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Not Nearly Enough: Why Bank of America Record $17 Billion Settlement Is a Rip-Off

BofA’s punishment does not fit the crime.

Back in 2012, the Democrats held their national convention and partied down at the Bank of America stadium in Charlotte. The fact that the stadium was named after an enterprise that had ripped off millions of hard-working Americans was not lost on many observers, but didn’t seem to bother the Dems a bit. Now the Democrats risk of losing control of the Senate in the congressional midterms, so they’d like to talk about getting tough on abusive banks and standing up for the little guy.

Here’s a headline they’ll be trumpeting: BofA has reached a record settlement of nearly $17 billion following investigation into its role in the sale of mortgage-backed securities before the 2008 meltdown. The Associated Press reports that the banking giant will pay $9.65 billion in cash and provide consumer relief valued at $7 billion.

Sure, this is the biggest settlement stemming from the economic crisis that sent millions of Americans into the streets after their homes were lost to foreclosure. (Earlier this year, Citigroup paid $7 billion and JPMorgan Chase & Co. for $13 billion for their respective abuses.)

The deal forces BofA to admit to wrongdoing in misrepresenting the quality of its residential mortgage-backed securities issued by itself and by Countrywide Financial and Merrill Lynch, which were acquired by the bank when they were about to go under in 2008. (Walker Todd of the American Institute for Economic Research has noted that such wrongdoing admissions typically fall short of owning up to criminal guilt and thus protect the company from lawsuits.)

What the settlement doesn’t do is address the Obama administration’s failure to rein in too-big-to-fail banks, which are bigger and more dangerous than ever. It also fails to appropriately punish executives for detonating the world economy out of greed and inhumanity. In the end, fines don’t matter much to banks as big as BofA.

If somebody steals a soda from a convenient store, they’re likely going to jail. But when banks and financial firms rob, defraud and mismanage the money of Americans—and even cast them out of their homes illegally—a fine is the worst they can expect. Such fines are simply factored into the cost of doing shady business. The fines may be bigger than ever, but these megabanks go right on making profits, humming along as if they were bitten by a pesky mosquito.

Don’t think for a second that the banks don’t have sneaky ways of making you pay for their fine. Maybe customers of BofA will have a little sneaky fee added to this or that transaction, something a little more under-the-radar than the blatant (and completely unreasonable) $5 fee for debit cards they tried to slap on customers a couple of years ago. But they’re bound to figure out something. There are other ways you pay, too. Taxpayers are paying for big banks to enrich themselves and enabling their bad behavior through our subsidies: banks can borrow money at a lower rate because creditors assume the government, on behalf of taxpayers, will bail them out in an emergency. Of course, this subsidy only encourages them to engage in more risky behavior. And we know who gets to pay when it all hits the fan.

Some experts hold that unless a fine is big enough to potentially force a company out of business when it commits abuse at an epic level, the fine is, by definition, too low.

BofA’s punishment does not fit the crime.