[ by Howard Haykin and Melanie Gretchen ]

Citigroup agreed to a $730 million class-action settlement over allegedly misleading disclosures by the bank.  In December, HSBC paid $1.9 billion to settle charges the bank allowed itself to be used as a launderer of Mexican drug money.  In mid-2012, Barclays forked over $453 million to U.S. regulator CFTC and U.K. regulator FSA on charges its traders manipulated the Libor benchmark interest rate. 

There was a time when 9-digit settlements - e.g., $730,000,000 - were few and far between.  A 10-digit monetary sanction - e.g., $1,900,000,000 - didn't exist - just never happened. 

But, as they say, times have changed.  AND HOW!   It's commonplace these days for a story about a 9- or 10-digit settlement .  Today's Tuesday's $730 million Citi deal, for example, was buried in the NYTimes Business Section - I believe on page 5.   

And, just in case you're wondering, we're not trying to single out Citigroup, HSBC and Barclays.  Those fine, upstanding global banking institutions have plenty of competition for "What Went Wrong" headlines - from Bank of America, JPMorgan, UBS, Goldman Sachs, RBS, and others.  And the problem is not only the mega-size of the settlements, but the numbers and frequency of these fines. 

• In the matter of Libor manipulation, no fewer than 12 global banks are mentioned as probable candidates for huge monetary sanctions.  
• Banks are paying off or will be ordered to pay enormous sums to Fannie and Freddie Mac, mortgage holders, and investors whose asset-backed securities were loaded with rotting mortgages and other debt obligations. 
• A recent headline referred to, yet, another settlement involving Auction Rate Securities, those pain in the ARS's. 
• JPMorgan is still paying for mistakes made by Bear Stearns and Washington Mutual.
• Bank of America is still paying for mistakes by Countrywide Financial.
• Bank of America is still paying for mistakes it made when acquiring Merrill Lynch.
• JPMorgan lost $6.2 billion on misguided strategies involving derivatives that supposedly benefited from loose risk standards and looser management supervision. 

How Do They Do It?   Yet, no matter how much money has to be paid out, or how often such fines and monetary sanctions are levied, the banks seemingly just dig into their pockets and pull out a wad of currency.  No one threatens to jump off a building in desperation.  No one seems to sweat.  

The best we can figure is that the banks have seemingly bottomless pools of loss reserves on hand - somewhat akin to black holes .  Alternatively, the banks don't have unlimited resources, but figure they can simply take from the left pocket to pay the right pocket fines and sanctions.  Of course, we know that the left pocket contains the budget for employee compensation, which invariably means there will be hundreds if not thousands of job cuts, and other reductions of basic expenditures.

But answers are not easy to come by, and determinations are guesses, at best.  Intricate accounting and inadequate disclosures preclude accurate readouts.  Lax regulatory oversight has added to the stalemate.  Whatever the reason, we haven't the foggiest notion of what's going on.  What makes all of this particularly frightening is that the worst kind of fears come from uncertainty and 'surprises.'  And that's just where we are - in a state of perpetual uncertainty. 

Worse, yet, the industry appears beset with a troubling trend – with no end in sight.  While we really don't wish it on anybody, it would be nice to hear someone once and say

[NY Times, 3/19/13] and our Perspectives story [Barclays Bonuses Take Libor Hit, 2/2/13].