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When it comes to big banks' bad behavior and the fines they pay to settle "allegations" – which are actually civil charges and which would be criminal charges if applied to any other business or in any parallel universe – things aren't even close to what they seem.
Sure the headlines scream victory, at least monetary victory, for some ripped-off consumers, some hard-charging regulators, and our vaunted (NOT) Justice Department.
We think we hear the ching-ching of the Treasury Department's cash registers ringing as they collect billions of dollars from miscreant, monster banks.
We think we can hear victorious regulators popping champagne corks as they celebrate settlement money coming in to prop up their budgets so they can keep going after these lawbreakers.
We think we can hear the cling-clank of consumers – who've been set up like bowling pins to be knocked down until the change falls out of their pockets at the feet of slobbering banksters – getting some of their stolen money back.
If that is what you think you hear, you're tone deaf.
Here's what's really going on…
Big Banks: What the Settlements Really Mean for Consumers
The headlines, like the ones that screamed JPMorgan Chase & Co. (NYSE: JPM) was paying a record $13 billion to settle misdeeds that may have accidentally contributed to the credit crisis and the Great Recession that maybe forever imposed on America's middle class and perennial underclass a new set of dream shackles, are BS. And I don't mean back-stabbing.
Ripped-off consumers don't get made whole. Regulators don't keep a dime of what they extract. Only the U.S. Treasury rings its register on any regular basis… and you thought the deficit was declining on its own!
And the big banks? Not only aren't they paying what the headlines trumpet, most of what they do pay, and far more disgustingly, a lot of what they say they are going to pay in restitution to consumers, they write off on their taxes!
That's right, after they neither admit nor deny doing what they did, and settle on paying fines and other forms of remunerative compensation to prove they didn't do anything wrong, they write most of those "expenses" off.
Of course those write-offs reduce their taxable income. So the public's screwed again.
You didn't know that? If not, don't beat yourself up. Not a lot of people do.
But Congress does.
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.