The Shocking Deals Behind Banksters' Fines

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Editor's Note: Yesterday Shah showed you the easiest way to make a fortune in the markets, as long as you're willing to break one of Wall Street's golden rules. Today, here's another reason Shah's so willing…

Headline news about banks settling charges for violating rules, regulations, and laws – and announcements of the fines they agree to pay – appears every day…

Rarely – if ever – do they reveal how much money is really being paid or where it's going…

They also seldom explain what kinds of settlements are reached…

Or how banks negotiate what they'll actually pay and to whom… or how they negotiate tax deductibility of fines… or how they get "credits" for fines they never pay… or how insurance covers some of it…

This is not one of those stories… this is about what really happens behind the banksters' doors.

The details are shocking…

These Massive Penalties Are Quieted to Protect "Us"

First of all, some settlements never see the light of day. They can be deemed "confidential" by regulators settling with a miscreant bank.

Why are some settlements confidential? Because bank lawyers argue their clients are exposed to "reputational risk" and details of their "alleged" wrongdoing, which they typically "neither admit nor deny," could impact the health of the bank. Of course, that could create "systemic risk," they argue, due to the damage to the public's perception of trust in their banking institutions.

The FDIC, the Federal Deposit Insurance Corporation, is one agency that thinks keeping settlements confidential will keep folks from withdrawing money from law-breaking banks. They believe it protects the agency from having to bail out remaining depositors if those banks eventually fail.

Last year, for example, the FDIC, ignoring the Federal Deposit Insurance Corp. Improvement Act of 1991 that mandates settlements be made public, fined Deutsche Bank $54 million for packaging and selling bad mortgage-backed securities to a failed bank, but no one heard about it.

According to E. Scott Reckard, who reported on the confidential settlement for the Los Angeles Times, "The deal might have made big headlines, given that the bad loans contributed to the largest payout in FDIC history, $13 billion. But the government cut a deal with the bank's lawyers to keep it quiet: a 'no press release' clause that required the FDIC never to mention the deal 'except in response to a specific inquiry.'"

Also last year, according to the Financial Times, Wells Fargo "quietly settled" with the Federal Housing Finance Agency "for allegedly misleading disclosures on mortgage securities" it sold to Fannie Mae and Freddie Mac. The FT went on to say, "unlike deals with UBS and JPMorgan, Wells' settlement, which is believed to be worth less than $1 billion, is governed by a confidentiality agreement."

The Real Reason No One Goes to Jail

Of course, whether their settlements are confidential or not, too-big-to-fail banks have only faced civil charges, for which they have to pay fines. There have been no criminal prosecutions of any banks or banksters. That's because of the doctrine: too-big-to-fail and too-big-to-jail.

None of the agencies that bring civil actions against the big banks can pursue them criminally. If a bank's actions are so egregious that they warrant a criminal investigation, the agency passes along their files to the Department of Justice.

But, the DOJ hasn't pursued any criminal action against any bank or bankster.

Why? Because as Lanny Breuer, who was chief of the Criminal Division of the DOJ from April 2009 to March 2013, explained in a 2012 speech to the New York City Bar Association, "To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects."

Lanny Breuer left the DOJ last year to return, for a reported $4 million a year, to his old white-collar criminal defense firm Covington & Burling, who represents Morgan Stanley, Bank of America, and others. Attorney General Eric Holder is also a Covington alumni.

Besides not being pursued criminally, when banks and banksters are caught breaking laws they are slapped on the wrist and gifted with Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs). These consistently handed out agreements, in the 20 years since their emergence as an alternative to indictments, are, in the words of the Harvard Law School, "a mainstay of the U.S. corporate enforcement regime, with the U.S. Department of Justice (DOJ) leading the way."

