going on here. The white-collar guys at the DOJ were inspired by their colleagues who took down the mob. That’s why when a man who had worked under Rudy Giuliani named Michael Chertoff became the criminal chief of the DOJ in 2001, the agency was ready for war.
  2. When Chertoff went after Arthur Anderson hard for its role in disguising Enron’s fraud, there was a backlash. Corporate America, and even some prosecutors, thought Chertoff had overstepped his bounds.
  3. Corporate attorneys started figuring out ways to protect their clients. They were trying to counter the ‘Thompson Memo’, a strategy written by then-Deputy Attorney General Larry Thompson. Basically he gave corporations carrots for rolling back the attorney client privileges that protected them. Because of the backlash, however, the memo has been all but rolled back, according to Eisinger.
  4. In 2003 there was a turning point. The Fed stepped in while the DOJ was prosecuting PNC Financial Services, and asked for a meeting with Chertoff, where Chertoff told then-Fed official Herbert Biern that: “if the DOJ ‘can’t bring these cases because it may bring harm, then maybe these banks are too big.'” Sound familiar?
  5. After that, they deferred and non-prosecution agreements started pouring out of the DOJ. There were 242 from 2004-2012. There had been 26 in the previous 12 years.


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