CNN approached us about writing an op-ed on the $8.9 billion BNP Paribas settlement and you can see the article here. This is the first time we’ve written for them and they seemed happy with the outcome. It was a very constrained space, only 600 words, which is enough only to make a point or two. Unfortunately, as often happens, the headline took a position I didn’t take in the article. Oh well.
I’ve been remiss in not making an observation about the settlement. There’s been a lot of handwringing about how fair the BNP Paribas settlement was, given that it was a dollar-for-dollar punishment, while other banks got off paying far less relative to their volume of money laundering. It’s not easy to make such simple comparisons. Each case has its own fact set, and prosecutors maintain that BNP Paribas’ conduct was the worst for several reasons: continuing to engage in prohibited activities for years after being warned, obstructing the investigation, and knowledge of and involvement in the misconduct at the very top levels of the bank.
The real bone of contention should be to compare the BNP Paribas settlement with bank pacts for other types of misconduct. That point has been made by foreign critics of the deal, in their objections to how large the fine is for defying US foreign policy. But there has been perilous little in the way of complaints by domestic activists, that these deals show how much the government was in bed with the banks when the various mortgage settlements were undertaken. You can be certain that the idea of “dollar for dollar” fines or demanding that senior officers lose their jobs never occurred to any of the regulators involved.
Nevertheless, now that these precedents have been set, it ought to be harder for the officialdom to let banks off as easy as they have in the past….provided that groups that represent the public interest make noise about it and can get the media to take the issue up.
34 comments
Comments are closed.
That was a very informative and helpful article, and I think the title was a reasonable conclusion based on your observations about history and the constraints on the willingness of the government to undermine banks. It is good to see you getting a higher profile still Yves!
Missing here is the main element: this is punishment for France refusing to cancel the helicopter carrier contract with Russia. It is well documented that the US offered to eliminate or drastically reduce the fine if France agrees to cancel the contract.
All that I’ve seen in the way of “documentation” is a charge from Paul Craig Roberts with no context and no link to a source. This investigation has been going on for years (recall BNP was stymieing the investigation since 2012) and other banks (Commerzbank, Deutsche, SocGen, among others) are in the process of negotiating settlements for similar abuses. Pray tell what the German banks have to do with the Mistral? This hardly fits your thesis.
And the context matters. The French started getting completely bent out of shape months ago when it became apparent that the US was going to fine BNP Paribas more than the $1 billion or so that BNP Paribas had already reserved. Even if the helicopters were discussed, what if it came about as a result of the French demand for lower fines? There’s no reason for the US to accept that unless they get a big concession, particularly if (as I believe) one of the major motives for roughing up big banks is to give the Dems badly needed talking points prior to the Congressional mid-terms. And if they really didn’t want to back down much, they’d demand something from the French they’d be certain not to give up.
Yves the article is a good start but it’s still the kidd gloves version. Given the desperate state of affairs, often covered and commented on your site, isn’t it time for someone to speak out much more stridently and forthrightly about the theft of our future, happening under our noses? Will it be you? Given the weight, power, and control enjoyed by criminal banks we need to push equally hard in the opposite direction to have any kind of satisfactory outcome. I mean we’re losing on all fronts: war, bank crime, civil liberties, education, retirement, health care…at this point we need much stronger truthtelling than just Nero and his string instrument.
I realize Vladimir Putin is some sort of “Commie” but he made the same charge in a recent Bloomberg article. I don’t think you can say Bloomberg is a left-wing anarchist.
Here’s the link; http://www.bloomberg.com/news/2014-07-01/putin-says-u-s-blackmailed-france-over-mistral-with-bnp-fine.html
Here are a two more; http://voiceofrussia.com/uk/news/2014_07_10/US-accused-of-blackmail-over-BNP-Paribas-fine-and-French-Mistral-deal-6977/
http://online.wsj.com/articles/bnp-paribas-may-raise-cash-after-u-s-fine-1404200325
Nicely done piece! It is nice to see your exposure grow…..how will the co-option attempts appear?
The headline should have read: “Who Owns and Directs These Sleazy Banks?”
Interesting, but as you alluded to, why do shareholders pay for managements crimes? I think this question needs to be asked for all bank fines. Also, where does that $9B go? Send ppl to jail if u want to make a point. Let the banks rebuild their capital so we can have a functional system, imo. Otherwise you are just transfering money from pension plans and investors to the government, for what?
This is a huge problem with our entire enforcement regime. No one wants to prosecute crimes by members of the elite, when that’s clearly the more fitting punishment. Now if you have people in a bank broadly benefitting from misconduct, then fines that lower profits across the bank should (stress should, but that does not mean it’s a given) lower bonuses. But that hits current employees, some of whom may not have been there when the bad acts occurred. Fines of individuals and clawbacks of compensation (and for the big dogs, deferred comp and pensions, and prosecution when the facts call for it) would be more effective and better targeted.
