Are banks too big for jail?

Hardly any bankers have been prosecuted for their role in the financial crisis. Instead, prosecutors are continuing to settle with large financial institutions outside of the courtroom.

“Too big to fail,” will be remembered as the motto of the financial crisis, when a number of large Wall Street financial institutions received billions of dollars in bailouts. The cause of the crisis was not only due to a risk-taking culture, but illegal activity.
According to the U.S. Financial Crisis Inquiry Commission’s final report on the origins of the financial crisis, the committee heard several testimonies of mortgage fraud that occurred before and during the recession. In the report, the word “fraud” appears 157 times, with “mortgage fraud” appearing 81 times. Yet hardly any bankers have been prosecuted.

A BBC 25-minute radio broadcast dives into why more dishonest bankers aren't in jail. The three-part series includes interviews of a former prosecutor, a law professor, an economist and a recently-retired U.S. senator.
“It’s incredibly complicated to figure out who knew what and who did what,” Brandon Garrett, a law professor at the University of Virginia, told the BBC. He added that although someone has signed a document that approved a fraudulent deal, there may have been hundreds of employees that helped plan the transaction.
"It is hard to place the blame, but it is even harder to prove intent to deceive. However, it can be done if recordings of what people were thinking at the time are available," said Garrett.

So instead of going after individuals, U.S. regulators are going after something more achievable—settling with large financial institutions out of the courtroom.
Garrett has spent the last few years documenting the biggest corporate crime cases, which have often lead to no convictions. In his book, Too Big to Jail: How Prosecutors Compromise with Corporations, he details every major corporate prosecution carried out in the 21st century.
Although the penalties banks have received are record-breaking by historical standards, Garrett went on to say that companies are given extreme leniency. “In any one of these cases, the fines are a fraction of what they could have been, and in plenty of the cases, the companies are disgorging their profits, but that's not much of a penalty, to just give up your profits,” he said in an interview with “It seems like something of a worthwhile risk if you don't always get caught.”
In a March 2013 Senate Judiciary Committee meeting, U.S. Attorney General Eric Holder said he feared that prosecuting the large trouble financial institutions would negatively affect the economy. “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”
The statute of limitations on fraud committed before the financial crisis is running out. “It is safe to assume that no one who committed mortgage fraud will be prosecuted,” wrote Ted Kaufman, former U.S. senator, in a column for
JPMorgan, Wells Fargo, Citigroup and Bank of America Corp. are among the biggest banks to receive bailouts and settle with U.S. regulators.
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Click here to listen to the BBC's broadcast.