Almost a year ago, during my first banking committee hearing, I asked several federal regulators a simple question: When was the last time you took a Wall Street bank all the way to a trial for breaking the law?
The regulators were stumped. After some hemming and hawing, they said they didn't need to take the biggest banks to trial for breaking the law because settlement agreements were tough enough to enforce the law.
I was a little skeptical.
But here's the deal -- if the regulatory agencies are so confident that settlements are a good deal for the taxpayers they represent, then you would think they would be willing to publicly disclose the key terms and conditions of those agreements -- hang it right out there so everyone can see what a great job they did on behalf of the American people. But too many times, that isn't what they do.
Instead of making all the terms pubic, they announce a big "sticker price" for the settlement, then hide the details in fine print or fail to disclose that the company will get a big tax deduction or -- worst of all -- declare all the terms of the deal "confidential."
Senator Tom Coburn and I have introduced the bipartisan Truth in Settlements Act to require accessible, detailed disclosures about these agreements so the public can hold regulators accountable for these deals.
Sign up now to show your support for the Truth in Settlements Act.
These hidden details can make all the difference. When you dig below the surface, settlements that seem tough and fair can end up looking like sweetheart deals.
Last year, federal regulators cut a deal with thirteen mortgage servicers accused of illegal foreclosure activities. The sticker price was $8.5 billion -- which is a great headline. But a loophole in the way that credits are calculated could end up cutting that value by more than half.
Wells Fargo settled a case involving the sale of fraudulent mortgage securities for a fraction of what JP Morgan had to pay in a similar case -- but since the Wells Fargo agreement is confidential, we have no idea why they got such a better deal.
And the list goes on.
Our bill takes several steps to fix these problems:
- It requires federal agencies to explain in written public statements that reference a settlement amount whether any portion of that "sticker price" is potentially tax-deductible or includes the cost of "credits."
- It requires federal agencies to post basic information about settlements over $1 million on their websites.
- It requires companies that settle with enforcement agencies to state in their SEC filings whether they have claimed a tax deduction for settlement payments.
- It requires federal agencies to explain their reasoning publicly any time they deem a settlement confidential.
- And it requires federal agencies to report annual aggregate statistics on confidential settlements.
Increased transparency will help ensure that Congress, citizens and watchdog groups -- people like you and me -- can hold regulatory agencies accountable for strong and effective enforcement.
The job of the regulators is to make certain that no one is above the law no matter how powerful or well-connected they are. The Truth in Settlements Act is one way to keep their feet to the fire to see that promise through.
Sign up now to show your support for the Truth in Settlements Act.
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