If somebody broke into your home and stole your belongings, you’d expect to see some serious consequences if they got caught. But when banks and financial firms rob, defraud and mismanage the money of Americans—and even cast them out of their own homes illegally—the worst that usually happens is a fine.

Since the recent financial crisis and housing collapse, some of Wall Street’s biggest banks have faced fines from regulators reaching into billion-dollar territory. In the latest news, JPMorgan Chase is looking at $11 billion in fines for pushing crap mortgage securities on unwary investors. 

That sounds like a hefty amount of cash—it’s about the gross domestic product of Kenya, and tops that of Iceland and Bahrain. As journalist Pat Garafalo has noted, $11 billion is equal to what all the major banks paid together in 2012. The sum would be the largest single financial fine in history, if in fact it ever is paid (JPMorgan Chase is reported to be in negotiations that might reduce it).

So what happens to all that dough? Will it really change anything?

Let’s follow the money trail.

Who gets fined, and for what?

Investigators from the SEC, the U.S. Justice Department, a smorgasbord of state governments, and other regulatory agencies have been fining financial institutions for everything from concealing risky products, to illegally kicking soldiers out of their homes, to trying to scam bailout money.

The SEC has a list of firms whose activity “led to or arose from” the financial crisis on its website. It tells you what they have been charged with, what fines have been sought and what has been paid. The list is pretty long. Here’s just a small sample of the 161 entities and individuals charged for a grand total of $2.73 billion collected so far in settlements:

• Goldman Sachs: Charged with conning investors on a financial product tied to subprime mortgages as the U.S. housing market started tanking. Goldman agreed to pay a record penalty in $550 million settlement and reform its business practices. A jury found former Goldman Sachs vice-president Fabrice Tourre liable for fraud.

• Citigroup: The SEC charged the company and two executives with misleading investors about exposure to subprime mortgage assets. Citigroup paid a $75 million penalty to settle charges, and the executives also paid penalties.

• Bank of America: Charged with misleading investors about billions of dollars in bonuses being paid to Merrill Lynch executives at the time of its acquisition of the firm, and failing to disclose ginormous losses that Merrill sustained. BofA paid $150 million to settle charges.

Now, keep in mind that so far we’re only talking about the SEC, which deals with various kinds of market scammers like inside traders, accounting fraudsters, and crooks who dupe investors.

If you start going through all the various agencies and the frauds they deal with, you may feel as if you’ve plunged into the 9 Circles of Financial Hell.

The U.S. Commodity Futures Trading Commission has its own list of enforcement actions, which covers hustlers who screw around with futures and option markets. Then there’s the Consumer Financial Protection Bureau, which deals with jerks who rip off consumers with products like credit cards and criminals who take kickbacks that raise prices on things like mortgage payments.  Over at the Department of Justice, they watch out for your price-fixers, your rate-riggers, and your money launderers. The Office of the Comptroller of the Currency handles swindlers of the sort who steal your financial info and make up phony investment programs, along with debt collectors. And so on.

There’s a good bit of overlap between regulators, and when there’s a big scam afoot, several agencies will often file suit against the same company.

Where does the money go?

That’s the billion-dollar question. Regulators love to brag about all the money they extract from financial transgressors, which comes in the form of various fines and “disgorgements” (returns of wrongful profits) to settle charges.

But does the money go to victims? Does it end up in the Treasury? Do regulators use it to fund more investigations? Buy snazzy new furniture for the office? The answers are not always easy to come by.

Let’s take a look at JPMorgan. This year alone, the megabank has paid $3.68 billion to settle various criminal probes into stuff ranging from manipulating electricity markets to ripping off credit card customers. A big fish was the “London Whale” debacle in which over $7 billion vanished due to risky derivatives bets.For its failed risk management and unsafe practices related to that Moby Dick of a f*ck up, JPMorgan is settling for $920 million. Out of that particular amount, $200 million will go to the SEC, and another $200 million to the Federal Reserve Board. The Office of the Comptroller of the Currency will receive $300 million, while the British regulator will get $220 million.

And we still haven’t gotten to the $11 billion whopper JPMorgan may have to pay out to end mortgage-bond investigations by federal and state authorities. That lump sum would presumably take care of all of the charges and would reportedly include $4 billion for relief for people who lost their houses and so on. The rest would go to pay various penalties. Where that $7 billion or so ultimately goes depends on what agency you’re talking about, and the particulars of the case.

