To listen to bankers tell it, President Barack Obama has been their worst nightmare. But considering how easy banks have actually had it since the financial crisis, Obama seems to be a banker's dream come true.
The banks can count the Dodd-Frank financial reform act, some $2 billion in penalties, and occasional criticism from the president and other Democrats among the horrors they have had to endure since the crisis. Relative to the profits they made before and after, these don't even rise to the level of minor inconveniences. And that makes it more likely we'll see more bank misdeeds in the future.
"This doesn't just reward past crime; it incentivizes future crime," Dennis Kelleher, CEO of the nonprofit group Better Markets, said of the penalties the banks have paid since the crisis. "It's less than the cost of doing business."
There have not been, and likely never will be, any federal criminal convictions for crisis-era bank misdeeds. Obama's Justice Department doesn't even bother keeping statistics on convictions related to the financial crisis, the Wall Street Journal reported earlier this year. High-profile cases against executives at Goldman Sachs, American International Group, Lehman Brothers and Countrywide Financial, institutions at the center of the crisis, have been dropped.
The Securities and Exchange Commission has done most of the heavy lifting in exacting some measure of justice from banks and bankers for crisis-era misdeeds, but not so heavy that the SEC might actually develop muscles or anything.
Unlike the Justice Department, the SEC does keep stats on its efforts, such as they are: It has charged 112 people and banks in the wake of the crisis, including 55 top executives. It has extracted $2.19 billion in penalties and other cash from the banks and bankers.
But $2 billion is a rounding error in comparison to the profits the banks raked in before and after the crisis, and the damage they did to the economy during the crisis. Kelleher of Better Markets estimates that Wall Street paid out $200 billion in bonuses between 2003 and 2011. And in the year before its London Whale trading debacle, JPMorgan Chase alone was making nearly $5 billion per quarter, on average, in net income after taxes, meaning it could pay the entire industry's crisis-era fines twice over with just three months of work.
Give JPMorgan a few years, and it could cover the entire industry's $2 billion in fines 20 times over: In the three years leading up to the crisis year of 2008, the bank made $38 billion in after-tax profit. In the three years that followed, JPMorgan made $48 billion. In 2008, its profits tumbled all the way down to $5.6 billion, or nearly three times the total fines paid by banks as a result of the crisis.
And that is just one bank, albeit the largest bank in America by assets. Even a far smaller bank, Goldman Sachs, could bear the brunt of the entire industry's regulatory fines very easily if it had to. Goldman has paid the largest single fine by far as a result of the crisis, $550 million to settle charges that it misled investors about bundles of bad mortgages that were hand-picked by other investors betting against them. That's a lot of money to you and me, but to Goldman -- which, of course, did not admit to the charges -- it's not much. The bank made $8.4 billion in profit in 2010, the year it agreed to the fine. It has made more than $26 billion in the past three years and nearly $27 billion in the three years before the crisis.
In the crisis year of 2008, Goldman turned a total after-tax profit of $2.3 billion -- enough to pay the entire industry's crisis tab.
Meanwhile, the big banks benefited for years after the crisis from an armada of government-subsidized lending programs. One initiative alone, the Term Liquidity Guarantee Program, likely saved banks an estimated $24 billion in borrowing costs.
Of course, this has not stopped the banks from lobbying furiously against financial regulatory reform to prevent another crisis. The securities industry has spent more than $250 million in lobbying since 2010, according to the Center for Responsive Politics. That money was focused most intensely on periods in the past few years when the Dodd-Frank reform act was being passed or shaped, according to the Wall Street Journal.
The banks have also had plenty of cash to throw at political campaigns. Wall Street has spent $164 million on the current election, the Center for Responsive Politics reported on Wednesday, putting the financial industry on pace to trump the record $170 million it spent on the 2008 campaign. Some of that cash has gone to Obama and other Democrats, but most of it is going to Mitt Romney and his fellow Republicans, who have pledged to repeal Dodd-Frank.
In fact, the American Bankers Association is expected to vote Thursday on whether to form a super PAC to donate money to Senate candidates who want to roll back financial reform, Bloomberg reports.
As Bloomberg's Phil Mattingly wrote recently in a separate story, a full Dodd-Frank repeal probably wouldn't happen even during a Romney administration and with Republicans in control of both houses of Congress. Instead, the banks would prefer to get some of the toothier aspects of the law repealed, leaving "a patina of protection for investors and consumers," as Mattingly wrote. That doesn't sound all that far from the situation today, with Dodd-Frank implementation already hopelessly muddled by bank lobbying.
