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It was hard not to cringe when hearing about Bank of America's almost $17-billion (U.S.) settlement with the U.S. Department of Justice (DOJ). The settlement is the largest banking fine ever, eclipsing the $13-billion levy against JPMorgan Chase & Co. and dwarfs the $7-billion fine against Citigroup Inc. These fines are directly related to the behaviours leading up to and during the financial crisis. Sure, they make for great headlines, but there could be some serious consequences.

First, the DOJ is waging a political campaign against these institutions because it ‎can. The DOJ is wrestling these settlements out of the banks because everyone knows that there is not much sympathy for Wall Street. It is cheap political grandstanding that is not focused on deterring future behaviour, but designed to capitalize on misguided public opinion. Perhaps if regulators were not careless themselves in the first place, some of these negative behaviours might have been more contained.

Second, these fines are not nearly as impactful as they are initially portrayed. Consider the fine against Bank of America. The cash paid by Bank of America will be approximately $10-billion, with the remainder accounting for consumer relief given to those homeowners struggling to repay their loans, loans that borrowers shouldn't have received or accepted in the first place. Make no mistake, these settlements are all about headlines and flash. The substance of these fines does not address the root causes, or the main actors of the crisis.

Third, look at who is being punished. The settlement will cut Bank of America's third-quarter profit by an estimated $5.3-billion. These settlements directly target the shareholders of these corporations. Many of the architects of the crisis have escaped with few adverse effects. There has been little personal accountability for the people running these banks and whose reckless decision making led to the largest financial crisis of our time.

Finally, the fines against Bank of America include punishment for the actions of Merrill Lynch. It has been widely reported that U.S. Treasury and DOJ officials strong-armed Bank of America into completing the takeover with the then failing Merrill Lynch. You can be sure that the next time regulators and Treasury officials need a favour during a financial crisis, whenever that might be, market participants might be wary to assist. I wouldn't blame them one bit.

Don't be misled by overinflated headlines or into thinking retribution has been made by those responsible. There's still much work to be done.

Adam Chambers is the former director of policy to Canada's Minister of Finance and holds a JD/MBA from the University of Western Ontario.

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