As Americans see unfair treatment by the justice system across the country, Wall Street’s biggest firms continue to benefit from a double standard: when they break the law, they get sweetheart deals as Better Markets detailed in reports on JPMorgan Chase’s and Goldman Sachs’ 20 years of criminal and illegal conduct as well as the actions the Department of Justice must take if it ever gets serious about stopping the Wall Street crime spree.
The two reports reflect Better Markets’ tenacious resolve over the years to call attention to the widespread illegal conduct of the six largest U.S. banks in the country, which was documented by Better Markets in an earlier report: Wall Street’s Six Biggest Bailed-Out Banks: Their RAP Sheets & Their Ongoing Crime Spree.
DOJ announced this week yet another sweetheart deal with JPMorgan Chase.
Prior to that announcement, Better Markets released a report focusing on JPMorgan Chase’s 20 year-long RAP sheet of criminal and illegal conduct, which included 80 major legal actions that have resulted in more than $39 billion in fines and settlements. It is the definition of a recidivist and yet prosecutors and regulators continue to treat it like a first-time offender. Its latest crimes were for manipulating the Treasury market for seven years and the precious metals markets for eight years. These are the third and fourth criminal proceedings against the bank in the last several years.
Yet, consistent with its past failure to enforce the law on Wall Street, the DOJ’s settlement was nothing more than a “sweetheart deal.” Others agreed with our assessment, including the award-winning columnist for the Los Angeles Times Michael Hiltzik, who wrote:
“Better Markets is right. This is at least the third market manipulation accusation JPMorgan has faced in recent years, including a bid-rigging scheme in the California electricity market in 2010 and 2011 for which the bank paid a $410-million penalty.”
Hiltzik further wrote: “Better Markets points out that at least a portion of the penalties will be covered by insurance and a tax deduction, assuaging the pain considerably. More to the point, the bank recorded $36.4 billion in profits last year, making its settlement sum worth a mere 2.54% of its profits, or a bit more than nine days of profits.” Worse, as we pointed out, JPMorgan Chase will once again “be allowed to use shareholders’ money to pay the fine,” which is also “de facto buying get-out-of-jail-free cards for its executives.”
Such a minimal sanction not only rewards past crime, but it incentivizes future crimes; after all, if Wall Street’s biggest banks face nothing more than a slap-on-the-wrist if caught, why not continue breaking the law. If DOJ ever gets serious about crime on Wall Street, Better Markets detailed what a meaningful punishment for JPMorgan Chase would look like:
- a full and complete public disclosure of all of the material facts and identification of all the people involved;
- a guilty plea to criminal charges by the bank holding company;
- a non-tax-deductible fine of not less than $3.64 billion or 10% of JPMorgan Chase’s 2019 earnings;
- the imposition of an independent monitor who files public reports quarterly detailing the changes made by the bank to ensure such crimes never happen again;
- limitations on the bank’s collateral activities; and
- prosecution, personal monetary penalties, and industry bars brought to bear on the materially involved or responsible executives and officers.
DOJ still has the opportunity to redeem itself: it is reportedly negotiating a settlement with recidivist and unrepentant Goldman Sachs for its criminal conduct in connection with the Malaysian 1MDB crime spree.
Goldman’s widespread and years-long illegal and criminal conduct in connection with 1MDB is beyond shocking and enabled the corruption of an entire country as well as undermining its democratic process as detailed in this Better Markets’ report. Any DOJ settlement with Goldman Sachs regarding the bank’s 1MDB crimes must include consideration of its 20-year-long RAP Sheet that includes 37 major legal actions that have resulted in more than $13.7 billion in fines and settlements.
While Goldman Sachs’ involvement in raising the billions of dollars that were looted from 1MDB is particularly egregious—and fueled a global crime spree and enabled the corruption of democracy in that country—it is still only one example of the bank’s 20-year record of illegal and criminal activity. If that record is genuinely considered by DOJ and Goldman Sachs is treated like the recidivist that it is, then any settlement would include terms similar to those proposed for JPMorgan Chase above, although the fine for Goldman should be no less than $5 billion, as detailed here.
Anything less will send the message that crime pays and that Goldman is above the law by de facto rewarding past criminal activity, which will incentivize future criminal activity. Given the high profile of the 1MDB case and how carefully it is being followed throughout the industry, that will be true not just at Goldman, but across all of Wall Street and the financial industry more broadly. As a result, DOJ’s credibility and the integrity of the rule of law are at stake in this case.
If justice is in fact blind and if there is equal treatment under the law, then DOJ will impose the sanctions we have suggested on Goldman Sachs and, at long last, a Wall Street bank will have been treated the way Main Street Americans are when they break the law. That won’t alone change the repeated unfair treatment of Americans by the justice system across the country, but it will begin to end the obvious double standard for Wall Street’s biggest firms.