Guest Post: Pocket-Change SEC Fines: Barely A Bark And No Bite

Tyler Durden's picture

Submitted by Nomi Prins

Pocket-Change SEC Fines: Barely a Bark and No Bite

There's a reason yesterday's
announcement that JPM Chase would 'settle' for a fine of $156.3 million,
while neither admitting nor denying any wrong-doing, thereby forking
over the whopping equivalent of a normal person's weekly grocery budget,
pisses people off. Because it's a marginal fleabite on the teflon hand
of the nation's second largest bank in terms of punitive pain, and
absolutely meaningless in altering the grand scheme of toxic securities
creation or  complex financial institution business as usual. 

The trivial settlement appears even
tinier in comparison to the financial aid JPM Chase received in the wake
of its financial crisis. Despite all of CEO Jamie Dimon's disingenuous,
though fervently delivered, remarks to the contrary (he didn't need a
bailout, he took it for the 'team' to ensure no bank would be singled
out to sport a scarlet 'B' of bailout shame), JPM Chase at one point,
during the height of the bank's federal subsidization program, floated
on nearly $100 BILLION dollars worth
of - exceptional assistance. That figure included: $25 billion from the
TARP fund, which has since been repaid, $40.5 billion dollars of new
debt backed by the FDIC's Temporary Liquidity Guarantee Program (TLGP),
which has since been retired, about $6 billion through various aspects
of the TARP HAMP program which aided a fraction of underwater borrowers,
and $28.8 billion behind its Fed-backed, Treasury-pushed acquisition of
Bear Stearns, which is still in place. That's aside from its government
aided acquisition of Washington Mutual.

There are those that believe that the
bailout program (which they continue to equate to just the $700 billion
TARP program) was a success (like the Fed, Treasury Department, any
Administration, and Andrew Ross Sorkin).

Yet, subsidizing Wall Street's most
powerful creatures, altered nothing for the banks that survived, while
promulgating ongoing economic pain for the general population caught in
the wake of a $14 trillion dollar asset creation machine, which became a
globally leveraged $140 trillion still-decaying mess, spurred by
rapacious speculation, that sat on just $1.4 trillion of sub-prime loans
and various other properties. 

Banks want us to believe that widespread
economic pain has nothing to do with them, that they were innocent
participants. Maybe they made a few mistakes - for which they're paying
SEC directed fines, but hey, we all do.

Meanwhile, the budget bantering that
drones on in Washington keeps missing the fact that part of the bank
subsidization process remains on the Fed's books. This includes $1.6
trillion dollars in EXCESS bank reserves - i.e. reserves for which the
Fed is paying banks 0.25% to NOT lend, about $900 billion worth of
mortgage-backed securities, and $1.5 trillion worth of Treasuries,
partly from the QE2 program. That's an awful lot of captive
non-stimulus. It sure isn't helping drive job creation or small business
expansion sitting there.

Of course, this latest SEC settlement is
not the first non-punishment for a bank's role in producing or
promoting a leveraged mountain of faulty assets. The hush money action
is part of a now-two-year SEC program to address, in the commission's
own words, 'misconduct that led to or arose from the financial crisis.'

Leaving aside, the tepid
characterization 'misconduct' instead of say 'racketeering', these fines
don't, and won't, change the banking system. And nowhere does this
fining regulatory body suggest a way to do so. It would be refreshing
for the SEC, founded in conjunction with the Glass-Steagall Act that
separated banks into institutions that dealt with the public's deposit
and financing needs from those that created and traded speculative
securities for private profit purposes, to suggest a modern equivalent
of that act. It might help the commission do its job of protecting the
public before unnecessary devastation, not years afterwards, or
at the very least, untangle the web of layered borrowing and debt
manufacturing at the core of these complex giants.

But, that's not going to happen. Not as
long as small fines, absent any form of attached probation, stringent
monitoring, or cease-and-desist requirements, can slowly make the issue
go away. Seriously, it takes longer to argue a traffic ticket than it
took Goldman Sachs to 'agree' to a $550 million settlement on July 15,
2010, after the SEC charged the firm with defrauding investors only
three months earlier. People caught with minor amounts of crack or pot
undergo stricter plea processes, probationary measures and detainments. 

To date, the SEC has charged four firms
with CDO related fraud, including Wachovia, Goldman Sachs, and JPM
Chase, who settled for $11 million, $550 million and $156 million
respectively. A case against ICP Asset management remains open. 

