Penalties imposed during the first half of 2017 on Wall Street
firms by their regulators — the Securities and Exchange
Commission (SEC), the Commodities Futures Trading Commission
(CFTC), and the Financial Industry Regulatory Authority (Finra) —
plunged 65% compared to the same period in 2016.
During the first half in 2016, $1.4 billion in fines were levied
on Wall Street firms by the three regulators. In 2017, the total
was down to $489 million, according to data collected
by The Wall Street
In this context, Wells Fargo doesn’t have much to fear after
admitting a week ago that since 2012 it had quietly
comprehensive and physical damage insurance to the car
payments of 570,000 (or 800,000) of its auto-loan customers.
The SEC imposed $318 million in fines in the first half, down 58%
from the same period a year ago, based
Journal’s search of federal documents and
publicly available records on the SEC’s website, along with data
provided by University of Virginia law school professor Andrew
In the first six months of 2016, the SEC imposed $750 million in
penalties. This included a case filed in June that year with a
penalty of $358 million; it alleged a bank had misused customer
assets. By contrast, the largest fine so far this year has been a
soft slap on the wrist of $30 million.
The Journal explains:
SEC Chairman Jay Clayton, who took over in May, has expressed
concern about the size of corporate penalties the SEC has
levied in recent years, saying they hurt shareholders and it
would be better to punish guilty individuals.
At the CFTC, the fines imposed in the first half plunged 74%, to
$154 million. In the first half of 2016, fines had reached $603
million, which included Libor-rigging and Euribor-rigging cases,
with Goldman Sachs alone getting docked for $120 million.
At Finra, a legendary wrist-slapper, the wrist-slapping in the
first half this year plunged 77% year-over-year to just $17
million. Finra is a private corporation that acts as
self-regulatory organization for its member brokerage firms and
exchange markets but is ultimately overseen by the SEC. In the
first half of 2016, it imposed at least five fines of over $1
million and publicly announced each one of them. Public shaming
used to be part of the process. Not anymore. In the first half of
2017, it imposed only two fines of over $1 million, without
publicly announcing either one.
“There has been a dialing back,” Brian Rubin, a partner at law
firm Eversheds Sutherland, told The
Journal. Finra “has gotten lot of feedback from member firms
that there has been a big increase in fines [in recent years]
…and that’s something they’re looking at.”
But 2016 had already been a low-water mark as the agencies under
the Obama administration were dialing back their efforts. In the
full year of 2016, penalties imposed by all three agencies had
plunged by over 50% from 2015, from $4.4 billion in 2015 to $2.1
billion in 2016, which had been the lowest level of fines since
2012. At this pace, penalties in 2017 are on track to drop to the
lowest level since the Financial Crisis.
The regulators say it’s no big deal. The
Kevin Callahan, the spokesman, said the
SEC doesn’t consider six months to
be long enough to draw any lessons about the agency’s
effectiveness. The number of cases brought over the two periods
was “relatively constant,” he added. [It was just the size of
fines, which were minuscule].
James McDonald, enforcement chief at the CFTC,
said variations in penalty tallies from year to year are normal
and “not an indication of any changes in our commitment to
vigorously prosecute violations of our laws to preserve market
integrity and protect customers.” He said, “There will be no
let up, no pause, and no delay in our enforcement program.”
Nancy A. Condon, a Finra spokeswoman, said
“vigorous enforcement is an essential part of our oversight.”
The nongovernmental watchdog, which oversees brokers and
brokerage firms, assesses its regulatory programs “based on our
ability to efficiently and effectively identify and discipline
bad actors,” she added, and “not on the volume of actions or
overall quantity of fines.”
Wall Street has been able to place four former Goldman Sachs
executives into top positions in the Trump administration: Gary
Powell, Steve Bannon, and Steven Mnuchin (famous for having
bought the mortgages of collapsed mortgage lender IndyMac from
the FDIC in 2009, folded them into OneWest Bank, dealt with them
in a controversial manner, and sold the whole schmear for a
blistering profit in 2015). The fifth, Anthony
Scaramucci, didn’t last long.
And Wall Street has been on an all-out lobbying campaign in
Washington. Among its goals is the gutting of the post-Financial
Crisis bank regulation bill, the Dodd-Frank Act. And Wall Street
firms, along with the Chamber of Commerce and the Financial
Services Institute, are lobbying fiercely to get the size of the
penalties reduced to where the consequences for wrongdoing don’t
matter at all anymore.
Congress is responding favorably. The administration is rolling
back regulations. And fines have already plunged under a
“business friendly” attitude that has spread to the regulatory
agencies. Clearly, the only lesson learned from the Financial
Crisis is that Wall Street always wins.
One of the big lobbying thrusts is for Congress to lower the bank
capital requirements that it had raised after the Financial
Crisis to keep banks from collapsing when things get ugly again.
But FDIC Vice Chairman Thomas Hoenig, a regulator left over from
the post-Financial Crisis years, is not happy. The “real economy
has little to gain, and much to lose,” he told the Senate. Read…
Mega-Banks Blow 100% of Earnings on Share-Buybacks
& Dividends, Crimp Lending, Constrain Economy
Read the original article on Wolf Street. Copyright 2017. Follow Wolf Street on Twitter.
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