It has finally happened, a Wall Street firm has pleaded guilty to a felony. Credit Suisse, to address criminal activity that occurred for decades, pleaded guilty to one count of conspiring to aid tax evasion. The firm will also pay a fine of $2.6 billion and have an independent monitor for two years.
Credit Suisse would easily be considered a megabank with hundreds of billions worth of assets on its books (roughly $1 trillion or 924.28 billion Swiss francs), yet the sky did not fall after they agreed to accept criminal charges. Were Eric Holder and Lanny Breuer wrong to worry about catastrophic consequences for holding criminals accountable?
The Credit Suisse guilty plea for a criminal offense is the first for a major bank in the 21st century.
The rebuke from federal prosecutors as well as from the Federal Reserve and New York’s state banking regulator, Benjamin M. Lawsky, is intended as a blow against overseas tax dodging and the shadowy world of Swiss bank secrecy. The deal also signals a shift in prosecutors’ tactics. It is the most prominent bank to plead guilty in the United States since Drexel Burnham Lambert in 1989, and the largest to do so since the Bankers Trust in 1999, a bank a fraction the size of Credit Suisse.
The Department of Justice is carving out some interesting territory for prosecutions. Insider trading and tax evasion but not systemic threats. Though you could argue that the sheer scale of the tax evasion Credit Suisse helped facilitate would qualify as a systemic threat.
But what about the kind of fraud that helped crash the economy in 2008? The kind of cases former SEC Attorney James Kidney lamented not bringing to court – the ones that take on people who underwrite presidential campaigns.
If the rule of law is to have any sway then the Justice Department must demonstrate more comprehensibly that there is no such thing as too big to jail.
Painting by Gabriël Metsu under public domain.