Is the Era of Too Big to Jail Coming to a Close?

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May 14 (Bloomberg) -- Bloomberg's Kei Geiger and Sheelah Kolhatkar discuss the U.S. Justice Department's investigations into BNP Paribas and Credit Suisse. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

National correspondent from "bloomberg businessweek." this is a big deal and we are finally talking about a. it's a pretty big deal for the cases we've seen over the last few years.

But essentially will happen is this will have a fine and a guilty plea.

This is really a game changer in terms of how this will deal with banks and whether they are serious about too big to fail or jail.

I'm not saying that $3 billion is going to do it -- there is a worry that you are destroying something that is serious and important integral part of our economy.

Dave chosen two foreign banks as the test case for this kind of settlement.

There's no way to know for sure, but you cannot help but notice that they did not take on the hometown banks.

Jpmorgan or anybody else.

The regulatory applications are less if they were jpmorgan or bank of america.

They have been doing the right thing to ensure that it would minimize the broader fallout to the rest of the economy.

Why should the banks reach an agreement or reach a deal?

We will take this as far as you want to take it.

They really have something to hide.

I don't think they have a choice.

To go along with what the regulators want out of this deal, a couple years ago, we size similar case with bnp paribas and standard chartered and they were going to hold a license if they did not go through the process to settle.

There are a lot of ways they do not have.

Collect a major ceo told me recently that they have us over a barrel.

-- a ceo recently told me they have us over a barrel.

They say they will remember it because they have been punished in some cases for having to pay fines over things they were doing during the financial crisis to help them out.

Essentially, they don't have a lot of leverage.

That's the argument.

The markets were certainly struggling.

As they are too rabid, you'll end up with a much smaller industry and maybe that is ultimately the best thing.

Banks have gotten too big and they have been too powerful and able to do things that they should not be doing.

Nonetheless, it is creating some concerns in the investment community.

It has been hotly debated.

These diluted shareholder value so it's not really seen by many critics of the system as a way to really significantly punish the bank which is why we think they're going the next up of trying to extract a guilty plea which could impact different businesses and impact revenue but we don't know because we have not seen it before.

You think about it, sheelah, who needs it?

Why don't you just say if the revenue and opportunity is not significant that you are willing to deal with all the regulatory hurdles?

It probably is, right now, but you wonder at what point do you reach the threshold where you say, we will take our business elsewhere.

We don't have to be here.

Bikes they can always make that thread and follow through, but this is a major market for them.

I think it would be a huge business disadvantage -- you run the risk that maybe your executives could go to jail.

Is that a risk here?

Like to does not seem to be in the car.

The moment and that is something that a lot of critics have brought up.

Eric holder posted this video and the justice department saying that no bank is too big to jail.

He's talking a good game.

Like that's right.

-- that's right.

No one really seems to be at risk of facing prison time or a trial.

Is that because they are willing to do a plea deal?

One of the big criticisms that we did not get, the type of cases against individuals, we did not get bankers or ceos.

These cases have nothing to do with mortgages, derivatives, all the things that people were clamoring for.

There might be something different about these cases and maybe there are individuals that could be implicated.

The new york state banking regulator has said he would like to get individuals on this case which we have reported previously.

Maybe there's a chance they are going to test that as well with the individuals with just a guilty plea.

We'll watch that very

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