More and more studies, including one by the International Monetary Fund, hardly a radical bastion, suggest that a bloated financial sector is bad for an economy. It generates destructive booms and busts. Its high pay entices the most creative to use their talents on financial schemes rather than in more productive activities. Its culture of greed corrupts not just Wall Street but also our politics and economy more generally.
And these recidivist banks — and the bankers who run them — clearly remain unrepentant. The law firm Labaton Sucharow recently updated its 2012 survey of bank employees and their ethics. It noted that there was a “marked decline in ethics” in the three years since their first survey. More than one-third of those earning $500,000 or more annually reported that they had firsthand knowledge of wrongdoing in the workplace. The percentage of bankers who believed their own colleagues had engaged in illegal or unethical behavior has nearly doubled since 2012.
According to the bank employees, this isn’t an accident. Nearly one in three admits that compensation and bonus plans in their company “could incentivize employees to compromise ethics or violate the law.” The raft of charges, costly settlements and now criminal pleas apparently has had little deterrent effect. The report found that the banks weren’t responding by cracking down on crime; instead, they reported a “proliferation of secrecy policies and agreements that attempt to silence reports of wrongdoing” and discourage workers from reporting lawlessness to government authorities.
The criminal pleas by the five banks will not redress this. In a stinging dissent, Securities and Exchange Commission Commissioner Kara Stein objected to the fact that the SEC granted the guilty banks waivers from the automatic disqualifications that they should have suffered, measures that would have had a dramatic effect on business as usual. She summarized the criminal conspiracy, noting, “The conspirators communicated . . . almost daily in an exclusive online chat room that the traders referred to as ‘The Cartel’ or ‘The Mafia.’ ” They “lied to customers in order to collect undisclosed markups. . . . This criminal behavior went on for years, unchecked and undeterred.”
Yet the SEC waived the disqualifications after already having granted more than 20 waivers to the same banks for criminal activities in the past. Stein wrote, “This type of recidivism and repeated criminal misconduct should lead to revocations of prior waivers, not the granting of a whole new set of waivers. We have the tools, and with the tools the responsibility, to empower those at the top of these institutions to create meaningful cultural shifts, yet we refuse to use them.”
The big banks — and the danger they still pose to our economy — should be at the center of the 2016 political debate. Last week, Sen. Bernie Sanders, a candidate for the Democratic presidential nomination, introduced a bill titled “Too Big to Fail, Too Big to Exist,” calling for breaking up the big banks. With bankers lavishing big contributions on political candidates in both parties, citizens and the media should insist that candidates describe how they would deal with banks that are too big to fail and with recidivist banks that seem to operate as continuing criminal conspiracies. We need to know who is prepared to stand up and who is in the banks’ pocket.