Five of the world’s top banks will pay over $5 billion in fines after pleading guilty to rigging the price of foreign currencies and interest rates. Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the five trillion foreign exchange—$5 trillion foreign exchange spot market. UBS pleaded guilty for its role in manipulating the Libor benchmark interest rate.
Matt Taibbi talking:
these banks, the companies, pleaded guilty to felony charges in this case, which means it was not individuals of the company, it was the actual company itself, which is actually a step forward, because for a long time in the post-2008 period we were having a lot of settlements where there was a sort of a neither-admit-nor-deny agreement between the government and these companies, and in this case they actually did have to admit to wrongdoing and did have to plead guilty to a criminal charge, in addition to the money changing hands.
The wrongdoing was manipulating the prices of currencies, which is about as serious a financial crime as you can possibly get, I think. I sat here a few years ago and talked about the Libor scandal. This is very similar.
if someone steals a candy bar and a person can go to jail for years for that. WHat about this.
They were monkeying around with the prices of every currency on Earth. So, if you can imagine that anybody who has money, which basically includes anybody who’s breathing on the planet, all of those people were affected by this activity. So if you have dollars in your pocket, they were monkeying around with the prices of dollars versus euros, so you might have had more or less money fractionally, depending on all of this manipulation, every single day. And again, Attorney General Lynch went out of her way to say that this activity went on basically every single day for the last five years or so. So every single day, that $5 in your pocket was worth a little bit more or a little bit less, based on what these people were doing. And if you spread that out to everybody on Earth, it turns into a financial crime that’s on a scale that, you know, you would normally only think of in Bond movies or something like that.
Justice Department says traders used online chat rooms and coded language to manipulate currency exchange rates. One high-ranking Barclays trader chatted, “If you ain’t cheating you ain’t trying.” And another responded, quote, “Yes, the less competition the better.”
the companies pleaded guilty, I think part of it is because they had this very graphic online record of these people chatting and admitting to essentially a criminal conspiracy in writing. That’s one of the things that’s really interesting about this entire era of financial crime, is that you have so much of this very graphic, detailed documentary evidence just lying around. The problem is the government has either been too overwhelmed or too disinclined to go and get it and do anything with it. In this case, you have people openly calling themselves the cartel or the mafia, and then openly talking about monkeying around or manipulating, you know, the price of this or that. The CFTC, the Commodity Futures Trading Commission, actually released chats from a different case involving interest rate swaps yesterday, where they—where one guy was bragging about how he was holding up the price of interest rate swaps like he was bench-pressing at. They were bragging about this, you know, in these chat rooms. So these—what you have to understand about a lot of these people, they’re very testosterone-laden, souped-up young people who think that they’re indestructible. They’re very arrogant. And they’re doing all this in chat rooms, thinking they’re never going to get caught. And they got caught.
On Wednesday, Citigroup CEO Michael Corbat said, “The behavior that resulted in the settlements we announced today is an embarrassment to our firm, and stands in stark contrast to Citi’s values”. Meanwhile, JPMorgan CEO Jamie Dimon called the investigation findings, “a great disappointment to us.” He went on to say, “The lesson here is that the conduct of a small group of employees, or of even a single employee, can reflect badly on all of us, and have significant ramifications for the entire firm,” said the CEO, Jamie Dimon.
what’s humorous about this is that virtually all of these so-called too-big-to-fail banks now have been embroiled in scandals of varying degrees of extreme seriousness since 2008. So for them to say, “Oh, it’s just a few bad apples in this one instance,” is increasingly absurd. They have been dinged for everything from bribery to money laundering, to rigging Libor, to mass fraud in the subprime mortgage markets and now the forex markets. It’s one mass crime over—you know, after another, and there’s no consequence.
in this case, is what’s happening is that they’re colluding, which is a far more dangerous kind of corruption than what we saw, for instance, in 2008, when you saw a lot of banks, in house, committing fraud against their own clients and against the markets. This behavior, where you have a series of major banks colluding to fix the price of a currency, that is extremely dangerous. And if that behavior is allowed to go unchecked, the negative possibilities that could stem from that are virtually limitless.
