Is the U.S. Justice Department Extorting BNP?

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May 21 (Bloomberg) -- Douglas Burns, a former federal prosecutor, Harvard's Robert Kaplan and Bloomberg's Keri Geiger discuss U.S. prosecutors seeking a guilty plea from BNP Paribas. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Number is a biggie.

It is double what credit suisse just paid to get a guilty plea.

Their issue's related to tax evasion.

This number is getting cold to the threshold -- close to the threshold of bnp paribas can take before it affects their ratios.

That number is not be taken lightly -- is not being taken lightly.

It is not like one of the huge banks that can absorb a make a fine -- absorb a mega-fine.

The thing $500 billion could -- do you think $500 billion could impact the bank?

I do.

It is a big slam him -- big sledgehammer.

The 800 pound gorilla -- taking your license away.

A lot of commentators have said in day-to-day action we cannot threaten action to get a civil result -- that's one of the problems here.

It came out around this time yesterday, and they said the problem with the credit suisse situation and the guilty plea is that no one is actually named.

How can you have this criminal guilty plea when no one is -- you made a better point than i made, which i was trying to make, you're not charging individuals.

That's the 800-pound gorilla.

Nobody wants to face prison.

They charge the company as an entity and, in return, they get a huge monetary number.

It is somewhat murky.

It is somewhat murky at the gray.

If-- it is somewhat murky ethically.

Here, it is all mixed under the same umbrella.

Is it like a weird kind of extortion?

I'd used that word on bloomberg before and i've said extortion is a strong word.

I'm not saying technically it is extortion -- but it might be a shade of it.

It is a gradation of it.

Bnp paribas, credit suisse -- think we are going to see more, and are they all going to be foreign?

They probably will see more.

The thing i watch in these is their credit spreads and to make sure they are still finance able -- financeable.

Credit suisse was up on the news yesterday.

It hasn't threatened their viability.

Companies that went out of business.

It hasn't seemed to threaten the viability of either of these.

You can destroy a company just charging them.

That comes into the calculus.

Arthur andersen, ultimately vindicated, company destroyed.

Too big to jail.

And a reversal of that term almost a year to the date.

There was some caution by way of the justice department a year ago that banks may be too big to jail.

Then we saw a strong reversal on that by holder just a couple of weeks ago.

Again, there is no individual named in any of this.

Individual prosecutions, what mccain said in his statement, why isn't there a shakeup at senior management in the c suite on this or on the board?

It is becoming the cost of doing business, as was said.

How does it affect the bottom line?

What does it look like to investors?

It doesn't equate to charging an individual.

Should he retire?

Why would he?

If you don't have to and if your stock price isn't getting killed -- that tracks back into the game that i was describing.

Nobody has to retire.

Only the entity is named.

It makes money.

It's a good payday.

It's not -- it's not a level playing field.

The company doesn't know what the government's proof is.

They have the -- they know they have a arthur anderson factor in play.

They will be walking on egg shells.

Does it affect other foreign banks' willingness to do business in the u.s.? will it?

I think it affects the mindset of every bank.

I think foreign banks want to be here because it is a huge market and this isn't going to stop them, i don't believe, but i think in the leadership of every bank, they are aware -- they are aware they are being watched very closely and, if they make a mistake, or -- he was not personally involved, but there was a supervisory problem.

That can cost you your career and your reputation.

You saw that in sac.

They charged him with supervisory failure.

It is equally potent.

It has a chilling effect when you run a bank, which is why the banks are worried.

Can they attract, retain, and keep their top people?

Is it easier to go to another kind of business which is somewhat less regulated?

Regulation in and of itself has -- since 2008, has just exploded.

If you look at the number of regulatory agencies in the u.s. government, a relatively short period of time, 30 years, you would be amazed.

People are relatively familiar with the security and exchange commission.

Some 300 regulatory agencies.

Very vulcanized.

I'm less worried about the health of the banks.

I do worry they are pulling capital away.

This is a separate subject from the regulatory push.

There is not as much liquidity in two-way markets.

But you will see it in the next credit crunch.

People may be surprised, including those in congress that pushed for these changes, may be surprised how wide credit spreads and how quick they gap out.

Thank you very much for all your reporting on this.

Great to have you here.

This text has been automatically generated. It may not be 100% accurate.


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