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Many of us may have a small share of the country's largest banks in our wallet: a debit card, a credit card, or for the old-schoolers, a checkbook.
And each month we get a statement showing our account activity, not the banks'…
That's because there's a staggering number that the banks will never show you, or even reference, on the statement…
Yet it directly impacts what you're paying them… this month… and for years to come.
It's the staggering amount of fines that they've paid out for a litany of misdeeds.
They're all here, in one place. You'll be shocked to see how colossal they are…
The "Gang of Six" Are the Biggest Offenders
The sheer number of abuses the six largest banks in the U.S. have committed – and I'm talking about the giant too-big-to-fail, too-big-to-jail banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley – is enormous.
But not as enormous as the sums they've paid in fines and settlements…
Or to buy back bad mortgages they put into mortgage-backed securities, and the huge legal tab they've run up in dealing with the fallout.
None of the alleged violations or charges were criminal; they were all civil allegations and charges. So, no one from any big bank has gone to jail, and only a few executives have lost their jobs.
Because it would be such a lengthy read to delineate every individual charge, every settlement, every fine, restitution payment, or other monetary toll banks have paid, and what they didn't admit to but agreed to not ever do again, I'm going to take some liberties and do some condensing.
But don't worry, there's enough here for you to come to your own conclusions.
A Sad, Shocking Scorecard
Let's start with just the numbers the six banks have paid through the end of November 2013.
That includes all third-quarter financial results for credit and mortgage-related settlement costs. These figures were compiled by SNL Financial and their breakdown is available on their website.
- Bank of America has paid out $43.9 billion;
- JPMorgan Chase has paid out $26.4 billion;
- Wells Fargo has paid out $9.5 billion;
- Citigroup had paid out $4.7 billion;
- Goldman Sachs had paid out $920 million; and
- Morgan Stanley has paid out over $329 million
Again, these figures are for credit crisis, mortgage-related settlements starting in 2010 paid up to the end of the third quarter of 2013. The tolls continued in the fourth quarter and will continue into 2014, so they are only going to grow.
In addition to settlement monies, since 2008 the six banks have also had to repurchase ("buyback") $98.9 billion worth of bad mortgages they stuffed into collapsed mortgage-backed securities they sold to investors around the globe.
And, in addition to buybacks and settlement fines, there are restitution and other compensation charges paid out to meet government regulations implemented in response to the housing crisis.
The regulations supposedly help underwater homeowners and foreclosed owners wrongly thrown out of their homes. For all this litigation, the six banks have had to pay their attorneys.
There are no credible breakdowns of what banks call "legal and litigation" expenses that breaks out the cost of their outside counsel. We can only presume those charges are well into the tens of billions of dollars.
But credit crisis and mortgage-related settlements aren't the only measure of banks' misbehavior.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
Who gets the money, a good question? And is it for not prosecuting them? After all, they pay the fine, but do not have to ever admit any wrongdoing. And then they get a bonus on top of that to boot. Ain't America's justice system great?
Dear Shah, Your knowledge is far above mine, but I've had one simple question that hasn't ever been answered to my satisfaction. With all of the BILLIONS that have been paid in fines, by banks and other companies, to my way of thinking this money is stockholders money!! The stockholders didn't have a thing to do with the 'illegal' acts of the Boards of Directors of the Cos. It would seem to me that the Board Members should be held accountable and not the shareholders!! In this way the Boards would 'get their act together' and the shareholders would benefit. Thanks for your comments.
Felix
Felix,
Thanks for being a Money Morning reader. Shah does have answers to these questions, and they are coming in the next two installments of this four-part series. The third installment will discuss where the settlement money goes and how banks account for it; and the final installment will discuss the costs to banks, shareholders the economy and society and who should pay and how payments should be accounted for.
Please stay tuned!
Thanks for providing this information. It's a public service.
And let's not lose sight of the crimes JPM is yet to be charged with….manipulation of the gold and silver, platinum and palladium markets. Overt, brazen manipulation.
Crime just keeps paying.
what about the class action suit that citigroup still has not paid. eventhough this suit has been settled there is little coverage given to their deceit.
Isn't there a law in the U.S. that allows the government to seize all of the assets of a criminal enterprise? Just sayin'.
Large corporations justify paying exorbitant salaries and perks supposedly because such executive talent is so hard to find and the competition so fierce. I guess I can understand just how good you have to be to plan and execute such extensive criminal operations and avoid prison. This obviously must be the number one criteria because after these kind of performance reviews, instead of going to prison, they get HUGE bonuses! Where can I apply?
The fines are not as onerous as they seem. They are considered expenses and deductible from taxable profits thus recouping a good portion of the fines in lower taxes.
I now know why the banks bought off the California Legislature and exempted themselves
from the finance charges that individual can charge for loans. We can charge 7.7% to 10%.
Over that amount is considered 'usurious'. Interesting that banks can charge 30% on their
credit card balances and be home free. It tells me who 'owns' both the state and federal
legislatures.
There is a movie INSIDE JOB that was never released to the general public do google search to find it well worth watching
ALL ARE COMPLICIT
The banks have too much power and the Government does not use what they do have if its against the rich, powerful, and influential. The regulators are actually afraid of them. That is probably why Bernard Madoff got away with his ponzi scheme for over 20 years until he was finally caught at it by authorities. Everybody looked the other way and covered for him, including JP Morgan Chase bankers. He made them money and profits.
Bernand Madoff simply made everyone connected with the system too much money and they are all involved, hence have their own "skeletons in the closet". The same thing continues to happen today in so many areas concerning government oversight. Could you call it systemic corruption?
Today's stock market valuations are built upon Central Bank QE and liquidity ( billions of dollars created for financial assets). Its all a kind of ponzi scheme which everyone has accepted and Bill Gross coined the term: " New Normal". Fact is, its anything but. So, we rationalize and continue on. We are all therefore, complicit.
DECLINE
All the financial games ultimately eats away at investor confidence and our global reputation, without which, we can not sustain our system or maintain our standard of living.
Shah
Another acronym for you TBTBH – Too Big To Be Honest.
Allan
these fines are laughable. How much did they make in their fraudulent processes? If you feel like justices has been served due to these fines then they got you…us all
what about the class action suit that Citigroup still has not paid. even though this suit has been settled there is little coverage given to their deceit.
Thank you so much
Are traffic fines there in the US tax deductible? Where I come from they are definitely not.
Fines at a very small fraction of the value of the damage done by the banks – and tax deductible, if that´s really so – are an insult to the victims. There needs to be full restitution, and not one that lawyers can mooch off at the victim´s expense. In my country the plaintiff often has to pay the legal expenses of the victim(s), also in civil cases. The fines – and part of that should be given to victims – need to be a much bigger percentage of the money stolen.
The reason this doesn´t happen is that the banks are in control.
They say crime doesn't pay. Looks like it pays very well for some. These fines are not nearly what these institutions have made in profit or what their brazen acts have cost the people. They have manipulated markets blatently, they have destroyed faith in some investing, they have destroyed wealth and made us look a bit less stable to the world as a whole. They should be fined at least 5X what they have already paid, with that money being used in some way to benefit all of us. Maybe in checks mailed out to many.
It's all a big $ shift. They pay a fraction of what they've made, they write-off these losses against profits, so they lose nothing really, & no one goes to jail for what should be considered CRIMES. And some people wonder why bankers, lawyers, & politicians are hated so much–I don't!