Prosecutors Suspect Repeat Offenses on Wall Street

Crossroads · Oct 30, 2014

http://dealbook.nytimes.com/2014/10/29/prosecutors-wrestling-with-wall-streets-repeat-offenders/?_php=true&_type=blogs&emc=edit_th_20141030&nl=todaysheadlines&nlid=64346135&_r=0

Prosecutors in Washington and Manhattan have reopened an investigation into Standard Chartered, the big British bank that reached a settlement in 2012 over accusations that it transferred billions of dollars for Iran and other nations blacklisted by the United States, according to the lawyers briefed on the cases. The prosecutors are questioning whether Standard Chartered, which has a large operation in New York, failed to disclose the extent of its wrongdoing to the government, imperiling the bank’s earlier settlement.

As reported earlier by The New York Times, prosecutors are also threatening to tear up deals with banks like Barclays and UBS that were accused of manipulating interest rates, pointing to evidence that the same banks also manipulated foreign currencies, a violation of the interest rate settlements. The prosecutors and banks have agreed to extend probationary periods that would have otherwise expired this year.

Typically, when banks have repeatedly run afoul of the law, they have returned to business as usual with little or no additional penalty — a stark contrast to how prosecutors mete out justice for the average criminal.

Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.

More recently, the government has grown skeptical of the argument that some banks are simply too big to charge, an argument that Sullivan & Cromwell often employs for its clients. That argument was tested in a recent case against BNP Paribas, the giant French bank accused of processing billions of dollars for Sudan and Iran.

Regulators and prosecutors blame a culture that prioritizes profit over compliance. And as banks have grown larger, and more international, illegality can stop in one unit of a bank even as it flourishes in another.

The bank, which declined to comment for this article, previously said it was “cooperating with all relevant ongoing reviews, requests for information and investigations.”

So, to input a politically charged word...I'm fairly certain these types of situations provide extensive reasons for heavier regulation on the banks in general. Far left individuals and socialists might even call this an example of why we ought to "socialize" the banks, and remove the pure profit incentive. This is in a similar vein with the HSBC issue of laundering money for drug cartels and violating U.S. sanctions.

Is there any hard defense FOR these banks? That would certainly make for an interesting debate.

Thoreau72 · Oct 30, 2014

I wish they would simply enforce the regulations already on the books.

Repeat offenses? Duh!

Crossroads · Oct 30, 2014

Henry David said:
I wish they would simply enforce the regulations already on the books.

Repeat offenses? Duh!

Ineffective regulation is the equivalent of less regulation. Same practical effect, thus requiring a change of what is on the books, or an addition to what is one the books.

Thoreau72 · Oct 31, 2014

Crossroads said:
Ineffective regulation is the equivalent of less regulation. Same practical effect, thus requiring a change of what is on the books, or an addition to what is one the books.

I understand your point, but regarding the idea that not enforcing existing regs REQUIRES a change in regulations to be somehow sophistry.

That is, if the enforcers deliberately choose to NOT enforce existing regulations, how and why does that require new regulations?

I say it does not. Such a suggestion is what bureaucrats advance, but that does not make it pass logical muster, IMO.

apdst · Oct 31, 2014

Crossroads said:
http://dealbook.nytimes.com/2014/10/29/prosecutors-wrestling-with-wall-streets-repeat-offenders/?_php=true&_type=blogs&emc=edit_th_20141030&nl=todaysheadlines&nlid=64346135&_r=0

So, to input a politically charged word...I'm fairly certain these types of situations provide extensive reasons for heavier regulation on the banks in general. Far left individuals and socialists might even call this an example of why we ought to "socialize" the banks, and remove the pure profit incentive. This is in a similar vein with the HSBC issue of laundering money for drug cartels and violating U.S. sanctions.

Is there any hard defense FOR these banks? That would certainly make for an interesting debate.

There are regulations in place, hence an investigation.

Napoleon · Oct 31, 2014

Crossroads said:
So, to input a politically charged word...I'm fairly certain these types of situations provide extensive reasons for heavier regulation on the banks in general. Far left individuals and socialists might even call this an example of why we ought to "socialize" the banks, and remove the pure profit incentive. This is in a similar vein with the HSBC issue of laundering money for drug cartels and violating U.S. sanctions.

I think the more interesting question is what you mean by "heavier regulation." The problem with existing regulation is not a lack of enforcement but a lack of bite. Fines are meaningless to financial institutions which have trillions of dollars in assets especially since they can and do just write them off on their taxes. Should we start throwing CEOs in the slammer?

