Erika Eichelberger

Erika Eichelberger

Reporter

Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Look at This Drone Deaths Interactive

| Thu Mar. 28, 2013 9:33 AM EDT

Pitch Interactive, a California-based data visualization shop, has created a beautiful, if somewhat controversial, visualization of every attack by the US and coalition forces in Pakistan since 2004. It doesn't fit on the blog, so we created a full-width page for it. You can look at it here.

Senate Agrees "Too Big To Jail" Should Die

| Mon Mar. 25, 2013 11:26 AM EDT

In a largely symbolic vote early Saturday morning, the Senate agreed that badly behaving financial institutions should not be "too big to jail," or so large that the government is afraid to prosecute them for fear of damaging the economy.

After 1,448 days without a budget, the Senate finally passed one Saturday morning. The process entailed a 13-hour voting session, called a vote-a-rama, in which lawmakers filed over 500 amendments, and voted on 70. Amendment 696 was Sen. Jeff Merkley's (D-Ore.), which would officially warn the Department of Justice that "too big to jail" is unacceptable and recommend prosecution when a crime is committed. Most of the amendments are more political posturing than anything else, because it's pretty unlikely the Senate's budget will be merged with the radically different House budget. Still, some of the add-ons, like Merkley's, are important because they point toward legislation that might not be far off.

In recent years, major US financial institutions have gotten away with book-cooking, fraud, terrorist financing, and money laundering, often without much more than a wrist-slapping. Last year, for example, the Justice Department declined to prosecute HSBC for years-long violations of money-laundering laws, slapping it with a fine instead. Earlier this month, Attorney General Eric Holder, in testimony before the Senate Judiciary Committee, admitted that the size of banks causes this kind of impunity:

I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.

At a hearing on bank money laundering earlier this month, a treasury official told senators that federal prosecutors had consulted with Treasury over the potential economic consequences of prosecuting HSBC. Sen. Elizabeth Warren (D-Mass.) was not happy. "If you're caught with an ounce of cocaine, you're going to go to jail," she said. "But if you launder nearly a billion dollars for international cartels and violate sanctions you pay a fine and you go home and sleep in your own bed a night."

Merkley's amendment would create a reserve fund to facilitate the criminal prosecution of financial institutions that break the law, no matter how big they are. Although the amendment will most likely not become law, it does indicate that lawmakers are fed up.

"Under our American system of justice—where Lady Justice is blindfolded—there should never be a prosecution-free zone," Merkley posted on his website after the vote. "But that is what our Department of Justice created...Too big to jail is wrong under our Constitution that promises equality under the law and we must end it."

Sneaky House Bill Would Gut Financial Reform

| Thu Mar. 21, 2013 12:46 PM EDT

This blog post has been updated.

A bipartisan group of four representatives introduced a sneaky little bill Wednesday that would dismantle a huge chunk of the historic financial reform laws enacted after the financial crisis.

The Swap Jurisdiction Certainty Act, introduced by Reps. Scott Garrett (R-N.J.), Mike Conaway (R-Tex.), John Carney (D-Del.), and David Scott (D-Ga.), three of whom sit on the House Financial Services Committee, would allow big banks to shift risky activities to foreign subsidiaries in order to avoid US regulations. Part of the landmark 2010 Dodd-Frank financial reform act requires that derivatives—financial products whose value is based on things like currency exchange rates and crop prices—be traded in public marketplaces, instead of in private. The new bill could exempt foreign companies from these US derivatives rules, which sounds reasonable; the law purportedly just affects other countries. But what it would mean is that huge US-based banks that operate internationally could just do their paperwork through their international arms to avoid US regulations, effectively gutting the section of Dodd-Frank that gave federal regulators the authority for the first time to regulate derivatives such as the credit default swaps that helped cause the 2007 bank failures.

The Commodities Futures Trading Commission and Securities and Exchange Commission were supposed to have finalized the Dodd-Frank derivatives laws into regulations a long time ago, but those governing international trading are still pending. The agencies are supposedly close to final rules now—SEC chair Elisse Walter said earlier this year that finalizing them was a top priority at the agency. But until they're finalized, the rules are still vulnerable to tweaking, or gutting, by crafty lawmakers. (The proposed Dodd-Frank rule on international swaps already says that countries with truly comparable regulations are exempt from US regs. This bill weakens that by presuming that international rules are comparable and making it hard for the SEC and CFTC to decide otherwise.)

Carney has defended his bill as consumer-friendly and bank-friendly all at once: "Congress and regulators must ensure that we're protecting American consumers, ending future bailouts and maintaining American competitiveness in an increasingly global economy," he said in a press release. Garrett was more straightforward about what the bill would do. "Our job creators—millions being crushed by overly burdensome Washington rules and regulations—deserve to be on a fair, level playing field with the international community," he said.

But last year, when Congress introduced a similar bill, financial reform advocates slammed it. Americans for Financial Reform, a group of national and state organizations that push for common sense financial reforms, wrote an open letter to representatives in May 2012:

The legislation "would create an overwhelming temptation to move swaps business overseas, indeed to the foreign jurisdictions where regulation was most lax compared to the US. In addition to seriously undermining the basic transparency and accountability requirements in the US, such a 'race to the bottom' would be a serious blow to the entire international effort to make derivatives markets safer.

Walter has said the derivative rules were the "critical linchpin" of Dodd-Frank because of the "global nature of the market."

Indeed, says Dennis Kelleher, president and CEO of the Wall Street watchdog group Better Markets. "The CFTC proposed very strong cross-border guidance," he told Mother Jones. "Even if the CFTC gets all of the other rules correct—if they don't get the cross-border rules right, then a lot of their other work doesn't matter."

Update: After this post was published, a spokesperson for Garrett's office, Maggie Seidel, got in touch with Mother Jones. She asserted that because the bill "fully and specifically authorizes the SEC and CFTC to regulate" derivatives, if banks are able to dodge strict US regulations in favor of more lax international regulations, the blame would fall on the agencies, not on the bill that Garrett and the other three House members drafted. Kelleher reiterates that the bill "raises hurdles" for the agencies by making it harder for them to label lax international regulations as lax.

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