At a November 2014 Senate Banking Committee hearing, the Federal Reserve was finally taken to task for shielding big banks from criminal prosecution as a matter of policy. November 21, 2014 marked the first time the policy was specifically admitted.
Rumors had circulated that government authorities were exceptionally lenient on big banks and their officers as a matter of policy and despite evidence of such criminal activities as: money laundering for drug cartels and suspected terrorists; manipulating interest rate levels; manipulating commodities markets; defrauding investors in mortgage-related securities; scamming homeowners into unduly expensive mortgages; manipulating municipal debt markets; and “robosigning” documents in violation of state and federal regulations in order to seize homes from borrowers whose payments were late. Indeed, every reported settlement between the Department of Justice and a major bank seems to include large sums of money but no specific statements or admissions of wrongdoing, no specific names and no criminal prosecution against anyone for anything.
The Senate Banking Committee’s special hearing was spurred by the lack of criminal prosecutions and the secret tapes of Carmen Segara, by which the former bank examiner employed by the New York Federal Reserve Bank indicated that New York Fed pressured her to give favorable treatment to some private banks, such as Goldman Sachs. The Senate Banking Committee members of Elizabeth Warren, Joe Manchin, Sherrod Brown, Jeff Merkley and Jack Reed were present but no Republican Senators attended the hearing, making matters more difficult for Dudley.
Under pointed questioning from committee members, William Dudley, President of the Federal Reserve Bank of New York, stated, “We were not willing to find those firms guilty before, because we were worried that if we found them guilty, that could somehow potentially destabilize the financial system.” Dudley claims that they are now beyond that point, whatever that means.
A breakthrough of sorts did come in May 2014 when Credit Suisse pleaded guilty to aiding thousands of Americans secrete their wealth to evade U. S. taxes; however, no individual from Credit Suisse or from the thousands of tax evaders is serving time in jail or prison.
Finally, despite the widespread leniency on alleged criminal behavior of big banks and their employees, Dudley argued against more aggressive oversight of the banking system, “Because I think our primary focus on supervision is ensuring that the bank is safe and sound, that it’s run well.”
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