You wouldn't know it by watching the news or reading the paper, but America's banks are on the largest crime spree the country has ever known. Let's go to the highlight reel, shall we?
In July, Wells Fargo paid a $175 million settlement after the feds caught its brokers systematically pushing minority customers into mortgages with higher rates and fees, even though they posed the same credit risks as whites.
One study found that Wells Fargo charged Hispanics $2,000 more in what the Justice Department called a "racial surtax." The bank docked blacks nearly $3,000 extra for their own improper pigmentation.
But despite a colossal civil-rights fraud perpetrated against 30,000 customers, the settlement amounted to just .011 percent of the San Francisco bank's annual income. It was like forcing a $30,000-a-year working stiff to pay a $240 fine.
Across the country, in Minneapolis, U.S. Bank also swindled its customers, though at least it let whites in on the action. Instead of logging debit-card purchases in the order they were made, the bank rearranged them from highest amount to lowest, the better to artificially stick customers with overdraft fees.
U.S. Bank paid $55 million to settle a class-action suit in July. It was the thirteenth major bank caught running this scam.
Yet these titans of finance were pikers compared to American Express. It promised $300 to anyone who signed up for its Blue Sky card, then decided it would be way better to just stiff them. The company was also caught charging illegal late fees and discriminating against older applicants. The penalty for its sins: $112 million in fines and refunds.
These were just the opening salvos of the assault. Bank of America was caught illegally foreclosing on the homes of active-duty soldiers. Visa and MasterCard were charged with fixing the prices they charged merchants to process credit-card payments. Morgan Stanley colluded to drive up New York electricity prices. And in the most depraved case of all, Morgan Stanley was even sued for allegedly swindling Irish nuns in an investment deal.
If they'd been common robbers, the bankers surely would have faced indictments. After all, their scams have run for years, their breadth and coordination breathtaking.
But not a single boss went to jail. Some firms settled for just a fraction of what they'd stolen. Most have never admitted wrongdoing. And in the ethics-optional land known as Wall Street, many saw their stock prices rise.
America's country club set has forged its own replica of the Mafia — only bigger, broader and capable of unleashing far more damage on the U.S. economy.
"Unquestionably, that's true," says Notre Dame law professor G. Robert Blakey, whose career prosecuting organized crime runs all the way back to the Kennedy administration. "I was looking at stuff on Mulberry Street, and the real theft was on Wall Street...All of the people who ran the scams have their big houses and their airplanes, and they're laughing — they got away with it."
The crime wave is a ready-made campaign issue: Gucci villains plundering the middle class. But you haven't heard a peep out of Barack Obama or Mitt Romney. Both have records they'd prefer you didn't notice.
The situation leaves Sam Antar with a sense of longing. He's a former chief financial officer convicted of securities, mail and wire fraud.
"My biggest mistake in life was that I committed my crimes in the 1980s," he says. "If I committed them today, I wouldn't even get house arrest. I'd just hire a good lawyer and pay a fine and I'd be free."
The prom queen visits Washington
Capitol Hill's approach to organized crime — at least the yacht-club variety — was on display in June, when JP Morgan Chase chief executive officer Jamie Dimon was summoned to appear before the Senate Banking Committee.
Four years earlier, American taxpayers shoveled him a $25 billion bailout package. But Dimon had since refashioned himself as the sweetheart of Wall Street, the heroic captain who'd weathered the storm. Obama called him "one of the smartest bankers we've got."
On this day, that compliment appeared based on a very low bar. A Morgan trader known as the "London Whale" had just gambled away a stunning $6 billion by making bad bets on the credit markets. His behavior reflected the same strain of incompetence that detonated the economy in 2008.
The senators had presumably summoned Dimon to extract a pound of flesh. Instead, the exact opposite happened.
They stumbled over themselves with softball questions and blubbering supplication.
Typical of the biting line of inquiry was Tennessee Republican Bob Corker: "You're obviously renowned — rightfully so, I think — for being one of the best CEOs in the country," he told Dimon.
So much for protecting the economy.
By the time the hearing was over, Dimon may have needed a post-coital shower.
Conveniently unmentioned at the hearing — or covered in the press — was that JP Morgan was in the midst of a criminal bender that would make the Genovese crime family envious.
It began the year before, when Dimon's bank paid a $27 million settlement for systematically screwing 6,000 active-duty soldiers. JP Morgan was caught overcharging on interest rates and illegally foreclosing on the soldiers' homes. (The bank did not respond to interview requests.)
Last fall, JP Morgan was nabbed again, this time for violating international sanctions and anti-terrorism laws. The Treasury Department cited the bank for engaging in illegal and "egregious" transactions with Iran and Cuba over a five-year period. But instead of being indicted for treason, JP Morgan paid an $88 million settlement to make the problem go away.
In February, the bank was caught gouging customers on overdraft fees. Some were charged hundreds of dollars for being just a few bucks overdrawn. Yet cash — a $110 million settlement, to be exact — again made the accusations disappear.
The crime spree didn't end until August, when JP Morgan paid another $100 million to settle another class-action suit. This time it was dinged for enticing customers to transfer balances at other banks to its own credit cards. In return, they would only have to pay 2 percent of the debt each month. But the bank quietly raised that minimum to 5 percent — the better to generate late fees.
In a span of 18 months, JP Morgan was involved in three major fraud cases — while moonlighting in money laundering and treason. But not a single executive faced criminal charges. And since the bank posted $25.9 billion in revenue during its most recent quarter, the collective settlements amounted to docking it less than two days' wages.
