“Rigging of Foreign Exchange Market Makes Felons of Big Banks,” reads a recent New York Times headline. Recently, four large, international banks pled guilty to charges related to the illegal manipulation of international currency markets. They will pay record-sized fines. Again.
Actually, the part of this scandal I’m interested in this time around is what’s in the headline. Specifically, I’d like to ask: can a bank even be a felon? And if so, what does that mean?
Let’s think about this. An individual who commits a felonious crime and then pleads guilty will probably receive some sort of punishment and then have a conviction on his or her record. That individual, thanks to the criminal record, will lose certain rights and privileges, depending on the jurisdiction, such as the inability to hold some sensitive jobs or the revocation of the right to vote. And heaven help you if you’re in a three-strikes jurisdiction; repeat offenders run the risk of life imprisonment.
The banks pay fines. Even if they are repeat offenders.
If a crime involves more than one individual, sometimes even if that involvement is just tangential or incidental, a host of additional charges and penalties can be imposed, from aiding and abetting to racketeering to conspiracy.
The banks, after admitting to colluding with each other (and not for the first time) to defraud other market participants, pay fines.
The elephant in this room, of course, is the fact that banks can’t go to jail, because they aren’t people (this nonsense notwithstanding). In fact, the major purpose for the invention of “corporations” is to provide as many benefits for its members as possible while exposing those members to as little liability as possible. In plainer English, the company’s job is to get the most profit with the least responsibility.
If you look at what just happened, you can see how good they have become at it. I mean, they just got caught cheating again and managed to get little more than a fine and a warning. Imagine: the express delivery companies get together to hack traffic systems and bribe local cops so they can speed dangerously and deliver packages faster, then they get caught and plead guilty–and all they get is a few speeding tickets. That’s kind of what this is like.
But even that’s not quite on target, because–as the Times article points out, no one of any significance is going to jail or even paying individual fines. The companies are facing punishment. Basically, a group of people can get together as a corporation, a legally recognized entity, and get away with all kinds of illegal activity without facing real consequences. In theory, that’s the whole point of a corporation, as I mentioned above.
Does anyone else think it’s stupid that that’s how things are supposed to work?
It’s individual people who make the decisions to cheat. If they don’t face consequences directly, they have no reason to play fair. Ever. Which, of course, is why we see repeat offenders among the “banks.” By which we should always think “bankers.”
Of course, this isn’t just about banks; it’s a problem with the relationship between corporations and the law. Specifically, Mitt Romney was literally correct if you look at the letter of the law: corporations are indeed recognized as people, which allows legal responsibility for misconduct to be redirected from the humans who broke the law to the company designed specifically to protect them from said responsibility–or liability. “LLC” (a common way to organize a company) stands for “Limited Liability Corporation”; think about what that really means.
What’s interesting is that the legal recognition is constantly reinforced in the law. I mean, have you read any recent legislation? Take a look at H.R. 1907, the Trade Facilitation and Trade Enforcement Act of 2015, which is right now making its way through Congress. In brief, it’s a bill to help protect American interests, both corporate and public, when we get involved in international trade. There’s lots of good stuff in there, if you ask me. There’s also some not-so-great stuff. Then there’s Title VI (Miscellaneous Provisions), Section 608 (United States-Israel Trade and Commercial Enhancement), Subsection g (Definitions). In this section, we get to see several definitions of a “person.” There’s a “foreign person” (608(g)(2)), which is both any “natural person” (a human) who is not at least a permanent resident and “any foreign corporation, business association, partnership, trust, society or any other entity or group that is not incorporated or organized to do business in the United States, as well as any international organization, foreign government and any agency or subdivision of foreign government, including a diplomatic mission.”
That’s a mouthful, but the point is that section 608(g)(2) of this law specifically defines “foreign person” in a way that includes corporations. Oh, and 608(g)(4) does the same thing with the definition of “United States person.” And 608(g)(3) ges a step further by doing the same for just plain old “person,” except that it specifically excludes governments and government entities that do not operate as business enterprises.
So corporations are people, after all.
Which brings me back in my question: what does it mean for a corporation to be convicted of a felony? The Times article notes that the public may lose faith in the banks; given the way things have gone in the last thirty years, I’d say that’s a meaninglessly low standard. And it’s definitely not enough to make them stop breaking the rules.
People need to go to jail. And by “people,” I’m not referring to legally recognized group entities. Because even though a CEO might get fired, he or she isn’t going to get a conviction on their record; they won’t forfeit any of their ill-gotten gains; they’ll probably just go consult for a hedge fund or become a lobbyist.
At some point we have to look up from the law books, take a step back, and just say this is wrong. Let’s start from there.