The foreign exchange market is the largest, and yet the least regulated, market in the financial world.
regulatory bodies got them on an antitrust violation, so this—it falls under the purview of the Department of Justice. The Fed, the banking regulators, the Commodity Futures Trading Commission, they all have a kind of a general mandate to look out for this sort of stuff. But the problem with the forex markets is that there isn’t a specific body that’s specifically looking at this all the time. It’s not like, let’s say, you know, the commodities market, where you do have a CFTC that’s specifically looking at that. This is one of many markets that simply falls between the cracks in the regulatory scheme, where there isn’t a single—you know, a targeted effort to look at this all the time.
independent Senator Bernie Sanders of Vermont, who’s now running for president, introduced the Too Big to Fail, Too Big to Exist Act. He’s a completely honest, I think, politician who is just really interested in seeing—you know, standing up for regular working people. So, his voice on this particular issue, I think, is really important, because he’s one of the few politicians who understands that it’s a truly bipartisan issue that affects everybody, people on both sides of the aisle, equally. And he’s absolutely right about breaking up the banks. That is the most single most important thing that has to be done with this issue.
banks trading for their own accounts, that’s been severely curtailed since Dodd-Frank. You know, there have been a number of regulations that have made it more difficult to engage in the kinds of risky activities that we saw before 2008.
But by and large, the general problem is more unwillingness to enforce existing laws. And it wasn’t so much an absence of new regulations that was the problem in 2008. It was more a failure of will on the part of the government. We had laws on the books that were perfectly sufficient in the late ’80s and early ’90s, when we, you know, conducted over 1,800 prosecutions and put 800 people in jail after the S&L crisis. We can do the same thing now, if we want to, with this or with robo signing or with subprime mortgage fraud or any of another dozen other scandals, and we just haven’t done it. And that—I think that’s the main problem, and it’s a failure of will. And I do hear from people that there is more serious now—seriousness now, in the waning years of the Obama administration, more willingness to go after the banks.
A new report from the Corporate Reform Coalition called “Still Too Big to Fail” says, since 2008, regulators have failed to enact key parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It found, quote, “The top six bank holding companies are considerably larger than before, and are still permitted to borrow excessively relative to the assets they hold. … Banks can still use taxpayer-backed insured deposits to engage in high-risk derivative transactions here and overseas. Compensation incentives fail to discourage mismanagement and illegality, given that when legal fees, settlements, and fines mount, it is usually the shareholders, not the corporate executives who pay.” The report concludes, quote, “Should one of these giant banking firms fail again, it appears that the damage will not be contained.”
the pain is not going to come from the actual wrongdoers, you know, the people who actually committed these offenses—although there have been some criminal indictments in the previous Libor case, so we can’t say that nobody’s going to go to jail, because it is possible that that could happen. There could be a few low-level players who will get rolled up in this thing.
even in the Libor case, there were people from other banks. Rabobank, there were a couple of employees who got—who were criminally indicted, if I remember correctly. But it was nothing like the roundup that should have happened. I’m just saying that there were a few individuals who got caught up here and abroad. But by and large, you know, that quote is absolutely correct.
There are a couple of points that are really important here. First, after 2008, we made the system far more concentrated. We made the too-big-to-fail banks much bigger than before. We actually did this intentionally. We used taxpayer money to merge banks together, to make them bigger and more dangerous and harder to regulate. And we saw, with episodes like the London Whale episode, that massive losses can happen in the blink of an eye, and we will have no idea when it’s coming. And so, this kind of activity—we’ve definitely made the system riskier, harder to regulate. And all those things are certainly true, and Dodd-Frank has failed to address those.
— source democracynow.org
Matt Taibbi, award-winning journalist with Rolling Stone magazine. His most recent book, The Divide: American Injustice in the Age of the Wealth Gap, is now out in paperback.