banks and financial institutions are getting away with figurative
murder. Every day, stories are popping up in the news about securities
fraud, tax evasion, rigging bids, abusive lending, risky mortgages,
insider trading, and other assorted crimes and misdemeanors. The
authorities in charge of protecting investors and the public at large
clearly aren't enforcing the laws.
As the New York Times reported, the Securities and Exchange Commission
is repeatedly allowing the biggest firms to avoid punishment. The Times
found nearly 350 cases in the last decade in which the SEC gave
financial institutions like JPMorganChase (NYSE: JPM), Goldman Sachs (NYSE: GS), and Bank of America (NYSE: BAC)
a pass on violations via waivers. JPMorganChase settled six fraud cases
in the past 13 years but obtained at least 22 waivers. Bank of America
and its wealth management division, Merrill Lynch, settled 15 fraud
cases but received at least 39 waivers.
That kind of punishment is not a sufficient deterrent, it seems to me.
Federal judges in New York and Wisconsin recently criticized the SEC
for its habit of settling cases by allowing companies to promise not to
violate the law in the future. The Times reported that nearly half the
waivers went to repeat offenders. The same Wall Street firms that
settled previous fraud charges by agreeing not to do it again are
violating the very laws that the SEC says they had broken previously.
"No wonder recidivism is such a problem," said Sen. Charles Grassley,
an Iowa Republican and member of the watchdog committee that oversees
In the rare cases when the alleged perps go to trial, the courts let them off easy.
My favorite case of the law being merciful involves Washington
Mutual, the largest US savings and loan association until its collapse
in 2008. The FDIC sought a $900 million penalty for the misdeeds of two
WaMu executives. When the dust settled, the two executives had to pay
only $400,000. (Insurance companies covered the rest of the bill.)
In his State of the Union address, Barack Obama asked for tougher laws that make penalties for fraud count. I agree.
Traditionally, when white-collar miscreants are sent up the river,
the big house tends to be part of a chain of incarceration
establishments known collectively as Club Fed. In this gulag, the
evildoers can serve their time playing golf and canasta, watching free
cable TV, and holding seminars with other lawbreakers on where they went
wrong and others didn't.
As a TV critic, I used to suggest that convicted financiers like
Michael Milliken and Ivan Boesky pay for their crimes against society by
performing community service, such as helping public TV solve its
financial problems. Since PBS always seems to be out of money no matter
how much we give it, the titans of crooked finance might be able to come
up with more inventive, even crooked, fundraising schemes... something
other than begathons interrupting the programs all the time. However,
working for public TV might be considered cruel and unusual punishment.
My suggestion now is that executives convicted of violating our
financial laws -- people I consider corporate terrorists undermining the
capitalist system -- be sent to another government penal facility, one
that is being underutilized: Guantanamo. At Gitmo -- which is apparently
not being closed, despite Obama's campaign promise -- they would have
the chance to help society by radicalizing the other detainees (117, at
last count) by explaining the advantages of capitalism -- until you're
But even that might be too lenient.
Come to think of it, I would send the lawbreakers to New York City's
finest penal institution, Rikers Island. Heck, even a three-day weekend
at Rikers would make new men out of them.
Incarceration in a serious penal institution, I dare say, would make
the recidivism rate decline. The ripple effect would boost probity and
might even protect investors from the chicanery now rampant in the free