Banking & Finance
Big banks have been at the center of some of the biggest corporate scandals in recent decades. Banks are in the business of making money. In fact, their corporate charters oblige them to put shareholders’ interests ahead of their customers’ interests.
However, this does not give banks the authority to deceive customers in order to profit at their expense. The government may have decided in 2008 that big banks are “too big to fail,” but they are not too big to commit fraud without recourse.
U.S. regulators oversee the nation’s banking system and have the authority to impose civil and criminal sanctions on financial institutions that break the law. But in many cases, regulatory actions amount to little more than a slap on the wrist. As the Great Recession demonstrated, “too big to fail” banks are so intertwined with the government that the interests of the two are virtually inseparable.
Where the government cannot provide meaningful checks and balances on the power of the banking sector, it is up to private litigation to hold these institutions accountable.
Milberg’s Banking & Finance Practice Group
For over five decades, Milberg has spearheaded litigation challenging unethical practices by some of the largest financial institutions in the world. Our Banking & Finance Practice Group attorneys are actively involved in cases that directly impact large banks and lenders, proving no company is too powerful to avoid legal consequences when they act irresponsibly.
Milberg pioneered the use of class action lawsuits to litigate claims involving investment products, securities, and the banking industry. Our attorneys have successfully challenged the most recognized names in the banking industry including Bank of America, JP Morgan Chase, and Bank of New York Mellon and Wells Fargo. Our litigation has set the standard for case theories, organization, discovery, methods of settlement, and amounts recovered for clients.
Big Banks Are Getting Bigger
The 2008 financial crisis was many years in the making and had multiple causes. Among the largest contributing factors was complex financial instruments, including credit default swaps, derivatives, and mortgage-backed securities, combined with lax lending standards.
But many of the large banks whose products and practices precipitated the Great Recession were not held to account. To the contrary, despite their role in the crisis, the government deemed them too large and too interconnected with the U.S. economy to be allowed to collapse.
The so-called “too big to fail” banks—including Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo—were bailed out by the government and emerged from the recession bigger than ever.
According to an analyst at the Roosevelt Institute, these banks are “still incredibly risky” and “more concentrated than ever before.” JPMorgan Chase has increased its assets 16% to $2.6 billion since 2008, while Bank of America’s assets have grown 69% to $3.1 trillion and Wells Fargo’s grew from $1.3 trillion to nearly $1.9 trillion.
Since helping to take down the economy in 2008, big banks have said the right things as they look to rebuild their damaged reputations. However, their actions have often spoken louder than their words.
Mike Mayo of Wells Fargo said in 2020 that, “In the global financial crisis, banks were the problem.” But just a month earlier, Wells Fargo agreed to pay $3 billion to settle claims that it created millions of unauthorized customer accounts to meet sales goals. In 2022, federal regulators fined Wells Fargo a record $3.7 billion for “widespread mismanagement” such as misapplying loan payments, illegally repossessing vehicles, incorrectly assessing fees and interest, and improperly denying mortgage modifications. These unlawful activities harmed over 16 million customers, as reported by the Consumer Financial Protection Bureau.
The recent failures of Silicon Valley Bank, First Republic Bank, and Signature Bank have again put “too big to fail” in the spotlight. Economists generally agree that bank issues from the 2008 crisis aren’t playing a role in the latest banking crisis. At the same time, many believe that Federal Reserve policy is hurting smaller banks and helping the biggest banks to become even bigger due to a deposit flight away from regional banks and toward corporate banking giants.
One result could be greater deposit concentration among “too big to fail” banks, giving them more power than ever before. In May 2023, the FDIC seized First Republic Bank and sold it to JPMorgan Chase, making the largest U.S. bank even bigger.
Big banks, flush with cash, are promising to be part of the solution this time if there is another recession. All 23 of the country’s biggest banks passed the Fed’s annual “stress test,” a practice started in the aftermath of the 2008 financial crisis. That means they can continue lending in the event of a severe economic downturn. Mike Mayo of Wells Fargo said that “Goliath is winning” in these “less certain times” as the largest banks see more business flow.
If history is any guide, big banks will not hesitate to turn market uncertainty into profit opportunity—at the cost of its customers and the economy at large.
Notable Cases & Recent Recoveries
- $16.65 Billion Settlement – Milberg was part of the team that secured a $16.65 billion global settlement—the largest civil settlement with a single entity in American history—from Bank of America after it was alleged that BoA defrauded the United States Department of Housing and Urban Development by submitting claims for purported losses stemming from FHA-insured mortgage loans.
- $586 Million Settlement – Milberg represented investors in 310 securities class actions alleging a market manipulation scheme involving hundreds of initial public offerings and approximately 55 defendant investment banks. This scheme, plaintiffs alleged, significantly contributed to the high-tech “bubble” of the late 1990s and early 2000. (In re Initial Public Offering Securities Litig., No. 21-92)
- $100 Million Settlement -Milberg served on the Executive Committee representing the class in this action against JP Morgan Chase & Co. The complaint alleged that Chase improperly increased by 150% the minimum monthly payment required for customers who entered into balance transfer loans with “fixed” interest rates that were guaranteed to remain so for the “life of the loan.” (In re Chase Bank USA, N.A. “Check Loan” Contract, No. 09-2032)
- $219 Million Settlement – Milberg attorneys obtained a recovery for investors of $219 million in this securities fraud/breach of contract action against Bank of New York Mellon and Wells Fargo—one of the largest recoveries against indenture trustees in United States history.