It’s not hyperbole or conspiracy theory. This story from Reuters is mind boggling in its acceptance of banks as criminal enterprises, by the journalist, the SEC, and the market:
The settlements on Wednesday stood out in part because the U.S. Department of Justice forced Citigroup’s main banking unit Citicorp, and the parents of JPMorgan, Barclays and Royal Bank of Scotland to plead guilty to U.S. criminal charges.
It was the first time in decades that the parent or main banking unit of a major American financial institution pleaded guilty to criminal charges.
Until recently, U.S. authorities rarely sought criminal convictions against the parents of global financial institutions, instead settling with smaller foreign subsidiaries. That made it easier for the government and the banks to control any fallout on the financial system and bank customers.
Banks involved in the plea deals have been negotiating regulatory exemptions to avoid serious business disruptions that could be triggered by the pleas.
The U.S. Securities and Exchange Commission has granted waivers to JPMorgan and the other banks that pleaded guilty, allowing them to continue their usual securities business.
With prosecutors and the banks working out ways for the institutions to keep doing business, analysts worried that convictions would become more routine and costly for banks.
“The broader problem is that this now sets the stage for the Justice Department to try to criminally prosecute banks for all sorts of transgressions,” said Jaret Seiberg, an analyst at Guggenheim Securities.
Barclays had set aside $3.2 billion to cover any forex-related settlement. Shares in the bank rose more than 3 percent to an 18-month high as investors welcomed the removal of uncertainty over the forex scandal.
UBS’s penalty was lower than expected, and helped its shares rise to their highest in six-and-a-half years.
So, the top priority here is not following the law, but making things easier for the banks to continue business as usual. This really defines moral hazard. Just like a criminal organization of any kind, the fines are simply a cost of doing business. Unlike other types of cartels or syndicates, the criminal convictions here are meaningless and punish neither the organization nor any individual.