Nobody can keep track of all the big bank fraud cases #TBTF #OWS
If you’re anything like me, this week’s announcement that 5 banks – JP Morgan, Citigroup, Barclays, RBS, and UBS – have pleaded guilty to manipulating foreign exchange markets is both confusing and more than vaguely familiar.
It was a classic price fixing cartel, and it went along these lines: these big banks had all the business, being so big, and the traders got on a chat room and agreed to manipulate prices to make more money. The myth of the free market was suspended, and eventually they got caught, in large part because of leaving stupid messages like “If you aint cheating, you aint trying”.
But hold on, I could have sworn that these same banks, or a similar list of them, got in trouble for this already. Or was that LIBOR interest rate manipulation? Or was that for mortgage fraud? Or was that for robosigning?
Shit. I mean, here I am, someone who is actively taking an interest in financial reform, and I actually can’t remember all the fines, settlements, and fake guilty pleas to criminal charges.
I say “fake” because – yet again – nobody has gone to jail, and the banks found guilty have immediately been given waivers by the SEC to continue business as usual. According to this New York Times article, the Justice Department even delayed announcing the charges by a week so those waivers could be granted in time so that business wouldn’t even be disrupted. For fuck’s sake.
But again, same thing as all the other “big bank events” that we’ve grown tired of in the last few years. What it comes down to is fines, but then again, the continued quantitative easing has essentially been a gift of cash to those same banks, so I wouldn’t even count the fines as meaningful.
In fact I’d call this whole thing theater. And really repetitive, boring theater at that, where we all nod off because every scene is the same and they’ve turned up the heat too high.
The saddest part is that, given how very little we’ve improved about the integrity of the markets – I’d argue that we’ve actually gone backwards on incentives not to commit fraud, since now everything has been formalized as pathetic – we are bound to continue to see big banks committing fraud and then not getting any actual punishment. And we will all be so bored we won’t even keep track, because nobody can.
mathbabe 
When I heard the announcement yesterday, it became clear to me that it’s actually a mark of banking brilliance if you get caught skirting the rules ~ then people know who to come to if they want certain “things” to get done. You’re right that until “guilty” = “jail time” we’re not going to get anywhere.
LikeLike
Can’t those data science journalists at Columbia come up with a database of bank fines? I mean this seriously.
LikeLike
Right on. Nothing meaningful will happen until someone, and not just a trader, goes to jail. Then the shenanigans, actually crimes, will stop in a hurry.
LikeLike
“really repetitive, boring theater” indeed (complete with wretched plot, acting, & song-and-dance… and an unchanged title: “To Big To Fail”). Maybe Mel Brooks could do something with this! (if only it weren’t so unfunny).
LikeLike
I am generally leery of these prosecutions as theater. But I was amazed that this one resulted in no person being prosecuted. After all, if Democrats won’t throw people in jail for clear criminal violations, can you imagine what will happen under a Republican administration.
LikeLike
I think a Republican Administration would throw a Democratic supporter in jail for a crime while letting a Republican supporter skate since they know nobody will make them pay a price.
The IRS 501(c) ‘scandal’ is perfect example. The IRS did keyword searches to target groups there were more likely to be breaking the rules. Those keywords covered both liberal and conservative groups, but because the GOP could have cared less about the underlying issue of GOP leaning organizations breaking the 501(c) rules or that Liberal groups were also caught up in the ‘scrutiny’.
LikeLike
Let’s actually prosecute HSBC for money-laundering. The old-fashioned kind with a trial.
I know we should do much more than that and maybe we should be more concerned about what a judge recently called enormous deceit in mortgage issuance, but it would be a good place to start as the facts are so clear.
During the years (2000-2010 or so) both the regulators and the press told them that there was large-scale money-laundering going on at their bank. The senior executives told the press and the public that the reports were false while they told the regulators that maybe there were some problems but they would definitely be fixed.
