The Staggering Numbers Your Bank Doesn't Want You to See

Editor's note: Last time Shah revealed who regulates the TBTF banks and how those various agencies' rules and regulations are administered to try to keep the banksters in line. Today Shah is going to shed light on the banks' abuses and just how much they've paid up for them.

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.

The Housing Crisis Was Just the Start

The too-big-to-jail banks have collectively paid tens of billions more for all kinds of, let's call them what they really are: crimes.

While they may not be crimes in a regulatory sense, if anybody other than a bank had committed these "regulatory" infractions, they would have been charged criminally. That in itself is a crime.

For example, let's take a look at the story behind some of JPMorgan Chase's settlements in recent years.

Be warned - each is more shocking (and disgusting) than the last...

In June 2010, JPM paid $48.6 million to U.K. regulators to settle charges they failed to separate client monies from the bank's money (that's what failed MF Global did)...

And in April 2011, JPM paid $56 million to settle allegations it overcharged active-duty service personnel on mortgages they took out from the bank.

Then, in June 2011, JPM paid $153.6 million to the SEC to settle charges they misled investors on a CDO (collateralized debt obligation) they put together and sold. They didn't tell the investors a hedge fund client of the bank's betting against the CDO actually put soon-to-be-failing instruments into the CDO. It failed.

During July 2011, JPM paid $228 million to the SEC to settle charges it fraudulently rigged 93 municipal bond transactions in 31 states.

In August 2011, JPM settled what should have been charges of "trading with enemy" by paying $88.3 million for improperly processing bank transfers and transactions involving Cuba, Iran, and Sudan.

The next year, in February 2012, JPM settled by paying $100 million, along with Bank of America and others, when it was charged with processing checks by size rather than chronologically, in order to cause overdrafts which customers were charged for.

Sure enough, in the next month, March 2012, JPM paid $150 million to settle a case brought by a pension fund that alleged the bank put them into a structured vehicle that failed.

It didn't stop there; in April 2012, JPM settled with the CFTC for $20 million after admitting it extended credit to failing Lehman Brothers based on customer funds they knew were supposed to be held separate from Lehman's collateral.

After what looked like a summer break from immorality (but wasn't), in August 2012, JPM along with other banks ponied up $1.2 billion to settle charges it conspired (that is, colluded to fix prices) to illegally set credit and debit interchange fees.

November 2012 saw a Thanksgiving turkey of a different kind. That was when JPM paid $296.9 million to settle SEC charges the bank misstated information regarding the mortgage delinquency status of loans it used as collateral for an offering it underwrote.

And the next year, in March 2013, JPM had to repay $100 million and return $546 million it took from MF Global before it failed.

In June 2013, JPM settled charges it helped cause Jefferson County, Alabama's bankruptcy for $1.564 billion. It had to give up a $647 million termination fee it wanted to charge the bankrupt county for ending a wrong-way derivatives swap it sold them. It also gave back $842 million in bonds of a $1.22 billion stinker sewer deal it hoodwinked the county into building, which it helped finance.

The very next month, in July 2013, JPM settled with the Federal Energy Regulatory Commission by paying $410 million when the FERC found the bank manipulated electricity markets in California and the Midwest from 2010 through November 2012.

In September 2013, JPM paid $389 million to settle allegations it charged consumers for credit monitoring services they never got.

At the same time, the banksters at JPM paid $300 million along with insurer Assurant to settle charges it pushed customers into overpriced property insurance for kickbacks from Assurant that it called commissions.

Finally, in September 2013 JPM paid $920 million to the Federal Reserve, the SEC, the OCC, and U.K.'s Financial Conduct Authority for covering up the $6 billion loss the London Whale caused the bank. That's the same loss that Chairman and CEO Jamie Dimon called a "tempest in a teapot" and a hedge.

October 2013, JPM settled by paying $100 million to the CFTC for its reckless conduct and market manipulation of derivatives connected to the London Whale loss. And of course JPM just settled by paying $2.6 billion for its part in turning a blind eye to Bernie Madoff's massive Ponzi scheme.

It's not much for the massively profitable JPMorgan Chase, but these settlements add up to about $8.7 billion over a period of less than four years.

And don't think I'm picking on poor old JPMorgan; it's not alone in its criminal status. Not by any stretch.

I showed you JPMorgan to give you an idea of the scope of mischief. Of course, the other big five leave an ugly trail of settlements that can be tracked online at SNL Financial.

There are just too many to list here.

These are the biggest banks in America...

They are fiduciaries of our money, of America's capital markets, of global commerce...

And I think they are also criminal enterprises.

All this leads to natural questions, like "Where does all that settlement money end up?" and "How do banks account for the payments and restitution they make?"

Stay tuned.

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.

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