The Justice Department reported Wednesday that it has collected $24.7 billion this fiscal year from big banks through settlements related to charges of insider trading, market manipulation, and other white collar crimes from the mortgage crisis. Attorney General Eric Holder announced the figure and explained that the sum included criminal penalties, civil suits, and civilian debts collected on behalf of other agencies. The largest portion of these fees came from banks paying civil penalties for roles in the mortgage crisis.
The $24.7 billion is a significant achievement for the Justice Department, which was only able to collect about $8 billion from prosecution of big banks the year before. The announcement comes as Holder leaves his office of Attorney General, perhaps as an effort to promote a more positive legacy for his time in the position. Regardless, the tripling of collection figures shows that the government has been more vigorously pursuing criminals within the financial sector and having greater success than before.
These heavy fines have altered the course of the banking industry’s climb, but not drastically. Over 2014, the profits of the banking sector have skyrocketed to all-time highs. In the second quarter of 2014 alone, U.S. banks netted approximately $40.24 billion in profits. This has helped the economy grow by increasing lending rates. But as these fines have been levied, some banks are struggling to sustain profitability.
In the third quarter, large banks like Bank of America and Citigroup both revised their earnings downwards. Both corporations cited the increasing fines and legal fees they’ve accumulated, with Bank of America reporting a $232 million loss and Citigroup’s profits falling by nearly half a billion to $2.8 billion in the black. The lengthy legal battles (most of which are still under wraps) are proving to be a significant problem for the balance sheets. Other industry giants like J.P. Morgan and Wells Fargo are still surging pending their good behavior, though J.P Morgan has recently been embroiled in a currency manipulation suit. Hopefully, the aggressive litigation of the Justice Department can strike a careful balance between regulation and profitability for the benefit of the economy overall.