Fines Are Tax on Banks’ Extra Profits, KrawcheckDakin Campbell and Robert Friedman
Sallie Krawcheck, a former executive at Bank of America Corp. and Citigroup Inc., said government fines and charges levied on the largest U.S. banks are a tax on excess profits the lenders made.
“There is a cost of over-earning in which some of that money gets paid back to the government in fines,” Krawcheck said today at The Year Ahead: 2014, a two-day conference sponsored by Bloomberg LP in Chicago.
The six biggest U.S. lenders have piled up more than $100 billion in legal costs since the financial crisis, including settlements and lawyers’ fees, data compiled by Bloomberg show. JPMorgan Chase & Co., which posted three years of record profit through 2012, reached a $13 billion settlement tied to mortgage bond sales yesterday. The firm still faces criminal probes that range from possible bribery in Asia to its relationship with Ponzi scheme operator Bernard Madoff.
“We can talk about whether it’s a fine for wrongdoing, we can also talk about it as a tax on over-earning,” Krawcheck said about JPMorgan’s accord. “It really has implications for the industry as you look to other banks and what they are potentially going to pay.”
Krawcheck, 48, grew up in Charleston, South Carolina. She was Citigroup’s chief financial officer and head of strategy, and later ran the New York-based bank’s wealth-management division until late 2008, when she was replaced by current Chief Executive Officer Michael L. Corbat. She joined Charlotte, North Carolina-based Bank of America in August 2009 to run wealth management before being ousted amid a management shakeup in September 2011.
Krawcheck didn’t see executives acting illegally during her career, she said today. At Citigroup, she spent hours looking for activities that broke the law, she said.
“I was at senior levels in these companies. I saw people who were overconfident, I saw people who took on too much risk, I saw people who made mistakes, I never saw the law broken,” Krawcheck said. “Stupidity is not a crime, too much risk-taking is not a crime.”
Krawcheck, 48, is owner of 85 Broads Unlimited LLC, a network that promotes women as business leaders.