The commission has charged five firms
with making misleading disclosures to investors about mortgage-related
risks, including American Home Mortgage, whose former CEO settled for a
paltry $2.45 million fine and a 5-year officer and director bar,
Citigroup, that settled for a $75 million penalty, Bank of America's
Countrywide, whose former CEO, Angelo Mozilo agreed to a $22.5 million
penalty and a permanent officer and director bar (a fraction of his
pre-crisis take), and New Century, whose executives paid $1.5 million
and agreed to a five-year bar. There is an ongoing case against IndyMac

In addition, the SEC charged six firms
with concealing the extent of risky mortgage-related assets in mutual
and other similar funds. Those included Charles Schwab that settled for a
$118 million fine, Evergreen that settled for $40 million to mostly
repay investors, TD Ameritrade that settled for $10 million, and State
Street that settled to repay investors $300 million.

Separately, Bank of America agreed to a
$150 million settlement for misleading its investors about bonuses paid
to Merrill Lynch and not disclosing Merrill Lynch's mounting losses.
This didn't stop the Federal Reserve and Treasury Department from
remaining steadfastly behind the Bank of America/Merrill Lynch
make-a-too-big-to-fail-bank-bigger merger, upon which the settlement was

In total, the SEC, mildly policing the
vast financial system that pushed a criminal musical chairs game of
last-one-holding-a-toxic-asset-or-underwater-mortgage-loses, charged 66
entities and individuals with 'misconduct', imposed 19 officer or
director bars, and levied $1.5 billion of penalties, disgorgement, and
other monetary relief fines. Put that in perspective, say, with the $28 billion in bonuses that JPM scooped up for just 2010, or the $424 billion in total bonuses the top six banks bagged between the crisis book-end years of 2007-2009, or the $128 billion
of bonuses Wall Street got last year. Now, consider that not only is
the penalty amount a pittance, but the impact of these fines, is even
smaller. And, that's the bigger problem with fines, particularly tiny
ones. They offer this illusion of a fix that leaves us worse off from a
stability perspective than we were before.

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Ancona's picture

This is beyond fucking ludicrous.

I want some heads on a fucking stick!

camaro68ss's picture

there only fining them because they got cought.

mayhem_korner's picture

...or to justify their own existence.

PY-129-20's picture

Heads on a fucking stick

Def. 1): A popular method of intimidation in ancient history; where the winning army cuts off the heads of defeated soldiers, impaling them on a pike or stick to demoralize and frighten the conquered people. It was also used after an execution to make a public example of the consequences of breaking the law.

(Def. 2): A metaphor describing retaliation or punishment for another's wrongdoing, or public outrage against an individual or group for the same reason.



Bernard René Jourdan, marquis de Launay (1740–1789) was the French governor of the Bastille, the son of a previous governor, and commander of its garrison when it was stormed on 14 July 1789

De Launay was then seized and was supposed to be escorted to the Hôtel de Ville by one of the leaders of the insurrection, soldier (future general) Pierre-Augustin Hulin, but on the way there, the furious crowd assaulted him, beat him and eventually lynched him by stabbing him repeatedly with their bayonets and shooting him once. The actual killing was reported to have been unleashed by the fact that de Launay, desperate and abused by the crowd, kicked an unemployed cook named Desnot in the groin. After the killing, his head was sawn off by Mathieu Jouve Jourdan, a butcher. It was fixed on a pike to be carried through the streets. Several other defenders of the Bastille were also lynched

mayhem_korner's picture

Main street believes anything that ends in "illion" is the same.  So a $156 million fine is just as big as a $14.5 trillion debt. 

Just ask any joe Q on the street - it's just static in the nintendo.

Cdad's picture

Because it's a marginal fleabite on the teflon hand of the nation's second largest bank in terms of punitive pain, and absolutely meaningless in altering the grand scheme of toxic securities creation or  complex financial institution business as usual. 

Exactly.  And this is why the Greater American Depression will continue, as real capital will not form in these banks. These banks need to be broken up, their assets sold, and the perpetrators of the 2008 economic collapse criminally prosecuted.  Until such time, Mary Shapiro's SEC should be publicly ridiculed for being an absurd, zombie bureaucracy.

And until the SEC can properly police the markets and punish the criminals that skim it, there is no point in investing in American markets.

And any day now, tens of thousands of pink slips will finally start being mailed out in the financial services industry...which will indicate a "good start."

Franken_Stein's picture



I mean come on, what are these fuckling chair farters, porn watchers and pen pushers at the SEC or FDIC actually doing ?

Why do these people even get up in the morning at all, knowing that their whole pathetic job just consists of looking the other way ?


Do they not ask themselves, what the point of their whole fucking existence is ?


Just to be a socialist American chair farter and apparatchick in a Washington or Manhattan bureau tower ?


Misean's picture

Gov't always and everywhere has been established by the elite, to protect the elite, and loot the masses. Why do you assume the SEC is NOT doing its job?

Hondo's picture

How in the F*** do we ever really know if the even paid it.......and most likely deducted it from their tax return......insane!

