This article addresses the “too big to jail” regulatory model in which large banks pay hundreds of billions of dollars to settle multiple and duplicative regulatory charges brought by a horde of state, federal, and even foreign regulators. The banks pay those massive settlements in order to keep their banking charters and to obtain immunity from prosecution for senior executives. In turn, regulators benefit from the headlines these fines generate. Much criticism has been directed at these settlements because the banks are allowed to continue business as usual and no senior executives are jailed. Other critics contend that these settlements are simply a form of official larceny that the banks must accede to in order to retain their regulatory licenses, that the settlements are hurting shareholders, and that employees are laid off in order to cover their costs. This article traces historical concerns that white-collar criminals enjoy immunity from criminal prosecution. It describes criminal prosecutions arising from financial scandals prior to the Financial Crisis in 2008 (Financial Crisis). The article then addresses the too big to jail settlement pattern in cases arising from the Financial Crisis. It concludes that the regulatory model applied in those cases is neither effective nor appropriate. The article proposes that the regulation of financial services be consolidated into a single federal regulator and that state regulation be preempted. This would stop the multiple, duplicative regulatory actions that are now common in the industry. The article also proposes that the single regulator be restricted in its ability to levy large fines, even in a settlement, in the absence of demonstrated culpability at the executive level.
Jerry W. Markham, Regulating the Too Big to Jail Financial Institutions, 83 Brook. L. Rev. 517, 578 (2018).