The bankers behaved like mafiosi. The feds handed out parking tickets.
"It's just about dollars," says Mitchell Crusto, a law professor at Loyola University in New Orleans. "If no one's serving time and no one's personally liable, I gotta do that all over again."
Bank of America, the nation's largest crime family
So bad has the leniency become that the feds are allowing bankers to keep much of what they steal. Ask Morgan Stanley.
In August, it settled with the Justice Department over its role in fixing New York City's electricity rates. The bank played middleman in a deal between two energy providers, KeySpan and Astoria Generating, which then colluded to withhold electricity from the market, artificially driving up prices and costing consumers an estimated $300 million.
Morgan Stanley was paid $21 million for arranging the scheme. But the ever-generous Holder let the bank settle for $4.8 million.
It marked a stunning new low in federal prosecutions, akin to forcing a bank robber to return just $2,500 after stealing $10,000. With no jail time, of course.
Morgan Stanley offers little defense for its actions. "We will decline comment," says spokeswoman Mary Claire Delaney. But New York state senator Michael Gianaris will happily fill that silence.
"It's a good business deal for Morgan Stanley," he says. "They could break the law and get away with almost $17 million in profits for it, so why not do it again? If they get caught — and that's a big if — they still get 70 percent of the profits."
Peter Vallone Jr., a Queens councilman and former prosecutor, has never seen such tender handling of criminals. "It didn't deter a company this big, because it sort of amounts to their lunch budget," he says. "And most of all, it didn't return the money to the people it was stolen from. I was a prosecutor for six years, and I've never seen someone being fined less than they made."
Unfortunately, it's been happening for years
Take the widespread scheme of reordering debit-card purchases to push customers into overdrafts. When it began, Bush's attorneys general, John Ashcroft and Alberto Gonzales, refused to prosecute. Private lawyers stepped into the breach with class-action suits.
California attorney Barry Himmelstein was among them. He noticed how bankers had become so entitled, they began to complain that getting caught chopped into their profit margins.
"We got that argument from Wells Fargo," he says. "It's a ridiculous argument. The fact that you can't make millions of dollars by screwing your customers is not an excuse to keep screwing them."
But even in class-action cases, the banks were getting off light. Himmelstein objected to one settlement involving Bank of America, which was also involved in the overdraft scam. By his calculations, the Charlotte company had ripped off its customers to the tune of $4.5 billion.
Yet the settlement allowed Bank of America to repay just 10 percent of its ill-gotten gains. The average victim was eligible for a $27 refund — less than the cost of a single overdraft.
Four years ago, American taxpayers kept Bank of America afloat with a $45 billion bailout. It repaid them by becoming a veritable crime family. Let's return to the highlight reel:
• Last year, BofA paid a $20 million settlement for illegally foreclosing on soldiers' homes over a three-year period. (Bank spokesman Larry Grayson declined comment for this story.)
• But it wasn't until this summer that the bank achieved frequent-guest status in American courtrooms. In June, it was fined for overbilling 95,000 customers over an eight-year period. Total revenue: $32 million. Total fine: $2.8 million.
• A month later, it paid $20 million more to settle a class-action suit. This time it was caught deceiving customers — or simply enrolling them without their knowledge — in worthless credit-card protection programs.
• In August, BofA paid another $738 million in a price-fixing case with Visa and MasterCard. It was accused of conspiring to keep merchant credit-card fees artificially high.
• The bank returned to court again in September, this time paying $2.4 billion for deceiving investors over its purchase of Merrill Lynch.
In less than two years, Bank of America had chalked up six major fraud cases. But there was no talk of three strikes. No indictments for racketeering. Not one executive charged with a crime.
Triage for cowards
The time to break balls was four years ago, believes Ed Mierzwinski of the U.S. Public Interest Research Group, a nationwide federation of consumer advocates. The banking industry was on the verge of collapse. American taxpayers showed up with a $125 billion life preserver.
Yet government officials were so worried about imminent carnage, they forgot to ask a simple favor in return: You have to stop ripping us off.
"We could have brought them to heel," says Mierzwinski. "The bailout was done so fast that they didn't put in clauses for better behavior."
Bankers, quite naturally, kept doing what they'd always done. This presented one of those only-in-government ironies: While the taxpayers had plenty of money to bail them out, we found our pockets empty when it came time to throw them in prison.
Mierzwinski empathizes with the Justice Department. Banks can field armies of lawyers, who are more than happy to stall and obfuscate as long as the meter's ticking. The feds cannot, so they retreat to triage, agreeing to settlements that present a mirage of victory.
The rampage continues
In May, SunTrust was caught working the same mortgage scam as Wells Fargo. It charged more than 20,000 black and Hispanic customers higher interest rates and fees than white clients with the same credit profiles. Price to make the problem go away: $21 million.
A month later, ING paid a $619 million settlement for violating international sanctions and anti-terrorist laws. It spent a decade providing "state sponsors of terror and other sanctioned entities with access to the U.S. financial system," Assistant Attorney General Lisa Monaco said at the time.
In July, Capital One was caught luring customers into buying credit-card protection "they didn't understand, didn't want or in some cases couldn't even use," said the feds. The company paid $210 million in fines and refunds.
In September, Discover was nabbed running the same scam on 3.5 million customers. The company spent $214 million to make its sins vanish.
For those of you scoring at home: Four major crimes against America. Millions of victims. Zero executives jailed.
"If there are no consequences," asks Sam Antar, "what incentive do I have to not be a criminal?"