According to the Harvard Law School Forum on Corporate Governance and Financial Regulation, "These types of agreements have achieved official acceptance as a middle ground between exclusively civil enforcement (or even no enforcement action at all) and a criminal conviction and sentence. DPAs and NPAs allow companies and prosecutors to resolve high-stakes claims of corporate misconduct – often the subject of sizable media attention – through agreements to obey the law, cooperate comprehensively with the government, adopt or enhance rigorous compliance measures, and often pay a hefty monetary penalty."

You'll Be Surprised Where the Fine Money Lands

So, how does the DOJ and how do attorneys general, and the SEC and CFTC, and the FHFA and FREC and any and all of the other alphabet soup of regulators overseeing the Lords of the Banking Underworld determine what settlement fines banks have to pay?

Join the conversation. Click here to jump to comments…

About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. fallingman | February 20, 2014

    Rule of law dead. CFTC a joke. DOJ a disgrace..

  2. Paul D | February 20, 2014

    It’s time to stop lying about the name “Federal” Government. It has not been a federal government for a long time. It was defined by the Founders and the Constitution as a Federation of the States. The reality of today is that the Federal Government has grown into exactly what the founders feared most—a central government in which the states are merely political subdivisions. Knowing that, we are lying every time we say Federal. It is the Central (or National) Government, and that is what honesty requires us to call it.

    • Buster | February 20, 2014

      ….It's not a federal government, it's a corporate governing body of a corporation owned by the British Crown, who itself is owned by the Vatican under the treaty of 1213. 'US Citizens' are employees subjected to corporate rules (under the guise of 'law') of this corporation & Obama is simply the 'President' of it as any company president is of any corporation.
      The US constitution is voided by the treaty of 1213, well at least according to the psychos who we accept as our leaders, nay, our 'rulers'.

  3. Steve O | February 20, 2014

    This article " with all supporting documents" should be require reading on every financial network, and every national "NEWS" channel , during the evening hours of 6:00 to 7:00 P.M.; on the same day, and through each time zone. Maybe if a large portion of the public was made aware of this type of "hand-in-hand" thievery, there might, just maybe, be some effort by those of some power to pool their efforts to get something done. Wouldn't that be a great rally cry for the mid-term elections…..

  4. Bud Mor | February 21, 2014

    The excuse that the government doesn't want to damage companies, their employees, and innocent shareholders does have some validity.

    It does not explain, however, why the government does not require CEOs and Boards of Directors to resign as part of these agreements.

    How about some of that "Change" we were sold on?

    • fallingman | February 24, 2014

      Not really. Prosecution of the individuals involved would have the salutary effect of cleaning out the Augean stables so to speak.

      The companies just might be able to inspire some confidence once the public sees that the lawbreakers have been removed. We punish people so that they won't be able to do bad things anymore and to set an example for other would be lawbreakers. Absent the threat of having to do the perp walk, what's to stop the lawbreaking? What's to deter the lawless?

      These bankster operations are like little kids testing their parents to see how much they can get away with. The answer is anything and everything. So much so, they don't even try to be subtle anymore. Is it any wonder junior grew up to be like, well, Jamie Dimon?

      And the shareholders aren't innocent. These charges hardly comes as surprise revelations. You'd have to be deaf, dumb, blind, and still not give a damn to not know what these sociopaths have been up to. When you own the shares, you're complicit. Period.

  5. Shana | February 21, 2014

    Federal Bank Reserve is a false name. the real name behind is "The City of London"

  6. Sandy Irmscher | February 22, 2014

    "In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects." … Reality Check … the employees, industries and global markets are already victims of the criminal demeanor theses companies and banks engage in. How gullible does one have to be to not understand the consequences of buying into the sophisticated lies of sociopaths ?

  7. William Walker | February 23, 2014

    This is in marked contrast to what happened to E-gold, which was criminally prosecuted and closed down.

  8. Liam | February 23, 2014

    The DOJ is a ridiculous farce. As well as the SEC and the CFTC. The fox is guarding the hen house. There is no justice in America. Fascism is alive and well. Wall Street has married the government.

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