Nobody likes the fact that corporate crime ends up with the payment of a big fine and a deferred prosecution agreement. It’s so unsatisfying, there being no perp walk, no face to hate and ridicule, no physical embodiment of corporate evil to name and shame.
That the problem might have more to do with the poor fit of criminal laws to corporate conduct doesn’t soothe the townspeople holding torches and pitchforks. They want blood, dammit, and don’t they deserve it?
In the government’s latest round of collecting donations from bank customers against their will, $5.6 billion this time which will of necessity be passed through to the townfolk as “new and improved” banking products and hidden fees to better serve you, the government proves that it’s not afraid of going after big banks.
Lately, the government’s lawyers have gotten a little braver. Attorney General Loretta Lynch announced Wednesday that four of the world’s largest banks had pleaded guilty to criminal charges that their traders had conspired to fix the massive and poorly regulated foreign exchange market. Citigroup, JPMorgan Chase, Barclays, and the Royal Bank of Scotland all admitted to being felons. Meanwhile, Switzerland’s UBS, pleaded guilty to manipulating the benchmark Libor interbank lending rate. The five banks are ponying up $5.6 billion in fines.
But that’s basically the extent of the punishment.
No blood? Where’s the blood? We must have blood! It’s kinda hard, impossible really, to lock JPMorgan Chase in a cell. It’s not an actual physical entity, but a legal construct. Fictitious entities can ooze through the bars, you see. And even if they don’t, they don’t really give a damn, because they’re fictitious entities. Not even close to satisfying.
Promisingly, Bloomberg reports that the Justice Department is still considering bringing charges against some of the individuals involved in the foreign exchange scheme. Even if the targets of its investigation turn out to just be relatively low-level traders, that would still demonstrate some determination to treat blatantly criminal activity as blatantly criminal activity; we are talking about a group of conspirators that had the gall to call itself “the cartel,” after all.
Could this be a solution, pick out a few “relatively low-level traders,” preferably the ones who aren’t particularly good producers, and toss them in the hoosegow as representatives of the giant evil bank?
This is the ridiculously pointless, yet dangerous, approach urged by Jordan Weissmann, Slate‘s senior business and economics correspondent. Give us blood, and any blood will do, because it’s not like it matters whether the warm bodies thrown under the bus to appease the bloodlust of the public matter.
Who cares whether the low-level guys did the dirty, or did what they were told to do by their seniors, or did anything? When corporate crime fails to satisfy, give us some punks in bespoke suits standing in the well. Everybody hates punks with working buttonholes in their suit sleeves.
Still, so long as banks are allowed to pay for their crimes by simply writing a check, it’s hard to think of these as anything other than ersatz convictions.
So here’s the big question. Is the Justice Department still too scared to pursue actual criminal penalties against a bank? Or, now that prosecutors have taken the step of forcing an actual plea from an American institution, will they feel empowered to seek somewhat harsher punishment the next time around? How brave are they, really?
Goading the government into prosecuting low-level traders, just to have someone to hate enough to satisfy the bloodlust, is foolish. Corporate “crime” doesn’t happen like a street mugging, with one drug-addled guy responsible for deciding to knock over an old lady for her cameo brooch so he can get his next fix. To suggest this is not merely foolish, but betrays a fundamental misunderstanding of the nature of financial crime.
When the government can identify an individual, or group, that actively engaged in crime, it’s hardly reluctant to go after them. And indeed, despite the connected deferred prosecution agreements and mega fines paid by corporations, they regularly prosecute corporate executives who are responsible for the decision to commit crimes, or knowingly effectuate those decisions.
But that doesn’t mean that there is always a bad corporate dude to be found. Corporate decision making is diffuse, as is the execution of those decisions, and people all along the spectrum, from top level executive to low-level flunky in a nice suit, have no clue that they’re engaging in a crime.
Indeed, they often have no clue why they’ve been given marching orders, or that there is anything remotely improper about them. Pushing paper from one side of a desk to another is not inherently wrong, or morally blameworthy, no matter how much you hate those guys whose bonuses are 100,000 times greater than the pay of, oh, a Slate senior business and economics correspondent.
Are the townsfolk right to be angry that there is no blood to be gotten from corporations that engage in crime? Sure. Why not? But that doesn’t mean that they find any warm body around to throw into prison to make us feel better about it. And it’s particularly galling for Slate to goad the government into sacrificing “low-level” people just so we can get the blood that would make people feel so much better about having to shoulder the $5.6 billion the banks will be shifting back to us.
Update: The New York Times has published an editorial taking the view that warm bodies need to pay:
An argument has been made that the S.E.C. was right not to revoke the banks’ capital-market privileges because doing so might disrupt the economy. That is debatable. What is not debatable is that bringing criminal charges against individuals and even sending some of them to jail would not disrupt the economy. To the contrary, holding individuals accountable is all the more important in instances of wrongdoing by banks that, for whatever reason, have been exempted from the full legal consequences of their criminal behavior.
It’s true that sending “some of them” to jail (actually, prison, but that’s a detail that often eludes the media) would not disrupt the economy. But does not doing so send the opposite message, that individuals are “exempted from the full legal consequences of their criminal behavior”? As a generic assertion, yes, but who, and for what specific criminal behavior?
Broad strokes are easy, and the vague idea that someone must pay is a palliative message. But we don’t prosecute individuals for generic corporate offenses. If you’ve got someone who you think needs prosecuting, New York Times, say so, and say why, and say what the evidence of their criminal behavior might be. Otherwise, you’re just riling up the townsfolk for nothing.
And nice to know you guys are reading SJ, and feel the need to offer a contrary view.