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Criminal Charges Against Banks Risk Sparking Crisis

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http://www.bloomberg.com/news/2014-05-01/criminal-charges-against-banks-risk-sparking-crisis.html

As U.S. Justice Department prosecutors angle to bring the first criminal charges against global banks since the financial crisis, they’ll have to stare down warnings of uncontainable collateral damage.

Stung by lawmakers’ criticism that multi-billion-dollar settlements have done too little to punish Wall Street in the wake of the financial crisis, prosecutors are considering indictments in probes of Credit Suisse Group AG (CSGN) and BNP Paribas SA (BNP), a person familiar with the matter said. Even after talking with financial regulators about ways to mitigate damage -- such as ensuring banks keep charters -- prosecutors might not fully understand consequences for the market, according to industry lawyers and bankers who are following the case.

Bank clients -- including trustees, fiduciaries and pension funds -- could be forced to cut ties with a financial institution labeled a criminal enterprise, the lawyers and bankers said, asking not to be named because they weren’t authorized to talk publicly. Counterparties also might think twice before entering into billion-dollar transactions with such firms. Damaging a bank’s business could lead to broader fallout across the financial industry, just as Lehman Brothers Holdings Inc.’s collapse in 2008 prompted investors to withdraw from other firms on concern its exit would set off a wave of losses.

http://www.bloomberg.com/news/2014-04-30/prosecutors-rarely-charge-banks-since-result-can-be-fatal.html

If the Justice Department follows through on a threat to bring criminal charges against Credit Suisse (CSGN) Group AG and BNP Paribas SA (BNP), it would go against years of standard prosecutorial practice.

The government rarely charges large banks -- or any other corporation -- because it usually proves fatal for the company. The 2002 indictment of accounting firm Arthur Andersen put some 85,000 people out of work and created a public relations debacle for the Justice Department that still influences its decision-making, former officials and defense lawyers said.

“If you indict a major financial institution, absent orchestrated board-level crimes, it will have ramifications for years,” said Jamie Wareham, a partner at DLA Piper law firm in Washington who stressed he was not commenting on specific firms. “Who pays for that? Customers, shareholders, the community.”

Where as not charging anyone just ensures they'll keep on doing it as there is no consequence to them just the taxpayer who keeps bailing them out.

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Where as not charging anyone just ensures they'll keep on doing it as there is no consequence to them just the taxpayer who keeps bailing them out.

Exactly, which is why these prosecutions will likely evaporate at the last moment. Taxpayers aren't powerful enough lobbyists.

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..prosecutors might not fully understand consequences for the market,

The people being charged weren't bothered about the consequences for the market or the consequences for anything or anybody else for that matter.

All of a sudden they want people to be bothered about the consequences for the market :rolleyes:

What would Mr Diamond say - the time for banker remorse is over.

Edited by billybong

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Both institutions mentioned aren't US domestic banks. Seems that the US authorities shy away from tackling their own dirty linen.

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