What does and doesn't matter about the Menendez indictment

Bloomberg News

WASHINGTON — I don't know Bob Menendez, the senior Senator from New Jersey, beyond what I hear him say at Senate Banking hearings and the odd encounter on the Capitol subway (in the latter case, he tends to answer the questions he wants to and not the ones he doesn't, which is about par for the course).

Part of that is because the Senate Banking Committee is his side hustle — most of his clout is deployed on the Senate Foreign Relations Committee, where, at least until Friday, he was serving in his second tour of duty as chair. His most visible issue on Senate Banking — at least when the Federal Reserve chair came to visit — was the lack of a person of Hispanic heritage on the Fed board, a shortcoming that was recently rectified with the confirmation of Adriana Kugler earlier this month.

So it is with that highly inauspicious series of caveats that I can say to you, dear banker reading this column, that Menendez's indictment on federal bribery and corruption charges doesn't matter to you — at least in the narrow sense of what bills may or may not pass in this Congress. Allow me to explain.

Let's start with the relatively small field of bank-relevant legislation that we have to begin with: SAFE SAFER Banking, stablecoin legislation, the executive compensation bill, the newest Durbin credit card bill … oh, and funding the government. Menendez isn't an outlier in any of these bills — he's a co-sponsor of the SAFER cannabis banking bill, along with 11 other senators, and he's not a co-sponsor of the Durbin bill, which has only four sponsors. And to the extent that there ever was a stablecoin bill, I would expect him to be somewhere in the middle of the Democratic caucus on that, too. 

In other words, there isn't a ton of banking-relevant legislation out there that isn't either going to pass or highly unlikely to pass, and so for Menendez's vote (or lack of a vote) to matter, something would have to hinge on his yea or nay. As of right now, nothing does. 

But there is something more abstract about Menendez's indictment that very much does matter to banks and bankers, and that is the degree to which corruption and bribery will be tolerated by law enforcement and the public. 

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Before I continue, I must disclaim that Sen. Menendez, like all criminal defendants, is afforded the presumption of innocence until such time as he is found guilty in a court of law. However, I don't know anyone — Cuban immigrant or otherwise — who has a couple hundred thousand dollars in cash sitting in envelopes containing the DNA of accused co-conspirators in the pockets of a jacket with his name on it. Whether or not there is fire is for a judge to decide, but that's an awful lot of smoke.

If Menendez is guilty, I would hope that for the sake of whatever vestigial sense of public duty he has he would resign. On Monday, Sen. Menendez said that not only will he not do that, but he appears to believe he will remain the senior senator from New Jersey for years to come. Perhaps he believes he's above the law, or he thinks he can beat the rap — after all, there's a lot of that going around.

That sense of confidence in the face of rather damning evidence may not seem like a danger lurking around the corner for banks, but it is. One of the things I've always appreciated about banks is that they are by nature small-C conservative — risks are tolerated but must be hedged, process is paramount and above all banking is a game that has cognizable and at least somewhat consistent rules. Corrupt politicians — and bankers who are allegedly involved in that corruption — by definition undermine the implied stability and process that banking requires. 

Corruption and graft are relatively rare in the United States. One isn't expected to grease the palms of police officers or bureaucrats to get out of a ticket or obtain a permit, as is the case in many other places. That isn't to say it doesn't happen — Menendez's indictment isn't even the most spectacular incident of corruption in Congress we've seen in the last several decades. 

But Americans — and their bankers — are able to enjoy that relative freedom from graft because things didn't used to be that way, and a great deal of political courage and effort was expended to ensure that public officials are on the level. The only way to keep them on the level is to stamp out corruption when it is evident, and if Sen. Menendez is guilty, bankers should be thankful to see him go.