Seems like an absurd question, “How do you arrest a bank?” Well, it is absurd. Someone said, “If corporations are persons, then why doesn’t Texas execute some of them?” That is another seemingly absurd, though valid, question. The answer, of course, is simple. Corporations – including banks – are not persons, nor could they be. Jails are physical structures meant to house criminal persons – living organisms of the species Homo sapiens who have violated laws.
Corporations are not living organisms; they are legal sets of formal relations between (replaceable) humans, specific relations that are sanctioned by the state chartering process. You can’t jail a relationship. If Texas wanted to execute a corporation, it could only do so by rescinding its charter and disbanding it – then it would be “dead,” i.e., it would no longer exist. Without a valid legal charter, its state-approved legal incorporation papers, a corporation does not exist. Persons are not chartered; they simply exist in nature and have some natural lifespan. Corporations, including banks, exist indefinitely until they either fail on their own or their charter is revoked. But they cannot be jailed because they are not living persons.
Managing Banksterism, or Not
In the real world, persons and corporations are clearly very different phenomena, no matter what twisted logic a jurist may come up with. The foolishness over this pseudo-issue is at the root of the deep institutional corruption that has infected our political economy. We have all but forgotten that corporations are legally chartered by state or federal authority and – theoretically – can be as easily disbanded. When some (usually small regional) banks have gotten into trouble, they have been allowed to fail. Bank assets have been seized, insured depositors paid. They may be either reorganized with infusions of cash and may be taken over by a solvent bank. The other option is to “resolve” the bank by liquidating its assets – that is, the bank is disbanded, or in Texas terms, it is executed. But some mega-banks have become so powerful that they are deemed “too big to fail.” That kind of power encourages further corruption.
You can’t physically arrest a bank, but if you are the government banking authority you can institutionally arrest its corrupt practices or, if willing, “execute” it. But the financial elite today is so powerful that it seems to “regulate its regulators.” Also, a “shadow banking” system has arisen in the form of “non-banking financial intermediaries,” that is, speculative financial institutions that fall outside the normal banking regulatory structure. These “shadow banks,” along with the giant investment banks, caused the 2008 financial crisis by their misdeeds. The greatest threat to banking and monetary systems today is the imaginary “too big to fail” status of mega-banks and shadow banks. “Too big to fail” assures that failed gigantic financial speculation will be “bailed out” by the government to avoid institutional failure. These shadow banks and mega-banks have been allowed by political authorities to rule economies. They directly threaten the viability of those same economies by their corrupt behavior.
Corrupting the Economy
Corruption used to be a personal thing. So-and-so embezzled a half-million dollars from his employer. A cop demanded tribute to ‘protect’ shop keepers from ‘the mob.’ Etc. Today, however, something much more vast and sinister is happening. Financial power elites are high-jacking entire economies, both here and abroad, by manipulating stock markets and currencies. “We the people” are paying the financial elites for “protection” from the collapse of our economy that will result from their corruption. But we get no real protection. The mega-banks and shadow banks and their executives continue to be protected from the losses their risky behavior causes. Fines and penalties to these institutions are not real punishments; they are merely passed on to shareholders. That will inevitably result in the public eventually paying for Banksterism with government bailouts.
The mega-banks, shadow banks, and the other corporations they control are so big and powerful that actions they take can yield obscene profits by secretly fixing interest rate spreads and other financial factors. Like the Ponzi schemes of sub-prime mortgage derivatives, the continued and various forms of banking corruption tolerated by government will cause the next financial crisis. When the risks of their speculation and manipulations come home to roost, it will be the society at large who will pony up the costs of keeping the economy from complete collapse. Meanwhile, the jackals of Wall Street award themselves bonuses and take vast infusions of dollars from the Federal Reserve to cover their losses. The bailouts will, just like last time, be backed by new federal debt – our debt.
Arrested Development of Justice for Banking Crime
JPMorgan Chase, Citigroup, Barclays and Royal Bank of Scotland recently “pleaded guilty”* to several financial crimes involving manipulating currency markets around the world. The players even called themselves “The Cartel,” and communicated via a private chat room. Brazen young “Masters of the Universe” secretly colluded to control currency prices to trade them for huge profits. Most of the employees who committed these crimes were fired by the executives that had enabled a climate in which such behavior was condoned. The executives suffer only slight embarrassment. If it were not so insane, the biggest banks in the world “pleading guilty” would be as absurdly amusing as putting a bank in jail.
Less than a month after her Senate confirmation, Attorney General Loretta E. Lynch announced her intention to “prosecute financial crimes.” Yet in secret negotiations, the banks were allowed “waivers” to continue doing “business as usual.” Further, the Justice Department did not indict any of the persons who carried out these schemes or the executives who encouraged them. Instead, it imposed “penalties” on the banks to “pay” for the crimes of their employees. The combined penalties, around $5.6 billion, constitute a loss for shareholders, but mean nothing to the bonus-bloated executives and are a drop in the bucket compared to their multi-billion dollar schemes.
How do you arrest a bank? It’s really a simple matter of justice. Indict and prosecute the actual criminals, including the responsible executives, and “resolve” the corporation – in effect, execute it, terminate it. Distribute its assets to more deserving institutions such as local and regional banks that serve the financial needs of the nation. Assign the losses to the perpetrators, not the public. “If a bank is ‘too big to fail,’ says Bernie Sanders it is too big to exist.” Of course, none of this is likely to happen under current political conditions. But the banking crisis is one element in the converging crises of our time, which together are preventing us from responding to the very processes that are leading to societal as well as climate collapse.
* Michael Corkery and Ben Protess, “Rate rigging makes felons of top banks; 4 fined $5B.” The New York Times. [reprinted in the Santa Fe New Mexican, May 21, 2015, p. A-1]