For big banks, crime pays

Last month federal authorities fined three European banks and arrested eight traders they say tried to manipulate the market in gold, silver, and certain financial products. This allegedly included a practice called “spoofing,” or placing thousands of bids to buy or sell a stock for the sole purpose of moving the stock. The orders are then quickly cancelled.

As usual, the case against Deutsche Bank, HSBA, and UBS was settled for a total of $46.6 million in fines without any of them admitting guilt. The money comes from shareholders, not individual bankers.

While the full extent of the wrongdoing is unknown, these and others of the world’s largest banks have broken the law over and over again, settling with the government each time. Fines don’t deter big banks, which are still out of control almost nine years after the financial crash.

The shameful legacy of the 2008 financial crisis continues. If a bank is “too big to fail,” the worst thing that will befall its senior executives is a comparatively minor fine that will be paid with shareholders’ money.

The 2008 financial crisis devastated the global economy and cost American workers their jobs and homes. After the financial meltdown and subsequent Great Recession, the government did not charge any top bankers or pursue corporate prosecutions for the widespread malfeasance and mortgage fraud that fueled the bubble and led to the crisis.

Some believe bankers control the government. Others believe the banks did nothing wrong. Still others believe there was insufficient evidence to prove beyond a reasonable doubt that any specific individual committed a crime.

Then there are those who believe that prosecuting big banks will result in “collateral consequences” to financial markets and the economy. They argue that too-big-to-fail banks had to be rescued by the government to stave off total economic collapse and this should be considered in deciding whether to file charges. The latter view has prevailed, with the government settling for cash rather than seeking prison sentences. Softball tactics.

In addition to being paid for by shareholders, the settlements lack transparency. They are sealed. The government does not spell out what the company did wrong or how the amount of the fine was determined. How can the public ever know how tough the government really was?

This was not always the case. After the savings and loan scandals of the 1980s, when hundreds of banks failed due to reckless real estate loans, the Department of Justice prosecuted and convicted over a thousand bankers for their transgressions.

But if you are a small family owned bank in Chinatown that’s a different story.

Abacus Federal Saving Bank a small Chinatown-based bank wedged between two noodle shops and catering to poor immigrants in New York, New Jersey and Connecticut – along with 19 of its former employees were charged by the Manhattan District Attorney in a massive mortgage fraud scheme. It was the only bank indicted for mortgage fraud related to the 2008 financial crisis. The 240-count indictment handed down in 2012 claimed that the bankers allegedly falsified loan applications to secure hundreds of millions of dollars in loans for unqualified borrowers through the Federal National Mortgage Association, known as Fannie Mae.

At the time, Abacus was the nation’s 2,651st largest bank with about $300 million in assets. During the trial, it was learned that the bank’s default rate was 0.3 percent during the period covered by the indictment, from May 2005 to February 2010, far below the national average.

After a four-month trial in 2015 that cost the bank more than $10 million, a jury found Abacus and its senior officers not guilty of grand larceny, conspiracy, falsifying business records, mortgage fraud and other charges.

You don’t have to be Sherlock Homes to conclude big banks get away with their crimes for a pittance. No one goes to jail and no one ever gets prosecuted. The fines are just a cost of doing business.

Originally Published: Feb 17, 2018

Irresponsible behavior on immigration reform

President Trump was hoping to mark his first anniversary in office at his Mar-a-Largo estate in Florida, but then the federal government shut down for 69 hours. The high-stakes game of chicken that began Jan. 20 ended when Democrats and Republicans in the Senate reluctantly came to an agreement that will keep the federal government paying its bills until Feb. 8.

Unable to pass a federal budget for the fiscal year that began Oct. 1, Congress has repeatedly resorted to these “continuing resolutions.”

The latest stalemate ended when Senate Democrats woke up, smelled the coffee, and relented on their demand for immigration reform in return for assurances from Majority Leader Mitch McConnell that the Senate will consider immigration proposals in the coming weeks and take up the plight of Deferred Action Childhood Arrivals recipients, often referred to as “Dreamers.”

Poll after poll has shown that most Americans want the Dreamers, who were brought to the United States illegally as children, protected. But a recent CNN poll also showed that when given a choice between keeping the federal government open and passing DACA legislation, most said they don’t want the government to shut down.

Americans understand that attracting hard-working legal immigrants has been an important reason for the nation’s prosperity. They also understand that promised entitlements like Social Security won’t be around in a few decades unless we have more workers paying into them.

President Obama introduced DACA in 2012 as a stopgap measure to avoid deportations. President Trump rescinded Obama’s executive order creating the program last September, but delayed implementation until March 2018 to give Congress the opportunity to develop a replacement. As a practical matter, Dreamers are not in immediate danger of being deported because any action would trigger legal challenges.

While the media was salivating over the prospect of an extended federal shutdown, this three-day version was uneventful. Unlike the 21-day instance in 1995-1996 and the 16-day shutdown in 2013, the fight was not over raising the federal debt ceiling or health care policy. Instead, it was about Senate Democrats trying to pressure their Republican counterparts to ensure that about 800,000 immigrants, mostly from Mexico, who came to the United States as children could remain.

Before you know it, Feb. 8 will be upon us. There is no end to the suspense.

All this political posturing and blame-gaming is about one part of a much larger immigration issue and the President’s insistence on building a wall on our southern border.

Moreover, both parties dance around an unspoken yet reasonable question: Once DACA recipients are addressed, how long before pressure mounts to accommodate the Obama administration’s Deferred Action for Parents of Americans and Lawful Permanent Residents, which was designed to defer deportation for about five million parents of children born in the United States and also of children brought to the country legally?

“Deferred action” is Washington speak which in plain English means ignoring the law.

The evidence with entitlements suggests that each extension of benefits establishes a new base for future expansion. As time passes, more groups of undocumented immigrants come forth claiming they are no less deserving and political pressure is brought on their behalf to again expand protection. The process repeats itself until a program’s original intention is virtually unrecognizable.

Immigration issues have defied compromise for decades. Americans have a wide range of opinions on the subject, many of which don’t add up to a coherent point of view. These conflicted emotions have blocked comprehensive immigration legislation and skirted the issue of enforcing existing laws.

Not to be overlooked is the political imperative to be reelected, which incentivizes politicians to follow Scarlett O’Hara’s approach from “Gone with the Wind”: “After all, tomorrow is another day.” Given that we elect politicians, the lack of a well-conceived immigration policy is the price the electorate must pay for their irresponsible behavior.

Originally Published: Feb 3, 2018