On Wall Street, bonus time comes a little before fine season, usually. Fines — for improper practices and fraud by financial corporations — are exacted mostly by three federal agencies (the SEC, FINRA, and CFTC) and a huge host of state agencies. For the biggest banks and stock trading firms, this happens throughout the year, EVERY year.
Here are some of the biggest fines Wall Street firms and the Big Banks have had to pay in recent years:
1. $722 million, JPMorgan Chase — For its role in the 2009 wreckage of a sewer refinancing attempted in Jefferson County, Alabama, JPMorgan was fined this amount by the SEC. The bank allegedly paid bribes to county officials in order to get the refinancing contract with the county. The deal was fraught with derivatives as part of the loan. Jefferson County is now bankrupt, sewer rates for residents have skyrocketed, and they are in endless debt.
There were more municipalities to file for bankruptcy that year too, for very similar reasons, in multiple states.
2. $550 million, Goldman Sachs — This fine was demanded of Goldman Sachs in July 2010 (but was still pending, as of March 2011) by the SEC, who sued the Wall Street firm for fraud related to only one mortgage security.
Abacus 2007-AC1 was the name of that security. The Abacus deal involved John Paulson, famous hedge fund manager who has probably made more than anyone else in shorting funds. Goldman Sachs failed to disclose to investors — who were going long on the deal — that Mr. Paulson was involved in choosing the components of that bundle of mortgages… and that he was also betting against it.
3. $515 million, Bank of America — Fined in 2004 for permitting improper rapid trading of mutual funds in its Nations Fund. At least half was for investor restitution.
4. $285 million, Citigroup — In December 2011, Citigroup was fined this lordly sum relating to a CDO containing toxic subprime mortgages. It is still in question, as U.S. District Court Judge Jed Rakoff didn’t like it, since they are not required to admit to any guilt for the sales.
5. $280 million, JPMorgan Chase — In June 2011, JPMorgan Chase paid this huge fine for its “Squared CDO-2007” deal, which resembled the “Abacus” of Goldman Sachs. Just like Goldman, JPMorgan had failed to let investors know that another party betting against the fund had helped make it.
6. $215 million, Citigroup — Way back in 2002 Citigroup paid $215 mil to settle a case brought by the FTC claiming that part of their company, The Associates (later CitiFinancial) deceived customers to get them to refinance at interest rates amounting to usury.
7. $137 million, Bank of America — This may be one of the most egregious cases, with a sadly inadequate fine, of all the fraud, collusion and predatory practices seen in the Big Banks and stock firms during the last few years. It was found in 2010 that a conspiracy to rig bids on municipal bonds contracts had been carried out among the biggest banks. JPMorgan Chase, UBS, Wachovia, and others were implicated along with Bank of America. They took turns being “awarded” contracts in dozens of local bonds derivatives contracts.
The SEC demanded for its fine only $36 million; but another $101 million was added to the penalty by multiple state and federal agencies. It is estimated to have cost taxpayers over $1 billion.
……. As huge as these amounts seem, they are tiny in relation to the sums earned by the respective companies. For instance, what JPMorgan CHase paid for the Squared fines was less than 2 days’ income that quarter. In 2006, Citigroup grossed $38 billion from subprime home loans…. wait for it…. and their net profit that year was $28 billion.