Tag: Finance

The new Attorney General Loretta Lynch proves why she should not have been confirmed, as she rubber stamps the same weak polices of her predecessor Eric Holder regarding the prosecution of the “Too Big to Jail” bankers.

Adding another entry to Wall Street’s growing rap sheet, five big banks have agreed to pay about $5.6 billion and plead guilty to multiple crimes related to manipulating foreign currencies and interest rates, federal and state authorities announced on Wednesday.

The Justice Department forced four of the banks – Citigroup, JPMorgan Chase, Barclays and the Royal Bank of Scotland – to plead guilty to antitrust violations in the foreign exchange market as part of a scheme that padded the banks’ profits and enriched the traders who carried out the plot. The traders were supposed to be competitors, but much like companies that rigged the price of vitamins and automotive parts, they colluded to manipulate the largest and yet least regulated market in the financial world, where some $5 trillion changes hands every day, prosecutors said. [..]

A fifth bank, UBS, will also plead guilty on Wednesday to manipulating the London Interbank Offered Rate, or Libor, a benchmark rate that underpins the cost of trillions of dollars in credit cards and other loans. Federal prosecutors had previously agreed not to prosecute the Swiss bank over the Libor scheme. But in a rare stand against corporate recidivism, the Justice Department voided that non-prosecution agreement after learning that UBS was also taking part in the effort to manipulate currency prices.

The guilty pleas, which the banks are expected to enter in federal court in Connecticut on Wednesday, represent a first in a financial industry that has been dogged by numerous scandals and investigations since the 2008 financial crisis. Until now, banks have either had their biggest banking units or small subsidiaries plead guilty. But with the four banks charged with currency violations, the guilty pleas will come from their parent companies. [..]

For the banks, though, life as a felon is likely to carry more symbolic shame than practical problems. Although they could be technically barred by American regulators from managing mutual funds or corporate pension plans or perform certain other securities activities, the banks have obtained waivers from the Securities and Exchange Commission that will allow them to conduct business as usual. In fact, the cases were not announced until after the S.E.C. had time to act.

Senator Elizabeth Warren (D-MA) and Wall Street watchdog group Better Markets weighed in on the lack of any criminal prosecutions:

Better Markets called it a “slap on the wrist” and Sen. Elizabeth Warren (D-Mass.) said in an e-mail: “That’s not accountability for Wall Street. It’s business as usual, and it stinks.” [..]

Dennis Kelleher, president of Better Markets, a non-profit group, said that the Justice Department had not done enough, saying “it talks tough, but winks at Wall Street’s too-big-to-fail banks’ criminal conduct, structuring sweetheart deals to minimize the impact on the criminals.”

Kelleher said the fines alone wouldn’t deter future criminal acts and that the Justice Department should punish bank executives and their supervisors for bad behavior. “Banks don’t commit crimes, bankers do,” he said.

Warren said “the big banks have been caught red-handed conspiring to manipulate financial markets, and several have even admitted in court that they’re felons – but not a single trader is being held individually accountable, and regulators are stumbling over themselves to exempt the banks from the legally required consequences of their criminal behavior.”

At Esquire Politics, Charles Pierce is not impressed by Ms. Lynch:

What a fake. What a fraud. What an insult to any stick-up kid doing five-to-fifteen for robbing a bodega. The banks don’t even have to look between the cushions on the sofa for the loose change they’ll use to pay the fines. They get to use their stockholders’ money to pay the fine. [..]

This is altogether remarkable. Here we have a staggering series of crimes that did very real damage to thousands of people all over the world. Here we have a staggering series of crimes, but not a single identifiable criminal. Who rigged the markets? The bank buildings? A shadowy cabal of ledgers? Motorcycle gangs made up of quarterly reports? This is the only area of criminal justice where law-enforcement actively avoids identifying anyone as a criminal.

Let us face facts. Within these institutions, there have to be hundreds of people who were involved in some way with a scam this large. There were people who supervised those hundreds of people, and people who supervised them. Somewhere, in that mass of criminal activity, I’m willing to bet something substantial that a human being committed an actual crime.

But, no. “The banks” get fined. This is just too freaking hilarious.

After all this evidence and investigation, not one person has been arrested. Sure some were fired at insistence of some regulators, but never criminally charged. So, the crooks are still getting away with breaking the law. Fines are a joke. Most of these banks will recoup those fines in less than a day and, at the end of the year, deduct them as business losses, so the tax payer once again foots the bill. I would hardly call that a victory. It’s a joke.

As David Dayen puts it, “it isn’t prison” but the consequences are at least a bit satisfying.

Finally, a Financial Executive Is Sacked for His Company’s Misdeeds

By David Dayen, The New Republic

Lets say you run a company whose misdeeds are splashed across the pages of the business section on an almost weekly basis. you might reasonably expect to be fired without delay. But then let’s stipulate that you’re in the financial service industry. Recent history suggest that you’ll be able to keep your job and your handsome bonus, and that even if law enforcement decide to penalize the company for improprieties, somebody else – like your shareholders – will pay those fines, leaving you to continue your charmed life unscathed.

William erbey, the billionaire chairman of the mortgage serving giant Ocwen, probably thought that would be his fate as well, but he didn’t anticipate the determination of New York Superintendent of Financial Services Benjamin Lawsky. On Monday, Lawsky announced that Erbey would step down from Ocwen and four related businesses, as part of the settlement of an investigation into the companies sad enduring legacy of ripping off homeowners.

The consequences for Erbey have been huge financial losses as Ocwen shares dropped 31% “after agreeing to a settlement that prevents it from acquiring mortgage-servicing rights until the company makes improvements to satisfy New York regulators.” The company must also provide $150 million for relief to homeowners and hire a monitor who will approve the appointment of two independent directors to Ocwen’s board and continue to oversee the business.

According to Forbes, poor Erbey is no longer a billionaire:

Erbey, according to Forbes’s Real Time Wealth Rankings for billionaires, lost over $300 million on Monday causing his net worth to fall to around $800 million and knocking him out of the billionaire ranks. He was worth as much as $2.5 billion in March when we published our annual listing of the world’s wealthiest. [..]

Forbes now calculates Erbey’s net worth at $802 million, as of late afternoon trading.

As Atrios said, “it’s sad that this is all we’ll get.”  

Maria, you are not entitled to creating your own facts.