Hey, just a heads up to all you felons out there that banking with Credit Suisse (CS) could now be a violation of your parole.
The Swiss bank pleaded guilty to criminal wrongdoing, admitting that it helped customers evade U.S. taxes for decades. It sounds like a big deal because this is the first time a bank of such size and stature has has admitted to criminal wrongdoing in more than 20 years.
But it’s not such a big deal. The upshot is that Credit Suisse will pay about $2.6 billion in penalties and forever be known as a felon.
And that about it.
Sure, Credit Suisse’s reputation takes a blow, and maybe it loses some clients. Beyond that, this is actually good news for Credit Suisse and CS stock. Indeed, CS stock closed down just about 2% on news of the deal with federal prosecutors — and then bounced back the next day.
Credit Suisse and CS stock essentially took a plea bargain to put this business behind it. Had Credit Suisse fought on, the bank could have faced federal indictment, in which case all bets are off. In that scenario, successful prosecution could destroy the bank.
Which is exactly what prosecutors don’t want. Push too hard and the bank or firm can collapse. In the case of Credit Suisse, that would mean the loss or more than 45,000 jobs. The damage to anyone holding CS stock or debt would also be immense.
And if prosecutors don’t push hard enough? We know what that looks like. None of the people connected to the financial crisis have been charged with a crime. Neither have any of the institutions.
Credit Suisse: The New Playbook for Prosecutors?
The federal government brought civil — not criminal — cases against the big banks. Aside from billions of dollars in penalties and fines, the banks and management teams at the heart of the financial crisis were completely untouched.
No one at Credit Suisse is going to jail either. Although this criminal case was a much more aggressive move from the Justice Department compared with the way it went after mortgage fraud, they still look like cowards.
The Credit Suisse deal has nothing to do with the mortgage crisis, for one thing. It’s punishment for helping rich people hide their cash from the IRS. Sure, the Justice Department might use the Credit Suisse experience as a template to go after JPMorgan Chase (JPM) or Bank of America (BAC) or Citigroup (C) for helping cause the financial crisis. But so what?
Those banks now know they still have a get-out-of-jail-free card. At worst, they cough up a few more billions in fines. That’s nothing. The big banks have already paid out more than $100 billion in fines. They have the money. A criminal prosecution ending in penalties is just the cost of doing business.
The Justice Department is touting this as a big win, but the fact remains that it still see the firms responsible for the Great Recession as “too big to jail.”
Most criminals find themselves behind bars, but that doesn’t seem to apply to financial fraud.
Damn, it’s good to be a banker.
As of this writing, Dan Burrows did not have a position in any of the aforementioned securities.