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Deterring Financial Crime—Reconciling and Improving Upon the Diverging Approaches of U.S. Antitrust and Financial Regulation

Posted  March 20, 2013

By Gordon Schnell (published in Competition Policy International’s Antitrust Chronicle)

As they appeared before the U.S. Senate Banking Committee last month, financial regulators seemed more than a bit discomfited when asked about the last time they took a big bank to trial.  It was a rhetorical question more than anything.  And the media played it up as another example of what some see as the government’s “too-big-to-fail” approach to regulating the banking sector.  In fact, there was more to it than that.  The Committee’s not-so-subtle rebuke underscored a fundamental divide in how financial crime is being regulated in the United States.  It is not about any kind of selective willingness to push a case to trial.  Few cases go to trial these days, particularly when the government gets involved.

Rather, it is about how differently the U.S. treats financial crime depending on whether it falls within the arena of antitrust or financial regulation.  Only with the former has the government shown any kind of zeal to put the individual wrongdoers behind bars.  Indeed, seeking criminal sanctions and jail time has become the driving force in the Obama administration’s redoubled efforts to stamp out illegal cartel activity.  But when the banks have been implicated for their various mortgage machinations and other acts of financial malfeasance, nary a noise is made about any criminal prosecution.  To the contrary—it is most often just a fiscal slap on the wrist and they are on their way.

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