Tuesday, January 19, 2021

U.S. banks rack up $ 200 billion in fines and penalties over 20 years

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America’s six largest banks are on the verge of hitting the $ 200 billion mark in fines and penalties around the world since the turn of the century, according to a new tally from advocacy group Better Markets.

The Washington-based group’s newsletter, founded to hold banks to account in the aftermath of the 2008 financial crisis, covers Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo. Together, they have paid $ 195 billion since 2000, paid between government agencies and investors and consumers harmed by their conduct.

Better Markets chief executive Dennis Kelleher said the report also shows banks’ behavior is deteriorating, as it finds that their behavior since the financial crisis has triggered more major lawsuits than their behavior before it.

Banks have been hit by 85 major legal complaints for activities between 2000 and the financial crisis and 110 cases for activities related to the 2008-2012 crisis period, including mega-settlements for mis-selling mortgage bonds.

Another 204 lawsuits have been concluded for activities that took place after 2012, Better Markets found.

“These are all major legal actions. . . It’s not like this is a post-crash ‘broken windows’ theory where prosecutors fine every little violation, ”Kelleher said, adding he doubted a enhanced regulatory review and stricter post-crisis rules fully explaining the rise.

“If they were held to higher standards, they would all have been put out of business because the reoffending is really quite shocking.”

Some of the cases in 2020 showed banks were repeating past mistakes, Kelleher said, including those from October. $ 920 million fine and a deferred lawsuit agreement on JPMorgan Chase’s manipulation of the metals and treasury markets.

JPMorgan also entered into a deferred prosecution agreement in 2014 after admitting anti-money laundering breaches related to Bernard Madoff’s Ponzi scheme, and pleaded guilty in 2015 to criminal charges to manipulate the currency markets.

“It is absolutely shocking that JPMorgan has now pleaded guilty to three separate criminal charges for years of egregious criminal conduct,” said Mr. Kelleher.

In many cases, banks do not admit or deny wrongdoing alleged by prosecutors and regulators, although guilty pleas have become more common.

JPMorgan has previously said many of its regulations relate to conduct at banks it acquired at the behest of U.S. authorities.

The bank had the second-highest level of penalties in 20 years, paying just over $ 40 billion in 83 different cases – although around $ 10 billion is linked to crisis-time activities at Bear Stearns and Washington Mutual, which she bought at the time. problem in 2008.

Bank of America paid $ 91 billion in penalties for 86 court cases, the highest in the group. He said the “vast majority” of his tally was linked to “mortgage-related issues that preceded the Bank of America’s business acquisitions more than 10 years ago.”

Countrywide, a mortgage lender bought by BofA in 2008, was linked with more than $ 40 billion in fines and penalties. BofA also paid billions to settle affairs related to Merrill Lynch, the brokerage house it bought during the crisis.

Mr Kelleher also pointed to the multibillion-dollar settlements of Goldman Sachs for its role in plundering Malaysia’s 1MDB development fund as evidence of continued bank misconduct. The regulations were agreed in 2020 but concerned behavior from 2009 to 2014 according to deposits of the Ministry of Justice.

Goldman Sachs referred to its statement when issuing the 1MDB fines in October, which described “significant improvements” in the bank’s compliance and internal control processes.

The Financial Services Forum, an industry group that represents America’s eight largest banks, said its members “exercise rigorous oversight and have made substantial improvements to their collateral over the past decade.”

The six banks collectively earned approximately $ 1.3 billion in net income over the 20-year period of fines and penalties, according to data from Capital IQ.

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