On Monday, justice finally made its way to Wall Street: The Swiss bank Credit Suisse, caught in a decades-long scheme to help Americans illegally hide their money from the IRS, pled guilty to criminal charges of conspiring to aid tax evasion. Or at least that’s the story the Justice Department would have you believe.
The preceding narrative of Justice Delivered is true in every detail, but so is the following: Credit Suisse will pay about $2.6 billion in fines, but nobody is going to jail. The bank is not losing its license. Media reports refer limply to a (hypothetical) “reputational stain” before conceding to reality: “the implications are likely to be limited” and the bank is “expected to survive largely unscathed.” As The New York Times candidly notes, in a prediction that would be cynical if it weren’t so obviously true: “Wall Street may be quick to forgive and go forward with business as usual, especially if Credit Suisse remains a source of profits.” The chairman and CEO have both kept their jobs, and the latter is even bragging that so far, none of Credit Suisse’s clients seem bothered by this little dust-up (“We have found no instances where clients cannot do business with us.”).
This outcome is pretty distant from the ideal described by President Obama. In his widely praised December 2011 stemwinder in Osawatomie, Kansas, the President declared that “a strong middle class can only exist in an economy where everyone plays by the same rules, from Wall Street to Main Street.” If that’s true, the middle class is in even bigger trouble than I thought. After all, this glorified slap-on-the-wrist is the best the Justice Department could get even after the rare feat of nabbing a guilty plea on criminal, not civil, charges. And as the statute of limitations closes on financial crisis-era misdeeds, the government still has yet to prosecute any big-time executives, evidently having settled on pursuing small-time offenders and bragging about exaggerated prosecutorial coups that will have little real-world impact—and certainly little deterrent effect. That last fact in particular must bother Obama, whose presidency was defined by the financial crisis and whose legacy will be so deeply shaped by the industry’s future—especially if there’s another crash brought on by reckless behavior, lax regulation, and the assurance that no amount of economic wreckage will land a banker in jail.
Despite all this, Eric Holder found reason to boast. “This case shows that no financial institution, no matter its size or global reach, is above the law,” the Attorney General declared. Holder was at pains to clarify this point after stating in 2013 that “it does become difficult” to prosecute large financial institutions “when we are hit with indications that if we do prosecute—if we do bring a criminal charge—it will have a negative impact on the national economy, perhaps even the world economy,” a notorious admission lampooned as the “Too Big To Jail” excuse. Luckily, Holder’s Justice Department seems to have found a way around this problem. If anything, the example of felonious Credit Suisse shows that, if applied with a sufficiently delicate touch, criminal convictions not only don’t have to harm the global economy—they can even avoid harming the individual firm itself!