Billions and Billions in Fines. Sort Of.

With great fanfare, the Justice Department has announced a settlement with JP Morgan Chase, bringing a close to a batch of civil investigations on payment of a "record" $13 billion fine.

$13 billion sounds like a boatload of bucks to me. And it is.: "The settlement amounts to roughly half the bank's annual profit," report Ben Protess and Jessica Silver-Greenberg in a DealBook piece in today's New York Times. The writers quote US Attorney General Eric Holder:

The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over. No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability.

But the "size and scope" of the settlement isn't quite as rich as it appears at first.

For one thing, it includes a $4 billion settlement reached earlier this fall with the Federal Housing Finance Agency. So it's really a $9 billion settlement.

Still pretty good, right? An acknowledgement that things got crazy out of whack, right? Not really.

As Matthew Yglesias points out in his article for Slate, "just $2 billion takes the form of an actual fine." (I like that "just"!) As for the rest: "The $7 billion in other compensatory payments Morgan will have to make is tax deductible, which assuming they've got smart accountants and lawyers working for them will reduce the real pain by somewhere in the $2-$3 billion range."

And as David Dayen writes for Salon (full article, here),

Nearly half of the [$9 billion] figure comes in the form of “mortgage relief,” which an independent monitor (and what’s so independent about a monitor chosen by the bank?) has four years to distribute. Any time you extend the time horizon of a penalty, you’re reducing its real value.

Sigh.

The government had earlier claimed that it was holding out for an admission of guilt, but in the final statement, JP Morgan Chase admitted to no violations of law. Thankfully, Justice did get a concession that the bank would not try to recoup any of the $13 billion from the Federal Deposit Insurance Corporation (yes, you read that right. New definition of chutzpah!)

Tony West, a senior Justice Department official who worked on this "deal", apparently believes that steep fines will discourage repeat bad behavior.

I wish I thought he was right.

Instead, I'll agree with Bart Naylor, a policy advocate at Public Citizen, whom Protess and Silver-Greenberg quote: "Unless you hold the executives accountable, it really is just the cost of doing business."