Don't expect the stock market to downgrade Deutsche Bank shares over something as trifling as a $150 million Jeffrey Epstein fine.
Deutsche Bank (NYSE:DB) has agreed to pay a $150 million fine for compliance failures as it moved money for Jeffrey Epstein.
The most notorious organized sex offender in history, Epstein withdrew $800,000 from Deutsche Bank over four years. He also paid out millions from his accounts for legal fees and to numerous Russian and Eastern European women.
The New York State Department of Financial Services announced the penalty under an agreed order Tuesday. It remains to be seen what sanctions, if any, will be faced by the U.S. Justice Department, and the New York State and Florida justice system. They allowed the alleged teen sex trafficker to run wild for years. Public reaction to Jeffrey Epstein’s 2007 plea deal noted substantial irregularities.
If Deutsche Bank let Jeffrey Epstein slide without enough scrutiny, it was merely following the U.S. government’s lead.
The $150 million settlement with Deutsche Bank is the first regulatory sanction against a financial institution for dealing with Jeffrey Epstein. With revenue topping €22 billion last year, the compliance fine is a slap on the wrist.
If the history of bank fines is any indication, Deutsche Bank stock will hardly flinch. By the time Wall Street financiers grabbed lunch Tuesday, shares were down some 0.6% for the day. By comparison, the Dow Jones average was down by 0.8% at the same time.
In Aug 2014, the U.S. Department of Justice slapped Bank of America (NYSE:BAC) with a $16.65 billion fine. It remains the most significant bank penalty in history. That was for the bank’s role in the 2008 subprime mortgage crash and financial crisis.
That day, BAC opened at $15.69 per share. A month later, markets opened with BAC trading at $17.09 per share. A year later, the share price was $16.20.
Monster penalties for banks historically have little to no effect on their stock price. Even the biggest fine in history was dwarfed by the assistance the government handed out to Bank of America in the wake of the financial crisis. That included a $20 billion bailout, $25 billion more from the Troubled Asset Relief Program (TARP), and loan loss guarantees of nearly $100 billion for toxic assets on Bank of America’s books.
Government financial regulators’ schizoid policies take much less from banks with one hand than they give back with the other. That makes these financial penalties entirely symbolic.
During the financial crisis, Deutsche Bank itself received $354 billion in secret revolving loans from the Federal Reserve. The public didn’t know about the loans until the U.S. Government Accountability Office published its audit of the secret Fed program in Jul 2011.
In 2016, Deutsche Bank agreed to pay a $7.2 billion fine for its role in the U.S. housing crisis. The next month, Deutsche Bank stock was trading slightly higher, and a year later, its share price had hardly moved. It seems no one but the victims will ever really pay for Jeffrey Epstein’s shocking crimes.
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Last modified: September 23, 2020 2:03 PM