On Monday, the Justice Department announced a $7 billion settlement of an investigation of Citigroup, the third largest U.S. bank, over its sale of mortgage-backed securities. Hold the applause.
Last year, JP Morgan Chase agreed to pay $13 billion for its role in selling bad mortgage-backed securities; most of that penalty was tax-deductible. The Justice Department is seeking a $20 billion settlement with Bank of America for its role in troubled mortgage investments.
These numbers pale in comparison to the damage done by banks’ dumping of toxic mortgages on a U.S. economy that has yet to recover from the subprime-accelerated crisis. Citigroup reported $181 million in net income in the second quarter.
Attorney General Eric Holder said the bank “misrepresented the facts, including the level of risk,” “sold defective loans to countless investors, including federally financed financial institutions,” and “made false statements to investors.” Such widespread, systematic, and destructive conduct should exact a penalty more severe than five weeks of revenue. Not one senior banker who took part in the mortgage-backed securities meltdown has gone to jail.
HSBC laundered $800 million for Mexican drug cartels, helped Iran skirt U.S. sanctions, and funneled funds to a blackballed, terrorist-linked bank. Not one HSBC banker went to jail.
Despite its claims of “landmark” penalties, the Justice Department hasn’t meted out much justice at all.
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