Pleasantly surprised you agree. I was thinking about the whole bank fine issue when I reviewed how much has been levied already. It’s pretty large, $25b for mortgage fraud, HSBC $2b, now this. If the money actually does some good, like going to improperly foreclosed home owners, then I am all for it ( though I seriously question how much money will go to the ppl, admin cost will eat a big chunk) . But for bnp it seems more like someone in the administration wants to make a point to France. Ok fine by me, but it’s just a little funny that most European banks are rebuilding thier capital by issuing rights/shares only to pay it back to the govt. on a higher level the question is really how do you fine a corporation. In the case of bnp, according to French law nothing the employees did was illegal so prosecution in that vein is out. So I guess you have to fine the company. But in this age of pension fund, etf ownership of stock, and lack of senior mgmt accountability the ones who pay don’t really match up. I would have an even bigger issue with the bank fines if it impeded with loan growth as that is the whole point of QE and all the fed policies but currently most banks don’t have much excess demand for loans ( see wfc recent commentary ) so I guess it’s a good time. We really need a sovereign fund like Norway who owns like 5% of every euro stock to take a stand and make execs more accountable.
It is an outrage that shareholders and depositors are being punished for the misdeeds of individual officers and managers of ANY of these TBTF institutions. These “prosecutions” are anything but. Rather, they are another mechanism for the oligarchy to extract savings in order to finance their shameless gluttony. As Neil Barofsky so lyrically pointed out, the so-called “prosecutors” in Washington are simply winking at their cronies as they spin through the revolving door — these “fines” are nothing but (as Yves has aptly termed it) Kayfabe when the “penalties” for bad behavior are made good on the other end when bail-outs used to maintain bonuses and sinecures for insiders while shareholders and depositors are saddled with the actual “losses” in this global Heads-I-Win-Tails-You-Lose looting scheme.
Had we done “people’s QE” instead of bank QE, we would have sent a check for $934.00 to every household in the US for the last five years. Imagine the economic boom we would have had, and guess what, the banks balance sheets would be improved from where they are today.
This is theft of the highest order and scale and no one seems equipped or brave enough to call it out:
http://dailybail.com/home/the-hammer-gets-hit-by-a-tree.html
Putin Says U.S Blackmailed France Over Warship With BNP Fine – Bloomberg July 01
From the article:
“Putin has ‘no evidence’ to support his claims, which appear aimed at his domestic audience as well as public opinion in Europe, said Dmitry Oreshkin, an independent political analyst in Moscow.”
And no supporting quotes from French officials, which as readers discussed at length in previous posts, has and continues to be a cause celebre in France. You’d expect the French press to be full of leaks about the “threat” given the ferocious reaction to the fine.
“prosecutors maintain that BNP Paribas’ conduct was the worst for several reasons: continuing to engage in prohibited activities for years after being warned, obstructing the investigation, and knowledge of and involvement in the misconduct at the very top levels of the bank.”
How is this any different than Citi other than being French? How many “very stern letters” has Citi received for laundering drug and terrorist money then continued business as usual? Slaps on the wrist for Citi. A slap across the face for BNP. When will we see some real punishments? When we go after a poor bank run by people with a different skin color and religion?
Well, MtnLife, here’s how it works in Northeast Ohio. As I recounted in a comment to Yves’ Benjamin Lawsky post yesterday, a black woman named Angelique Bankston just got 14 years and has to pay full restitution of $73,000 for “conspiracy to commit bank fraud, conspiracy to commit mail fraud, money laundering, aggravated identity theft and other related charges.”
http://www.cleveland.com/court-justice/index.ssf/2014/07/south_euclid_woman_sentenced_t.html
As noted in a comment to the cleveland.com story, a local financial operator named Frank Gruttadoria got 7 years for stealing $50 million of his clients’ money. Gruttadoria is white.
If you speed in Texas, or for that matter, Kansas (speaking here from personal experience) and you have out of state plates, you get hit with a much bigger fine than a local. This is pretty much true around the word.
And “Johnny did that too” isn’t seen as acceptable from three year olds. I fail to see why we should take that excuse any more seriously when we’re talking about adults and companies.
I think you may have misinterpreted my intent. I was in no way excusing Citi or BNP, but calling for more blood. I think the applying the law equally should apply here. If a person breaks the law and has to go to jail, a corporate “person” should as well – freeze all assets (maintenance/rent provision) and halt all company activities. Yes, some people will lose their jobs but it would change the corporate atmosphere everywhere if everyone’s job depended on someone else not doing anything shady, self-policing in economic self-interest. Of course, we’d actually have to support our whistleblowers instead of demonizing them.
Oh, Kansas. Yeah, got pulled over in Abilene (with NY plates – trouble anywhere) within 3 min of pulling off the highway for food and gas. Officer said I didn’t look like I knew where I was going, which was true, and was actually friendly once he realized we weren’t drug runners or drunk, but definitely on us quick.
Agreed, I wish throwing the book at BNP Paribas would mean we’d at least be willing to throw magazines at US banks (and better yet, bank execs). Recall, for instance, that we wrote a whole slough of posts on why Jamie Dimon should be fired for Sarbanes Oxley violations due to the accounting and risk control problems exposed by the London Whale fiasco.
French and German intelligence services are committed to industrial espionage, helping out domestic banks — in total defiance of American law which explains why they (French & German) were so quick to point out European law was not violated. German & French governments must be heavily involved with hacking into SWIFT, like everyone else. There is a virulent anti-American sentiment with these folks.
