The answer comes in the title of the bill they introduced together last week, "Truth in Settlements Act," designed to expose the misleadingly inflated numbers in the multibillion-dollar government "fines" being meted out to JPMorgan Chase and other banks.
The lawmakers claim that these big headline numbers, like JPMorgan's $13 billion settlement with the Justice Department in November for mortgage securities fraud, include write-offs and credits the bank has already made rather than actual new costs to the bank, while other charges are partly recouped because they are tax deductible.
"Agencies trumpet the topline amount they obtained while failing to disclose that the settlement includes significant tax deductions or 'credits' for routine conduct that dramatically reduce the actual value of the settlement," the lawmakers say in a Fact Sheet accompanying the announcement of their bill.
There is, in other words, less than meets the eye in these mega-fines. As long as there are no criminal indictments and no bankers go to jail, these fines make it look like regulators are cracking down, but they remain for bank executives what they have always been – just the cost of doing business.
The new bill takes a two-pronged approach. It would require regulators to disclose details of settlements, item by item, and how each was categorized for tax purposes, and it would require the companies to include any tax deductions on the settlements in their filings with the Securities and Exchange Commission.
"Increased transparency will shut down backroom deal-making," Warren said in a statement last week, "and ensure that Congress, citizens and watchdog groups can hold regulatory agencies accountable for strong and effective enforcement that benefits the public interest."
When JP Morgan rea! ched a new settlement for $2.6 billion last week in connection with failure to report suspicious behavior in Bernie Madoff's accounts at the bank, the media dutifully reported that the bank's total in fines and penalties now reached more than $20 billion over the past 12 months.
David Dayen, a blogger who has chronicled the evolution of these inflated numbers, criticized these latest reports. "That $20 billion is a FAKE NUMBER," he railed.
The headline numbers are double-counting various types of payments and charges, failing to take account of offsetting tax relief, and failing to note that it is investors, and sometimes even the bank customers themselves, who are being penalized by the measures, Dayen says.
And the press uncritically accepts these self-serving numbers from the government agencies involved. "Regulators are basically getting a free ride from the press for their inadequacy in enforcing the law," he writes.
Dayen noted in November that the famous $13 billion JP Morgan settlement, for instance, included $4 billion that had been previously announced and reported, so that the new fine was only $9 billion.
News editors, Dayen wrote in Salon, "aren't obligated to do the Justice Department's P.R. for them" with misleading headlines. "We don't say the Miami Heat beat the San Antonio Spurs 200-98, but 100 of those points came from a previous game," he said.
Moreover, he continued, half of that $9 billion settlement was in the form of mortgage relief to be distributed over a period of years, so hardly much of a hit to the bank's bottom line.
This is why JPMorgan's stock continues to rise even in the face of these record fines, as investors – apparently unruffled by the ethical and management lapses exposed by the settlements – just pay attention to the financial behemoth's powerful earnings capacity.
The Warren-Coburn bill is designed to at least expose this bait-and-switch on regulatory penalties to congressional and public scrutiny.
"Taxp! ayers des! erve to know the settlement details corporations arrange with the government, and the best place for Congress to start is with policies that enhance transparency," Coburn said of the bill.
The new bill is the second major piece of bank legislation in recent months for which Warren has reached across the aisle for a bipartisan proposal. In July, she joined with Arizona Sen. John McCain to introduce a new version of the Glass-Steagall act to separate commercial and investment banking.
Even though tougher restrictions on banks and regulators clearly have bipartisan appeal, the House Republicans' preoccupations with Obamacare and budgets means neither of these Senate bills is likely to be enacted.
But the very drafting of the legislation is a signal to regulators that not everyone is being fooled by their tardy and overblown claims of reining in the banks.
Darrell Delamaide has reported on business and economics from New York, Paris, Berlin and Washington for Dow Jones news service, Barron's, Institutional Investor and Bloomberg News service, among others. He is the author of four books, including the financial thriller Gold.
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