Prosecutors May Finally Go After Criminal Mega-Banks

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Logo of the Swiss bank Credit Suisse towering on its HQs in Zuerich, Switzerland, November 1997. (APM Photo/Michele Limina)

Logo of the Swiss bank Credit Suisse towering on its HQs in Zürich, Switzerland, November 1997. (APM Photo/Michele Limina)

The biggest banks pose a challenge for prosecutors. They are so entangled in the larger economy that there is a risk that punishing their misdeeds can create a ripple effect that damages the entire economy. In now notorious testimony before the Senate Judiciary Committee last year, Attorney General Eric Holder claimed, “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

But not holding them accountable for their misdeeds only encourages their officers to engage in more fraud, market-fixing and misrepresentation. Failure to prosecute creates a huge amount of systemic risk.

So far, to the frustration of most Americans, no criminal charges have been filed against the biggest banks since the 2008 crash. But in today’s New York Times, Ben Protess and Jessica Silver-Greenberg report that this dynamic might be changing:

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.”

Addressing those concerns, prosecutors in Washington and New York have met with regulators about how to criminally punish banks without putting them out of business and damaging the economy, interviews with lawyers and records reviewed by The New York Times show.

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.

In the talks with BNP, which has a huge investment bank in New York, prosecutors in Manhattan and Washington have outlined plans to extract a criminal guilty plea from the bank’s parent company, according to the lawyers, who were not authorized to speak publicly. If BNP is unable to negotiate a lesser punishment — the bank has enlisted the support of high-ranking French officials to pressure prosecutors — the case could counter congressional criticism that arose after the British bank HSBC escaped similar charges two years ago.

Such criminal cases hinge on the cooperation of regulators, some who warned that charging HSBC could have prompted the revocation of the bank’s charter, the corporate equivalent of the death penalty. Federal guidelines require prosecutors to weigh the broader economic consequences of charging corporations.

Read the rest of the story at The New York Times

And also see  “The Rise of Corporate Impunity,” Jesse Eisinger’s story for ProPublica and The New York Times Magazine on the only Wall Street executive who’s been prosecuted as a result of the financial crisis.

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