Big bank penalties in last five years offset industry profits for first decade of this century
That’s the conclusion from Keefe, Bruyette & Woods in a report they just released, which I can’t find online.
The analysts there calculated that the big bank and brokerage firms made $152B in profits from 2001 through 2010 (please no comments on the century and decade actually starting in 2000).
Fine and civil settlements paid by 43 banks for all settlements are $184B from 2009 up through the forex settlement last week.
I don’t know how much of the $184B had already been paid or reserved by 2010 and thus already reflected in the $152B profit. Also don’t know that the firms included for calculating profits are the same as for the settlements calculation, but am willing to conclude it is an apples to apples comparison.
Fine tune the calculation if you want, but the point remains – settlements in the last five years wiped out profits of a decade. The fines are predominantly for behavior before and right after the financial meltdown, although some of it (forex) continued through 2013.
Phrased more broadly, the reported bottom lines in the 6 or 8 years before the meltdown should have been around zero, if not losses.
The report also says the settlement numbers reflect 117 cases with a settlement of $100M more. There are an additional 174 cases still to go.
Sam Antar’s tweet (@SamAntar) that tipped me to the issue (edited to remove political overtone):
Memo to [federal government]: $184 billion in bank fines, but no jail time. You’ve turned prosecutors into tax collectors. http://www.crainsnewyork.com/article/20141119/BLOGS02/311169994/no-magic-act-alas-bank-profits-vanish …
He also said:
$184 billion in bank fines, but pennies on the dollar for victims
Memo to Bank Oligarchs: Fraud isn’t a crime. It’s a fine.
Some reading for you with more detailed coverage:
- 11/19 – Crain’s New York Business – No magic act, alas: Bank profits vanish
- 11/14 – The Street – Bank Fines Total a Whopping $184 Billion with 174 Cases Still Left