Id fight Gandhi's picture

Pay a small fine, a fraction of the crime's take and admit no wrong doing. Not right, not fair. Why can't the little guy get the same treatment? Why not make them forfeit all ill gotten gains?

mayhem_korner's picture

You left out the punitive part.  Payback all ill gotten gains sevenfold. (Proverbs 6:31)

XenoFrog's picture

So long as the too big to fail banks continue to be too big to fail, we are lost.

cougar_w's picture

True, dat.

Wasn't long ago someone was talking about "too big to live" as a concept. Didn't go anywhere, proof that the bankster class really do run the show.

we r pwned.

sitenine's picture

 +1 TBTF indeed.  What a trivial phrase for such profound implications.

If any institution is TBTF, then we must, by all means available, keep them alive in a belief that it will keep us alive in turn.

How did it come to this?

Cdad's picture

How did it come to this?

Hank Paulson had a bazooka in his pocket...and the rest is the history of TBTF banks...which are now systematically destroying the credibility of markets.

eureka's picture

Myabe some of the neo-nazi, real politik, clannish 'might is right" zerohedge visitors can muster their heroic impulses to go exact some real vengence on the masters and minions of the JPM, C, WFC, BAC, GS etc clans of the world - and thus live up to all their mighty talk.

mayhem_korner's picture

Complaining about criminals is legal; eliminating them is not.  Nice try for a Patton speech, though.

Silver Bug's picture

Criminals run the show, who wouldn't rob a bank if you only had to give 10% of it back?! The U.S is broke and it is because of nonsense like this.

Joe Davola's picture

Why don't they go after Magnetar and Paulson for criminal conspiracy to commit theft?


Damn, sometimes a naive thought just sneaks out before I even realize.

Rynak's picture

The article implied it, but it for my taste didn't go far enough in outrightly saying it:

Fines, no matter how high, don't mean anything to such players. The issue is not that fines are too low - the issue is that financial fines don't mean anything to someone who's buddies can print money. If we were to follow the consequences further, who in the end is "fined" by those fines, are not those players, but instead every dollar holder on the planet: As long as they get bailed out over and over, any losses including such fines, will in the end be transfered to every holder of dollars via inflation.

And even if they would not be able to do this, fines purely for the sake of "punishment" are mostly useless here: What does a fine change? Does it change the framework that allowed such things to happen? If not, do such fines help to prevent such things in the future?

Fines may make sense to compensate victims. Heck if done right they may even help a little bit to encourage that specific player to not do it again. But fines on their own don't fix anything about the causes, but just punishes symptoms. It politically certainly is useful... it allows regulators and politicians to tell the population "See, we punished them for their evil. Your thirst for vengeance is satisfied. Therefore now everything is okay again."..... uh, no... not really. All it fixed, is peoples ego.

mayhem_korner's picture

Spot on, Rynak.  At its core, this is a colossal game of transfer - wealth and liberty - to establish ruling class and subjects.  It's a slow moving dance, however, to make sure too few plebes catch on to create an uprising.

Problem is...wealth grab is going to fail (economic collapse) before the power grab is complete.  So NWO is going to be NW(dis)O...

my two cents.

AgShaman's picture

I agree....7's & 11's (+)

Well described....for all, and any interested in focusing in on what's the dynamic at work...and how it continues to keep the system flawed...and the pyramid structured to benefit the "slave masters"

ebworthen's picture


SEC = a Chihuahua chained with lamp cord to the pillars of the NYSE

"Look, the dog is barking and tugging on it's chain, those banks and investment houses must really be afraid now."

"Yipe! Yip! Yip! Yipe!" in-between humping the legs of passers bye.


Franken_Stein's picture
Morgan Keegan to Pay $200 Million to Settle Fraud Charges Related to Subprime Mortgage-Backed Securities



Washington, D.C., June 22, 2011 – The Securities and Exchange Commission, state regulators, and the Financial Industry Regulatory Authority (FINRA) announced today that Morgan Keegan & Company and Morgan Asset Management have agreed to pay $200 million to settle fraud charges related to subprime mortgage-backed securities. Two Morgan Keegan employees also agreed to pay penalties for their alleged misconduct, including one who is now barred from the securities industry.



Ooooh, so two Memphis based companies that no one has ever heard of have to pay more in fines than the biggest bank in America, for the same crime ?


Yeah, right.


Dr. Porkchop's picture

The lame ass fines are bad enough, but to be able to pay a 'fine' and admit no guilt is a joke.

If you're not guilty, then what are you paying exactly? I know if I get a traffic ticket, it's considered a minor conviction, because I'm guilty of violating a law. So WTF is this? A gift?

Oh, a bribe, I get it..



karzai_luver's picture

they are paying.............PROTECTION MONEY!

between that and the campaign payola you have the prefect system.

Simple as that.



Dr. Porkchop's picture

Oh, right... they're paying the vig.. I forgot my mafia mathematics.