If there is a silver lining to this story (or a dark cloud for the banks), it is the appropriately harsh punishment the stock market has rendered. Combined, JPMorgan, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and AIG have lost a whopping $594 billion in stock-market value since the end of 2006, just before the dawn of the crisis, according to FactSet data. Many shareholders are suing the banks over their crisis-era behavior. Citigroup recently settled one such suit for $590 million.
The banks have also suffered lasting damage to their reputations, leaving them vulnerable to more regulation and higher capital requirements around the world, which could crimp their profitability in the years ahead. But that also means the banks could eventually seek other, more creative ways to make money.
Given the lack of severe consequences following the worst financial crisis since the Great Depression, it is hard to imagine bankers seeing much downside in gambling with the global economy once again.
HuffPost Live will be taking a comprehensive look at the corrupting influence of money on our politics on Sept. 6 from 12-4 p.m. EDT and 6-10 p.m. EDT. Click here to check it out -- and join the conversation.
Below are 14 things Obama doesn't want you to know:
Prosecution For Financial Fraud Hit A 20-Year Low During The Obama Administration
Despite Obama's <a href="http://www.thedailybeast.com/newsweek/2012/05/06/why-can-t-obama-bring-wall-street-to-justice.html" target="_hplink">promises to crack down</a> on Wall Street, federal prosecutions of financial fraud hit a 20-year low last year, according to a <a href="http://www.huffingtonpost.com/2011/11/15/financial-fraud-prosecution_n_1095933.html" target="_hplink">November study from a watchdog group</a>. The number of these types of prosecutions has been falling every year since 1999 -- in other words, there were more prosecutions during every year of George W. Bush's presidency than during every year of Obama's.
Income Inequality Is Worse Under Obama Than Under Bush
The rich took home a <a href="http://www.huffingtonpost.com/2012/04/11/income-inequality-obama-bush_n_1419008.html" target="_hplink">greater share of America's income pie</a> from 2009 to 2010 than they did between 2002 and 2007, according to an April analysis from Emmanuel Saez, a professor at the University of California, Berkeley. That means the gap between the rich and the poor was more pronounced under Obama's presidency than under George W. Bush's.
Obama Wants To Lower The Corporate Tax Rate
Some of America's most profitable companies used a variety of loopholes to pay <a href="http://www.huffingtonpost.com/2011/11/03/major-corporations-tax-subsidies_n_1073548.html" target="_hplink">less than zero in taxes</a> between 2008 and 2010, according to a November 2011 report by the Citizens for Tax Justice. But the Obama administration wants to make it even easier for corporations to have a smaller tax bill; Obama proposed a tax overhaul that would <a href="http://www.huffingtonpost.com/2012/02/22/barack-obama-proposing-to_n_1292939.html" target="_hplink">cut the corporate tax rate</a> from 35 percent to 28 percent.
Health Care Reform Won't Make Health Care Cheaper For Most Americans
Once the health care law takes effect, insurance companies will be footing the bill for millions of previously uninsured Americans and for those who were denied coverage for pre-existing conditions. And health insurance companies will <a href="http://www.huffingtonpost.com/2012/04/20/health-care-costs-rise_n_1440584.html" target="_hplink">likely pass on to consumers the cost</a> of insuring the new patients. After Massachusetts enacted a similar health care plan in 2006, premiums for an individual plan in the state <a href="http://www.huffingtonpost.com/2012/06/28/health-insurance-ruling-supreme-court-costs_n_1634555.html" target="_hplink">rose 18 percent</a> over three years.
Obama's Housing Programs Have Largely Been A Failure
In 2009, Obama announced the Home Affordable Mortgage Program, promising to help 3 to 4 million borrowers, but as of January -- more than three years into the program -- HAMP had <a href="http://www.huffingtonpost.com/2012/01/27/hamp-loan-modification-expands_n_1237169.html" target="_hplink">only reached 1 million borrowers</a>. In an aim to give the program legs, administration <a href="http://www.huffingtonpost.com/2012/01/27/hamp-loan-modification-expands_n_1237169.html" target="_hplink">officials changed the rules</a> in January to make more borrowers eligible. Still, the fixes were likely too little too late, experts said at the time.
Homeowners Haven't Seen Much Out Of That Huge Mortgage Deal
The Obama Administration touted the $25 billion mortgage deal it reached with 49 states and the big banks to settle allegations that banks mishandled mortgages. As part of the settlement, banks said they would <a href="http://www.huffingtonpost.com/2012/06/12/national-mortgage-settlement-_n_1589499.html" target="_hplink">offer at least $10 billion</a> in loan forgiveness to homeowners. But months after the deal was inked, <a href="http://www.huffingtonpost.com/2012/08/29/debt-relief-mortgage-settlement_n_1839923.html" target="_hplink">banks have been slow</a> to hand out the money.
