Where Will Credit Suisse's Fine Go?

This week, the Department of Justice handed Credit Suisse the largest criminal tax penalty ever. $2.6 billion is a lot of money, so NPR's Arun Rath asks the New York Times' Jessica Silver-Greenberg where it all goes.

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ARUN RATH, HOST:

For those who think big banks in America too often skate above the law, this week brought some welcome news.

(SOUNDBITE OF NEWS ANNOUNCEMENT)

UNIDENTIFIED WOMAN #1: Credit Suisse pleaded guilty Monday to criminal wrongdoing...

UNIDENTIFIED WOMAN #2: So Credit Suisse was recruiting Americans to hide their money and avoid taxes?

UNIDENTIFIED MAN #1: No bank is too big to jail.

RATH: Credit Suisse is the first major financial institution in decades to plead guilty to a criminal charge. And it's going to cost it big.

(SOUNDBITE OF NEWS ANNOUNCEMENT)

UNIDENTIFIED WOMAN #3: Credit Suisse will pay more than $2.5 billion...

UNIDENTIFIED MAN #2: $2.6 billion...

UNIDENTIFIED MAN #3: $2.6 billion is unprecedented.

RATH: In fact, it is the largest criminal tax penalty ever, which got us wondering, just where does all that money go? Jessica Silver-Greenberg has been covering the case for the New York Times Deal Book blog and I put that question to her.

JESSICA SILVER-GREENBERG: So it's really split between two entities, the Department of Financial Services, which is New York State's banking regular gets $715 million, one five million. And that's going to go into New York State coffers. And then $1.8 billion goes to the Department of Justice. That is going to go to Treasury.

RATH: Credit Suisse pleaded guilty basically to helping people avoid paying taxes. So in the end was this money the U.S. government and New York State had planned for or is this just a surprise windfall?

SILVER-GREENBERG: Well, it's not really planned for because you can't always plan, you know, how much the bank is willing to pay. So was New York planning on this money or was the Department of Justice planning on this money? No, I don't think so. I wouldn't call it a windfall but it's certainly a lot of money that they can now use to fill various holes.

RATH: Last fall, JP Morgan Chase settled over a different issue but for $13 billion. It was a settlement not a fine like in this case, but still that's a lot of money. Do we know now where that money from the settlement ended up going?

SILVER-GREENBERG: Yes. The state received more than $600 million. And that money, for the most part, has been used to help struggling homeowners. So that can be bulldozing foreclosed homes to try to bolster property values in neighborhoods that have been stricken by foreclosures and reducing their mortgage balances in some cases. And then there's more money on the federal side as part of that $13 billion settlement that's also going to similar kinds of consumer relief.

RATH: It sure seems like the Justice Department is getting more aggressive about going after the big banks. Do you think we can expect to see more of this?

SILVER-GREENBERG: They are getting more aggressive and they're also figuring out creative ways to go after the banks without wreaking kind of havoc throughout the financial system. So we know that prosecutors are currently working on a case against BNP Paribas, France's largest bank. That case revolves around accusations that the bank transferred money on behalf of countries that are blacklisted by the U.S. So, Sudan, for example.

That case, I think, we're expecting a resolution of it as early as kind of mid-June. And that's going to come with a really hefty price tag, bigger than we saw in Credit Suisse.

RATH: You know, there's of course a cynical take on this. This is sort of like when a local sheriff's department needs more for the budget and they set up more speed traps. You get a sense that these gigantic finds are a motivating factor.

SILVER-GREENBERG: You know, I think there's always skepticism and cynicism when you talk about law enforcement's interaction with gigantic financial institutions. And, you know, the defense bar would certainly agree with that skepticism. But it's a blip on the balance sheets of some of these banks. I mean, you pay not $5 billion certainly but, you know, Credit Suisse is going to be just fine.

RATH: Jessica Silver-Greenberg of the New York Times. Both the Justice Department and New York State expect to receive the Credit Suisse money in the coming days. They will deposit the money into their respective general funds.

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