JW n FL's picture

Higher Capital Requirements for To Big To Fail ='s Higher Leverage (0.04 / 0.4) for To Big To Fail Banks!


Either way "We the People" are fucked!


How come no one is talking about how the Chinese Dollar (Yuan / Renminbi) is 1,200% Leveraged.. and the U.S. Dollar is 120% Leveraged.. but yet we borrow monies from them?


How many U.S. Dollars were poured into China? before the collapse? by Blackstone / ad other Private Equity Group that used matching Federal Funds (with a 10% cap) to pump up China into the Monster? (1,200% Leveraged Monster) that it is..


How the Fuck do all the minds here ignore all of the above facts???????????


if you dont like the sources, you can find any other that you like.. these popped up first.


their access to capital significantly constrained. Investment in startup and early-stage companies ... Concurrently, later-stage firms' access to funds through the public ... Other recommendations focus on improving existing federal programs to match .... annual employee growth rate, and a minimum of 10 employees. ...


Buy Gold and Silver to Protect Yourself from the FED’s Printing Presses! How many times has the FED been right before?

citta vritti's picture

plus they’re tax deductible, at least to the extent the banks pay taxes

mayhem_korner's picture

Do bankers' tax forms have a line for "criminal fines" in the itemized deductions?

Dr. Porkchop's picture

They'll pay all the taxes you want, with imaginary Benny Bux!

mayhem_korner's picture

That reminds me...has williambanzai done a caricature of Ben on the $10 Trillion?  Would be nice.

AbandonShip's picture

"trading losses" , "goodwill"   PriceWaterhouseCooper will find some useful category for them.

Franken_Stein's picture




I mean come on, what are these fucking chair farters, porn watchers and pen pushers at the SEC or FDIC actually doing ?

Why do these people even get up in the morning at all, knowing that their whole pathetic job just consists of looking the other way ?


Do they not ask themselves, what the point of their whole fucking existence is ?


Just to be a socialist American chair farter and apparatchick in a Washington or Manhattan bureau tower ?


taint's picture

I hate the banks as much as anyone!   But would your comments be different if the total penalty exceeded the size of the deal for which JPM was investigated?   Believe the deal was 150 million deal.  

karzai_luver's picture

how does the dude(s) at the top escape this type of fine?


Are they or are they not running the company?


If not then dump them as they are clearly overpaid , if so then they know

or should and if they know then they should get hit hard.


You can't have it both ways, unless of course you are playing a rigged game.

my oh my.


Dr. Porkchop's picture

how does the dude(s) at the top escape this type of fine?


Same as where I work, the douchebags throw someone else under the bus.

Commander Cody's picture

In my view, its not just the I-didn't-do-no-wrong fine, but lack of fraud prosecution.

I am a Man I am Forty's picture

so the only penalty is you give back the money that you basically stole? that's not a penalty.  if i rob JPM for $100k, get caught, and all I have to do is give the money back??

Dr. Porkchop's picture

That and weed their gardens every Saturday until you've learned your lesson.

glenlloyd's picture

penalties need to be onerous regardless of the amount of the 'deal', otherwise they do nothing to curtail the bad behavior.

want the bad behavior to stop? make the financial penalty a multiple of the deal amount. these institutions don't feel it unless it's like a kick in the crotch.

i suggest perhaps a multiplier of 10

slewie the pi-rat's picture

teflon zombies playing musical chairs.  thx, nomi!

Zero Govt's picture

how does the SEC arrive at the $fine? it by random number pulled out of a hat, by formula (can we have it so we can see how fairly it's applied?) or is it by backdoor negotiations with Jamie 'bankrupt in 2008' Dimon???

AbandonShip's picture

Good question!  I was also outraged about these puny fines and luckily I caught the SEC guy (Khazami? Khazumi? Calamari?) on CNBS yesterday.   He said that the fines are BASED ON THE ESTIMATED DAMAGES TO THE CLIENTS.  Everyone here that?   So those poor German banks in Dusseldorf or whatever that bought these rediculous CDO monsters were only looking at a couple hundo million in damages.  Therefore the fines/penalties could only be in the general vicinity of the 'damages'.  So although the size of these CDO market was much larger (and the hit to the taxpayer is nearly immeasurable), "legally" (I guess, I ain't no lawyer..) the SEC could only fine JPM/G-sucks for something near the estimated damages to the buyers of the CDOs.    (Maybe someone can find the video link to help explain the argument?)

Franken_Stein's picture


Here's the standard phrase of your everyday apparatchik:

"Well, I'm just doing my job here."


I think that's what Adolf Eichmann or the guards at Auschwitz death camp also said.


Commander Cody's picture

Obama and friends, the new Mussolini gang.

jblack010's picture

I assume everyone that is railing against the "settlement" has read the SEC's complaint. Please point out to me where it says the value of the securities sold to the investors was misrepresented.