How dare they spy on us, when our NSA exhibits such admirable restraint?
Give them euro punks a millimetre, and they’ll take a bloody kilometre, is whut I always say.
Yves,
okay, I can buy into what you say usually, keep a keen eye on most of what you have written about BNP, and indeed, Lawsky in relation to enforcers enforcing rules somewhat more strongly, but you have missed the elephant in the room as far as US law goes withe regards the status of corporations, thats any corporation registered in the USA. This basically being that under your federal legal system corporations are effectively “real human beings” and in reality have been accorded more rights under your federal legal code than actual living and breathing humans. Hence, and lets not forget the “Holder Memo” or the fallout from criminal charges against Arthur Anderson, by imposing large tariffs against miscreant institutions, apparently your legal system is dishing out justice – although not to an actual living and breathing entity.
I’d say this is the root of your current predicament, combined with the revolving door, which acts against actually not only bringing the perpetrators to court under the criminal code, but by issuing jail time.
Obviously matters as more complex, as I’l be writing myself in a 1800 word article later this month, but as a Brit and European it seems ludicrous that your corporations are accorded more rights, rights that are actually upheld and expanded, than those “true living entities” the Constitution was supposed to protect, namely: “We the People.”
“We the People”, as you refer to us, also used to have a motto for our country with a similar sentiment. E Pluribus Unum means Out of Many, One. That change occurred in the 1950’s and we are just further down that road.
CDR: You are correct. Many of us all across the United States are working to address this with a proposed Constitutional amendment that restricts Constitutional rights to human beings, thus outlawing ‘corporate personhood’, and reverses the “money as speech” doctrine. It has been introduced in Congress by Reps. Nolan and Pocan as House Joint Resolution 29. No other amendment has been proposed that would accomplish both of these essential goals. See http://www.movetoamend.org
Yes! I wondered earlier this week if people here had taken notice of this: http://www.thenation.com/blog/180605/senate-judiciary-committee-just-backed-amendment-overturn-citizens-united
and move to amends response: https://movetoamend.org/campaign-finance-reform-thatll-shut-em
naturally the congress critters are acting to create a distracting big battle over an insufficient amendment
as we both live in NE Ohio, i don’t know about you, but i was disappointed to see Sherrod Brown Co-Sponsoring SJR-19
Re: Sherrod Brown– Me, too. SJR 19 is total bullshit. But you know, Sherrod didn’t even support single payer health care. I could tell you a story about that.
Savedbyirony, I hope you are involved, or get involved, with one of the local Move to Amend affiliates. We did a cool action on July 4 down at Settler’s Landing and got a very positive response from the public.
If you would like to get in touch directly, respond to me here, and I will email Yves to ask if she can give us each others’ email addresses.
Good article–no surprise there.
Your mention of how the US used its financial muscle to achieve its foreign policy objectives (1956 Suez) was instructive–good perspective.
Thank you. This is important and isn’t being said in the msm. I shared the CNN link on Facebook and immediately got a few likes and positive comments from people who I wouldn’t have expected it from. This topic clearly touches a raw nerve for many people and I hope the traffic to CNN convinces it to pursue the issues you raised further and with more fervor instead of the usual Nancy Grace drivel.
The idea that the United States Government can impose it laws and even executive decisions on the rest of the world shows a level of arrogance and hubris that is breath taking. The whole world will one day turn against this evil leviathan and shun and isolate it. Be assured that if this government gets control of the rest of the world, the freedom and liberty that Americans have left will be at an end. We will be looking at Orwell’s prediction : “If you want a vision of the future, imagine a boot stamping on a human face – forever.”
Please read the article. BNP Paribas cleared all the transactions at issue in its New York branch. There was no overreach here. They engaged in conduct in the US that was verboten in the US, period. This is not hard to understand unless you have a vested interest in not understanding it.
Good article, and I enjoyed the “more links” at the bottom of the page, particularly Banks Know That Customers Hate Them
“The bankers say that this is taking a financial toll on the industry. According to Scott Tangney, executive vice president of Makovsky, those surveyed estimate that their firms lost 27% in revenue over the past two years, equaling billions of dollars, due to reputation problems.
Unsurprisingly, the bankers point their fingers at regulators. Tangney said that 55% of the executives surveyed thought regulatory actions, fines and lawsuits were hurting the industry’s reputation. ”
Bank execs are blaming their bad reputation on regulators and Bad Headlines, not their own actions.
Nothing changes, it seems.
“Unfortunately, as often happens, the headline took a position I didn’t take in the article. Oh well.” Umm, well…, you did write: “But it is bankers, not banks, that commit crimes.” so the headliner probably took that as your central thesis (certainly is an attention grabber).
But you got this lead: “Yves Smith is the creator of the influential financial and economics website Naked Capitalism…”. Three cheers for Yves! (and a Bronx cheer to Google, word of mouth is still the best advertisement).
I do think punishment should fall on the bankers responsible and the people in their reporting line. But there are times where the bad conduct is so widespread that whacking the institution can make sense. I don’t want to rule out options.