Crossroads · Nov 1, 2014

Napoleon said:
I think the more interesting question is what you mean by "heavier regulation." The problem with existing regulation is not a lack of enforcement but a lack of bite. Fines are meaningless to financial institutions which have trillions of dollars in assets especially since they can and do just write them off on their taxes. Should we start throwing CEOs in the slammer?

I mean "regulation" in a very broad sense, perhaps to my discredit. Heavier punishments and a more watchful eye are needed. But I'm not expert on the subject, so I don't know exactly what the details of those efforts would look like beyond the basics of it.

Crossroads · Nov 1, 2014

apdst said:
There are regulations in place, hence an investigation.

The goal shouldn't be to deal with these crimes after the fact, the goal should be to preemptively discourage such crimes with far greater punishments thus increased risk for banks such as these.

Crossroads · Nov 1, 2014

Henry David said:
I understand your point, but regarding the idea that not enforcing existing regs REQUIRES a change in regulations to be somehow sophistry.

That is, if the enforcers deliberately choose to NOT enforce existing regulations, how and why does that require new regulations?

I say it does not. Such a suggestion is what bureaucrats advance, but that does not make it pass logical muster, IMO.

I think I probably misused the words "heavier regulation" in the first place. Heavier punishments for repeat offenders such as these would be far more apt. The regulations themselves, whatever they may be (as I'm no expert at all on the subject), seem to be working moderately well, in the fact that they ARE opening up investigations and thus it would seem they are keeping tabs on these activities to an extent.

apdst · Nov 1, 2014

Crossroads said:
The goal shouldn't be to deal with these crimes after the fact, the goal should be to preemptively discourage such crimes with far greater punishments thus increased risk for banks such as these.

You're suggesting stiffer penalties, not more regulations.

Crossroads · Nov 1, 2014

apdst said:
You're suggesting stiffer penalties, not more regulations.

I was going to correct myself on that, but actually the basic definition of the word comes fairly close anyway to what I was trying to say.

reg·u·la·tion
ˌreɡəˈlāSH(ə)n/
noun
1.
a rule or directive made and maintained by an authority.
"planning regulations"
synonyms: rule, ruling, order, directive, act, law, bylaw, statute, edict, canon, pronouncement, dictate, dictum, decree, fiat, command, precept

Thoreau72 · Nov 1, 2014

Crossroads said:
I think I probably misused the words "heavier regulation" in the first place. Heavier punishments for repeat offenders such as these would be far more apt. The regulations themselves, whatever they may be (as I'm no expert at all on the subject), seem to be working moderately well, in the fact that they ARE opening up investigations and thus it would seem they are keeping tabs on these activities to an extent.

Yes, but it seems to me--and I'm certainly no financial authority either--that the largest fault is the failure of the system to enforce existing regulations.

I'm sure there are numerous examples, but certainly the most glaring is the case of Madoff. I can't remember the guy's name, but I'm pretty sure even 60 Minutes covered the story. He was aware of the scam going on, and he wrote several letters to SEC regarding the scam and rule-breaking by Madoff's gang, yet the SEC did nothing at all. A private and well-informed individual had it fairly well figured out, but the enforcement bureaucracy failed or refused to act.

That's my big complaint, and from this layman's perspective, it is rampant.

Crossroads · Nov 1, 2014

Henry David said:
Yes, but it seems to me--and I'm certainly no financial authority either--that the largest fault is the failure of the system to enforce existing regulations.

I'm sure there are numerous examples, but certainly the most glaring is the case of Madoff. I can't remember the guy's name, but I'm pretty sure even 60 Minutes covered the story. He was aware of the scam going on, and he wrote several letters to SEC regarding the scam and rule-breaking by Madoff's gang, yet the SEC did nothing at all. A private and well-informed individual had it fairly well figured out, but the enforcement bureaucracy failed or refused to act.

That's my big complaint, and from this layman's perspective, it is rampant.

It might sound somewhat idiotic to say we need regulators for our regulators...but....

Thoreau72 · Nov 2, 2014

Crossroads said:
It might sound somewhat idiotic to say we need regulators for our regulators...but....

Or, we need solid regulations enforced by honorable and responsible men. Am I describing a utopia? I fear I am.

Is the system so rotten that good men cannot prevail?

reinoe · Nov 2, 2014

Crossroads said:
Is there any hard defense FOR these banks? That would certainly make for an interesting debate.

Punishing the banks would be bad for business.

Crossroads · Nov 2, 2014

reinoe said:
Punishing the banks would be bad for business.

Take them to task hard and bite the bullet?

Thoreau72 · Nov 3, 2014

reinoe said:
Punishing the banks would be bad for business.

Only if "business" needs to operate in a corrupt and artificial world.

In my view of capitalism, the fit and efficient survive, the weak and poorly managed fail.

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