A recent New York Times article exposes the double standard in regard to enforcement actions between community banks and too-big-to-fail institutions. The article finds that nearly all of the largest Wall Street financial firms have repeatedly settled fraud cases by promising to never again violate the antifraud laws, only to do so over and over again. According to evidence revealed in the article, there were at least 51 violations in just the past 15 years, with several of the largest banks in the United States having violated fraud laws multiple times in just the past five years alone!
Any community banker or director reading the article should be outraged. There are no consequences for senior officers and boards of these systemically dangerous financial firms. However, community bankers and directors who, in good faith, sat on the boards of failed community banks are routinely pursued individually and collectively by bank regulators both civilly and, in some cases, criminally.
What is that all about? Certainly not equal justice, I will guarantee you that. It is justice by size and influence—sometimes called crony capitalism. Whatever you call it, don’t call it equal application of the laws.