News Release

Courts Recognize Bank Secrecy Must End; Does Congress?

For Immediate Release:

The big banks that limped into Washington a year ago now march all over Capitol Hill with their lobbyists, fighting the financial and tax reform legislation at every turn. 

But the banks’ big money doesn’t seem to influence the way some judges have been ruling lately. In three recent court cases, some of the biggest players in the financial sector ¬– global banks and the agencies who have failed to police them – have been called out.

These recent rulings – related to the Federal Reserve, UBS and Bank of America [details and commentary here] – have been far from perfect. In fact, courts often just scratch the surface of larger issues, and these decisions will likely be (or already are) subject to additional proceedings or appeals.  However, true to its promise, the system of checks and balances is doing at least a little bit of checking and balancing when it comes to one of the main problems in our broken financial system: secrecy.

While Congress is considering several bills that would address that problem, across the country there’s a genuine fear that:

  • The outrage of Main Street has been drowned out by the lobbying by Wall Street.
  • The big banks, made only bigger through sloppy bailout-era mergers and acquisitions, won’t have to change their ways.
  • Congress won’t even ask the banks how they’ve used hundreds of billions of taxpayer. dollars.
  • The SEC hesitated to weigh in on behalf of investors.
  • And that the Federal Reserve won’t tell taxpayers or even Congress who they’ve bailed out.  

But these three rulings from another branch of government represent an attempt, however temporary and however nominal, to inject much needed transparency and accountability into the murkiest parts of the financial system and the financial bailout. 

What do these three cases add up to?

The takeaways from these court cases individually are these: 

  • Exempting the Federal Reserve, or any government body, from basic accountability decreases the credibility of the institution and the trust of the people; 
  • A slap on the wrist will not deter Bank of America, or any other bank, from rewarding failure; and, 
  • Allowing UBS, or any other bank, to game the system and help hide money costs average taxpayers hundreds of billions of dollars and contributes to the economic crisis.  

The outcomes as they stand now are not optimal.  The degree to which they’ll successfully change behavior, if at all, is unknown. And, most importantly, courts can only handle issues on a case-by-case basis; they can’t write laws or set up regulatory agencies. 

But taken together as a trend, these cases send a message to our leaders in Congress and in the Obama Administration that secrecy in the financial system is a real problem and should have real consequences for those who facilitate it.  

It’s easy to talk about the need for more transparency and accountability.  It is practically a mantra heard from the right, the left and everyone in between.  

Now the courts have thrown the first punch against bank secrecy.  Congress and the Administration need to step up their game and get in the ring in a more serious way.  Then we’ll know who is fighting for greater accountability and transparency. We’ll know who is fighting for average taxpayers – and who is just spouting popular talking points.  

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