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Spare the Rod and Spoil the Banker
Clipping the Right Wings at Credit Suisse

The Department of Justice has been demanding that Credit Suisse plead guilty to an “extensive and wide-ranging conspiracy” to help holders of U.S.-based accounts evade taxes. Yesterday, the bank complied, and will have to pay around $2.6 billion in fines.

No one seems to be defending the bank’s conduct. The evidence points not only to a deliberate intention to break the law, but to a management-orchestrated cover-up. The Justice Department seems to have the right plan in place here: sanction the bank, take steps to ensure future compliance, but don’t roil the markets by doing things like taking away its business license. Criminal cases against senior staff are proceeding, and here it is important that the law be sustained. These highly-paid businesspeople abused a position of great trust out of greed. As long as the violations of law were clear and deliberate (not technical or resulting from a complicated web of fine print and tricky regulations which could ensnare the unwary), then the penalties in these cases should be painful and severe for those found guilty.

It may seem odd to some that we recommend, on the one hand, treating the bank with some lenity by allowing it to stay open, but also, on the other hand, bringing down the full power of criminal law like a hammer on anyone who clearly and knowingly broke the law for gain. In both cases, this comes from what we see as a duty of the justice system to protect the common good from the consequences of crime. The potential that bank closures could set off a round of instability in the financial markets is real, and this would cause harm to many innocent people. That is a legitimate reason to go easy on the bank as a corporation, provided that adequate safeguards exist to prevent a recurrence of bad behavior. But letting guilty bankers get off lightly would also harm the innocent. It would encourage other bankers to disregard the law. Exemplary punishment of high-profile defendants in cases like this sends a signal to others in the industry, and therefore benefits the public good.

All too often judicial discretion ends up piling long sentences onto poor and obscure criminals, while letting the rich, well connected and well lawyered off with a slap on the wrist. Justice would be better served, and the public better protected, if this tendency were reversed. Rich, well connected people in positions of great trust who still commit criminal acts deserve less consideration than the smaller fry.

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  • PKCasimir

    Switzerland is not a country but a criminal conspiracy. Its “neutrality” has allowed its banks and bankers to prosper on the profits derived by managing the funds of some of the most odious people in the history of the world.
    Americans should acquaint themselves with the notorious Swiss high-security, punishment prison called Straflager Wauwilermoos” (literal English translation – “prison camp at the swamp of Wauwil”) used to detain American flyers during WW2 who tried to escape their internment in Switzerland after being shot down. Swiss authorities used it to discourage American prisoners from escape. American flyers were beaten, raped, and forced to live in lice-infested, filthy conditions. The Commandant, believe it or not, was a former officer in the French Foreign Legion named Capt. Andre-Henri Beguin, corrupt as he was cruel, and wore a Nazi uniform.
    For those who think I am making this up, I would recommend “Masters of the Air”, by Donald L. Miller, the best book written on the Americans who conducted the air war against Nazi Germany.

  • foobarista

    This is silly. The US should adopt a consumption tax and abolish overseas taxation (which almost nobody else does). But doing so would put lots of bureaucrats out of work and get rid of a populist talking point, so it won’t happen.

    The US is making American citizenship a liability to the point where lots of people are being advised to renounce it, and if they’re immigrants, to not bother getting citizenship.

  • Andrew Allison

    Isn’t “don’t roil the markets by doing things like taking away its business license” a license to steal if you’re big enough to roil the markets? It strains credulity to suggest that the senior staff against whom criminal cases are proceeding were not acting with the full knowledge of senior management. The villain here is the institution, and $2.6 billion chump change.

  • gabrielsyme

    Evading American taxation is not a moral delict for those not subject to American law. It is not clear whether it is solely US-based employees who are being criminally charged. While Credit Suisse must follow American law since it operates in the US, it would be appalling overreach to attempt to enforce American law on Swiss nationals working in Switzerland.

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