I contacted the Department of Justice to find out how it handled fines, and no one returned my messages. (Perhaps during the shutdown, justice has been put on hold—or maybe that already happened when Attorney General Eric Holder admitted that banks had gotten too big to jail.) In any case, a former DOJ officer, Billy Jacobson, has gone on record as saying that the fines don’t pay for coffee and donuts for investigators. Instead, the money has to go the U.S. Treasury. Restitution for victims is rare, and constitutes a trivial amount of what the DOJ brings in. In 2011 the DOJ took in $2 billion in judgments and settlements, and only $116 million went to restitution.

At the SEC, I got hold of a spokesperson who tersely informed me that money collected from fines does not ever come back to the agency, but rather goes into the Treasury’s general fund. Anything else would violate the agencies' statutes.

The Sarbanes-Oxley Act of 2002 also directed the SEC to create something called the Fair Fund, which in some cases, distributes monies collected from fines and disgorgements to investors. So if you invested in a company like, say, Enron, you might end up seeing some of your money returned, though rarely all of it, and the process can take years. If you happen to own stock in a company or owned a mutual fund that has been charged by the SEC, you can check the SEC website to see if there’s a settlement fund. Only a small portion of what’s in the Fair Fund has been returned to investors, so don’t hold your breath.

Some have complained that money from fines goes back to the regulatory agencies to launch further investigations, which creates a parasitic relationship between regulators and those they pursue. Barry Ritholtz of the Big Picture was recently quoted in Yahoo Finance on this point: "Only a portion of the settlements collected go to the actual victims,” stated Ritholtz. “For the most part the money is used to fund more investigations." When I asked him for particulars, Ritholtz first told me to “Google it” but when I pressed him, he sent me the SEC’s 156-page financial report from 2012. When I read over this bloated document, it seemed to contradict Ritholtz’s statement. Perhaps he sees something in 156 pages that I don’t —alas, he did not respond to further inquiries.

I continued my quest to follow the money by calling up the Consumer Financial Protection Bureau. The folks at the CFPB were the most helpful so far, and explained that when the bureau collects civil penalties, it drops them into something called the Civil Penalty Fund, which was established by the Dodd Frank legislation in 2010. The bureau will use the money in the Civil Penalty Fund to provide some compensation to victims, an amount which depends on various factors such as how much the victim has gotten from other sources.  When the CFPB can’t find the victim or determines, for whatever reason, that it’s not “practicable” to pay them, the money goes to “consumer education” and “financial literacy programs.” That last bit is a little vague.

In the end, we seem to have a large chunk of money from fines and penalties going to the U.S. Treasury, which, if you’re a deficit hawk, ought to cheer you. But the amount going to victims, though on the rise, still appears to be inadequate.

Case in point: 10 megabanks, including Citi, JPMorgan Chase, and Bank of America, will have to fork over $3.3 billion in direct payments to customers who were in foreclosure during 2009 and 2010. That adds up to about $125,000 for each person who was foreclosed on even though they were up to date with their mortgage payments. Does that amount really cover the horrific cost of being kicked out of your home, losing equity, and all the other costs and inconveniences that go along with such a cataclysmic disruption? Some victims are saying no, it doesn’t, by a long shot.

Who pays the fines?

Technically, the banks or financial entities charged pay the fines. Much has been made of an aspect of corporate tax law that allows companies to write off disgorgements when they pay Uncle Sam. The Washington Post reports that the law lets the companies off the hook for millions of dollars in tax payments. Some bloggers have leapt to the idea that a big bank can write off fines, but that is not true at all, because fines are not the same thing as disgorgements.

Here’s how disgorgement works: If you’re a crook and you get your money from illegal activity you then pay taxes on, what you’ve really done is inflated your income and assets to the government because that money actually didn’t belong to you in the first place. If disgorgement happens, then you have to hand over the money you made from your shady activity. From a technical accounting perspective, you shouldn’t be taxed on the money because it was never yours, and the taxes you paid must be returned. This obviously doesn’t sit well in the gut for many folks, but instead of arguing this particular point, perhaps what we should really be doing is insisting that the fines should be much bigger—because right now, they aren’t big enough to hurt.

