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Is Credit Suisse Really in Jail?

Wednesday, 21 May 2014 10:53 By James Kwak, The Baseline Scenario | Op-Ed

Credit Suisse’s guilty plea to a charge of tax fraud seems to be a major step forward for a Justice Department that was satisfied both before and after the financial crisis with toothless deferred prosecution agreements and large-sounding fines that were easily absorbed as a cost of doing business. A criminal conviction certainly sounds good, and I agree that it’s better than not a criminal conviction. But what does it mean at the end of the day?

Most obviously, no one will go to jail because of the conviction (although several Credit Suisse individuals are separately being investigated or prosecuted). And for Credit Suisse, business will go on as usual, minus some tax fraud—that’s what the CEO said. A criminal conviction can be devastating to an individual. But when public officials go out of their way to ensure that a conviction has as little impact as possible on a corporation, it’s not clear how this is better than a deferred prosecution agreement.

The reason for the kid-glove treatment, of course, is the fear that Credit Suisse is too big to jail. Otherwise, why would the DOJ have been so concerned to get regulators’ assurances that they would not pul Credit Suisse’s licenses? In fact, that’s the bank’s main defense against harsher punishment, since it’s clearly guilty, guilty, guilty. (Who ever thought that Swiss banks were not abetting tax fraud? Isn’t that the whole point?)

But the thing is, they’re not too big to jail. The regulators could have revoked their banking license without bringing on the end of the world. I make that argument in my Atlantic column today, but the basic point is that a solvent bank (and everyone says they’re solvent) can be wound down without spillover effects; if it can’t, it isn’t solvent to begin with.

In the end, it seems like the Department of Justice has managed to take something that seems like it should have teeth—a criminal conviction of a corporation—and turn it into just another slap on the wrist. And so the world turns.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

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By Robert Scheer, Truthdig | Op-Ed
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Is Credit Suisse Really in Jail?

Wednesday, 21 May 2014 10:53 By James Kwak, The Baseline Scenario | Op-Ed

Credit Suisse’s guilty plea to a charge of tax fraud seems to be a major step forward for a Justice Department that was satisfied both before and after the financial crisis with toothless deferred prosecution agreements and large-sounding fines that were easily absorbed as a cost of doing business. A criminal conviction certainly sounds good, and I agree that it’s better than not a criminal conviction. But what does it mean at the end of the day?

Most obviously, no one will go to jail because of the conviction (although several Credit Suisse individuals are separately being investigated or prosecuted). And for Credit Suisse, business will go on as usual, minus some tax fraud—that’s what the CEO said. A criminal conviction can be devastating to an individual. But when public officials go out of their way to ensure that a conviction has as little impact as possible on a corporation, it’s not clear how this is better than a deferred prosecution agreement.

The reason for the kid-glove treatment, of course, is the fear that Credit Suisse is too big to jail. Otherwise, why would the DOJ have been so concerned to get regulators’ assurances that they would not pul Credit Suisse’s licenses? In fact, that’s the bank’s main defense against harsher punishment, since it’s clearly guilty, guilty, guilty. (Who ever thought that Swiss banks were not abetting tax fraud? Isn’t that the whole point?)

But the thing is, they’re not too big to jail. The regulators could have revoked their banking license without bringing on the end of the world. I make that argument in my Atlantic column today, but the basic point is that a solvent bank (and everyone says they’re solvent) can be wound down without spillover effects; if it can’t, it isn’t solvent to begin with.

In the end, it seems like the Department of Justice has managed to take something that seems like it should have teeth—a criminal conviction of a corporation—and turn it into just another slap on the wrist. And so the world turns.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Related Stories

Too Big to Jail
By Robert Scheer, Truthdig | Op-Ed
Too Big to Prosecute and It's Obama's Fiscal Cliff
By Paul Jay, The Real News Network | Video

Hide Comments

blog comments powered by Disqus