Democrats Have Received Lots Of Campaign Cash From Bain Employees
The Democratic National Convention will feature <a href="http://www.huffingtonpost.com/2012/09/03/bain-capital_n_1852302.html" target="_hplink">employees of firms run by Bain Capital</a> -- the private equity firm where Mitt Romney was formerly CEO -- likely in an aim to raise questions about Romney's tenure at the now-controversial company. But Democratic candidates and committees had <a href="http://articles.boston.com/2012-05-23/nation/31814221_1_obama-campaign-mitt-romney-romney-claims" target="_hplink">actually netted double the amount of campaign cash from Bain workers</a> as of May than their Republican counterparts since 2008, according to the <em>Boston Globe</em>. Now, Republicans are beating their Democratic colleagues in Bain cash, with <a href="http://www.opensecrets.org/overview/topcontribs.php" target="_hplink">58 percent of donations from Bain</a> employees going to Republican candidates and parties, according to the Center for Responsive Politics. <strong>CORRECTION:</strong><em> An earlier version of this slide misstated that Democrats were receiving more donations from Bain employees than Republicans. That was the case in May. As of September Republicans are receiving more donations from Bain employees.</em>
Goldman And Other Wall St. Firms Have Largely Escaped Punishment For Their Role In The Financial Crisis
The announcement last month that the Justice Department wouldn't be prosecuting Goldman Sachs over allegations surrounding the financial crisis was <a href="http://www.huffingtonpost.com/2012/08/15/matt-taibbi-eric-holder_n_1784167.html" target="_hplink">a reminder for many</a> that the Obama Administration has largely let banks off the hook for their role in the meltdown. And regulators and officials may be running out of time; <a href="http://dealbook.nytimes.com/2012/08/09/goldman-says-sec-has-ended-mortgage-investigation/?ref=business" target="_hplink">the statute of limitations</a> for crimes related to the financial crisis is fast approaching, according to <em>The New York Times</em>.
The Revolving Door Is Alive And Well In Obama Administration
Many current and former members of the Obama Administration have ties to Wall Street. The <a href="http://www.huffingtonpost.com/2012/08/30/wall-street-washington_n_1842517.html" target="_hplink">list includes</a> the president's current and former chiefs of staff -- Jacob Lew and Bill Daley, respectively -- as well as his former budget director, Peter Orszag, and others.
Too Big To Fail Banks Have Grown Under Obama
At the end of 2011, five big banks, including Bank of America and JPMorgan Chase, held <a href="http://www.bloomberg.com/news/2012-04-16/obama-bid-to-end-too-big-to-fail-undercut-as-banks-grow.html" target="_hplink">56 percent of the U.S. economy</a>, according to Bloomberg, compared to 43 percent five years earlier. That's right, the too-big-to-fail banks have actually gotten bigger.
The U.S. Has Gained A Lot Of Low-Wage Jobs During The Recovery
Welcome to the U.S. of Low-Wage America. Most of the jobs lost during the recession paid middle wages, while most of those <a href="http://www.huffingtonpost.com/2012/08/31/low-wage-jobs_n_1846733.html" target="_hplink">gained during the recovery were low-wage jobs</a>, according to a recent study from the National Employment Law Project.
Incomes Declined More During The Recovery Than The Recession
Median <a href="http://www.nytimes.com/2011/10/10/us/recession-officially-over-us-incomes-kept-falling.html" target="_hplink">household income fell 6.7 percent</a> between June 2009, when the recession technically ended, and June 2011, according to a Census Bureau study cited by <em>The New York Times</em>. That's more than the 3.2 percent incomes fell during the recession, between 2007 and 2009.
Payroll Tax Cut May Expire On Obama's Watch
Last December, congressional Democrats managed to save the payroll tax cut for one more year, giving 122 million workers a few extra bucks each paycheck, but now that <a href="http://online.wsj.com/article/SB10000872396390444130304577561410867407728.html" target="_hplink">boost may quietly disappear</a>, according to the <em>Wall Street Journal</em>. That's because the White House won't be pushing for another payroll tax cut extension this year.
Many Top Obama Donors Are Employees Of Major Corporations
Of the top 10 companies with employees donating money to Obama's campaign, three are big banks: JPMorgan Chase, Citigroup and Goldman Sachs, according to <a href="http://www.opensecrets.org/pres08/contrib.php?cid=N00009638" target="_hplink">the Center for Responsive Politics</a>. Some of Obama's other major contributors include employees from big companies such as Microsoft and Google.
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