The banks are very clever about things like fines, and in some cases, they actually have ways of making you pay for them. When HSBC got hit with a giant money-laundering fine, customers got letters soon after noting certain “changes.” HSBC, for no reason it cared to explain, would be taking longer to deposit monies into accounts. What the bank was really doing was increasing the “float,” or soaking up interest on the money in between the time you deposit a check into your account and the moment it shows up there. Was there any link between the money-laundering fine and what happened to your account? Makes you wonder. It did not make the Federal Reserve wonder, though.

What if you decided to go after a bank yourself for harmful activity? Alexander Eichler at the Huffington Post has pointed out that there’s some very interesting fine print on fines buried way down in the terms-and-conditions agreements you have to sign when you open a bank account with big names like HSBC, TD Bank, and PNC Bank. Basically, if there’s any legal disputes over your account, and the bank has to fork over any fees, like attorney fees and so on, you get to pay them. In other words, if you sue your bank over a credit card dispute, you may have to pay for the bank’s losses, even if you win.

Here’s HSBC’s clause: “You agree to be liable to the bank for any losses, costs or expenses the bank incurs as a result of any dispute involving your account. You authorize the bank to deduct any such losses, costs or expenses from your account without prior notice to you." The LA Times reports that though the practice is on shaky legal ground, what it’s really intended to do is scare consumers out of taking a bank to court.

Such is the peculiar reality in our banks-gone-wild universe.

In fact, taxpayers are paying for big banks to make all those heady profits and enabling their bad behavior through our subsidies. The megabanks can borrow money at a lower rate because creditors assume the government, on behalf of taxpayers, will come to the rescue in an emergency. Ironically, this subsidy only encourages them to engage in more risky behavior, for which we all end up paying.

What’s the goal of the fines, anyway?

Good question. Nobody really seems to know. In theory, disgorgements are a remedy for misdeeds, whereas fines are a punishment. But the punishment in many cases does not fit the crimes, which have wreaked havoc on the entire economy and caused job losses, vanished savings and pensions, and lost homes for millions of blameless people. Fines may sometimes force a company out of business, but most of time, those paying the big bucks barely bat an eye.

In case you hadn’t noticed, bank profits are up.

Despite JPMorgan’s potential $11 billion hit, the company stock has barely registered the fine. Maybe that’s because the fine, though large, would only amount to about two quarters worth of profits. Or because no one really believes a sum like that will ever be paid.

In any event, banks like settlements because they save a lot of hassle. Settling matters outside of the court system means that they usually don’t have to admit wrongdoing, they save money on legal fees, and they avoid juries, which may be in the mood to get a lot tougher on them than your friendly neighborhood regulator. This is true not just for banks, but all across the corporate sector. Big Pharma has gotten hit with big fines, too, for things like fraudulent marketing practicies. Hasn't slowed them down a bit.

I spoke to banking expert Walker Todd of the American Institute for Economic Research, and he noted that though there has been a movement to get banks to at least admit wrongdoing when they settle, these admissions typically fall short of owning up to criminal guilt. When firms admit to criminal guilt, then they are open to lawsuits, and if they end up in court, they can’t deny what they’ve already admitted as facts.  

Until they are truly forced to admit their crimes, or have to pay penalties that exceed their profits, banks have little to fear.

Are fines just the cost of doing business?

The Obama administration has not been very eager to pursue full-blown court cases with corporations or send executives to jail. When criminal charges ensue, they often involve lower-level employees who take the hit while the company and the big honchos go unscathed. The fines are paid and everybody goes back to business as usual.

The New York Times noted in an editorial that in the case of UBS, which was involved in the LIBOR rate-rigging scandal, a subsidiary got hit with a $100 million fine and two former traders of various criminal acts could wind up in jail. Sounds good—until you realize, as the Times observes, that a “subsidiary’s plea on a single criminal charge appears to shield the parent company and the prosecution of two traders appears to shield their managers.”

In other words, crush the small fry and let the big fish go.

What is clear is that fines, even the biggest ones, do little to deter criminal activity. Big banks appear to be simply calculating fines into their business models: fines, after all, don’t exceed profits, and in this scenario, what do you think the incentive is for banks to cease their fraudulent and criminal activity? If you answered, “none whatsoever,” you are likely correct.

Bank fines are simply baked into financial business. Until fines are much, much bigger and perpetrators at the top face the possibility of prosecution, the crime spree will go on.