Message From Plea Deal: Criminal Behavior Is Rampant on Wall Street

Note: Today, the U.S. Department of Justice announced that five major banks have agreed to plead guilty to felony charges and pay criminal fines in connection with the foreign exchange market. Four agreed to plead guilty to conspiring to currency manipulation; a fifth will plead guilty to manipulating benchmark interest rates.

There are two messages in today's plea deal: First, criminality is rampant on Wall Street. Second, the era of too-big-to-jail is alive and well. Even as they beat their chests announcing how tough they are, government regulators refuse to apply to the giant banks the same rules that apply to everyone else.

The illegal acts to which the five banks have admitted wrongdoing weren't accidents or technical violations. They were intentional violations of the law. They were conducted in concert with purported competitors. And they were hidden through use of code words.

Many of the five banks are repeat lawbreakers, and the Department of Justice deserves credit for revisiting a prior non-prosecution agreement, and now prosecuting prior crimes at the giant company UBS. But the lesson for the DOJ should be that it never should have entered into deferred and non-prosecution agreements in the first place, and it should cease using them for future corporate wrongdoing. They are simply escapes from criminal pleas with no demonstrable deterrent effect.

It is being reported that the U.S. Securities and Exchange Commission has granted a waiver to the banks from rules that would otherwise require the agency to revoke the banks' authority to undertake certain securities activities. If these reports are accurate, this action is disgraceful and intolerable. Congress must investigate this dereliction of duty at the agency.

Important questions remain about this plea deal: Will individual executives be prosecuted? And did the DOJ charge the parent companies in this case to avoid triggering potential sanctions with real and significant business consequences for the banks, including charter revocation hearings? The public deserves answers to these questions. In that information is some insight into whether the government continues to protect the megabanks - those colloquially labeled "too big to jail."

What becomes clear is that regulators genuinely are afraid of enforcing the law when it comes to the megabanks. As a result, and notwithstanding today's announcement and others like it, these banks are not deterred from violating the law - indeed, they are literally not subject to the same standards as other banks and other companies. A democratic society cannot tolerate having banks above the law. There's a solution to this problem: break them up.