Then in 2013 there was a big deferred prosecution agreement (DPA). This was before the government was “getting tough” on banks and so they were not even required to plead guilty but they did admit to the facts as laid out by the Dept. of Justice.
http://www.bloomberg.com/news/articles/2013-07-02/hsbc-judge-approves-1-9b-drug-money-laundering-accord
Two years later, it is still going on.
The reason I focus on this is that 1) the facts seem pretty clear and 2) the DPA was from the Eastern District of New York (Brooklyn), negotiated by Loretta Lynch. Loretta Lynch has since moved on to a higher position. Perhaps she should be concerned that the order she put in place is not being complied with. It’s time to put the “prosecution” back in “deferred prosecution agreements”.As various people, including a sitting federal judge, have pointed out, there is a systemic problem with deferred prosecutions.
http://www.nybooks.com/articles/archives/2015/feb/19/justice-deferred-justice-denied/
Obviously, there is a systemic problem with lack of true accountability of banks.
Perhaps HSBC is a good starting point to tackle both.
LikeLike
Fuck yes, Josh.
LikeLike
The April NYT article suggests that HSBC is incapable of complying with the DPA. They are too large and complex, evidenced by (a) their problems with internal systems connectivity and (b) their inability to get the entire bank culture to buy into the belief that money laundering is a bad act. It seems to me that an appropriate penalty/action, would be to:
(1) break the bank into manageable pieces
(2) prosecute the individuals and business units involved in post-DPA violations
(3) fine senior management for inadequate supervision (this is a thing in the UK, not sure about the US)
That the last action would be a warning shot for senior management at other banks where it is literally impossible for them to adequately supervise their organizations.
In addition, I think it is impossible for a large, international organization to successfully convince its employees that complying with US financial rules is a moral imperative. There are a lot of rules advanced to further US strategic and political objectives. To a non-US employee, these will be seen somewhere in the range from annoying irritants to morally and nationalistically offensive. In other words, I can understand people who feel that they have a moral imperative to violate the rules.
If US authorities ever get serious about enforcement (which they should, or change the rules if you aren’t going to bother), then I would recommend that no US citizen or resident take a job with supervisory authority for a non-US branch or business line.
FWIW, I’m a different Josh and can’t take any credit for my namesake’s nicely written post. Notice my more lip-y and hip-y avatar, but we both have cool tentacles!
LikeLike
My understanding is that the reason we’re hearing about the same scandal all over again is that DoJ caught them on some new thing, and said, “Hey, you’ve violated the terms of your settlement on that old thing, so we’re tearing up the settlement and adding new fines for THAT too, as well as the new thing.”
There’s at least some dim hope that this kind of escalating logic might continue to apply, the next time the banksters get caught with their hands in the cookie jar. (Which is an inevitability; these guys really don’t seem to have any capacity to restrain themselves.) Maybe we can get a “three strikes and you’re out” policy”? They’ve already used up two, maybe next time somebody big goes to jail? OK, sadly probably not…
LikeLike
Hahahahahahaha.
On Thu, May 21, 2015 at 3:47 PM, mathbabe wrote:
>
LikeLike
Calling Bill Black! Calling Bill Black!
LikeLike
Re the despicablev waivers: once again it comes downn to one person , Mary jo White, actively voting to gut her own agencies enforcement tools.
Thanks to commisioner Kara Stein, the waivers now need to be approved by the Comissioners. Previously this authority was delegated to SEC staffers and they grahted them freely,
The 2 R commisioners consistently vote for the waivers. The 2 Ds consistently say nay.
MJW is the decidercand she has consistently approved them, when she didn’t have to recuse herseof. In the casecwhere she had to recuse herself (which is a pathetic commentary on political appointmehts to top regulatory spots) thevwheels nearly fell off the settlement bus. Innthat case , BOA iirc, tye final settlement included additional elejehts demahded by Stein.
Now that tye SEC has failed us on their waivers, any remaining serous penalties rest withbthe DOL. The banjs have submittedvwaiver requests to DOL to exempt them as felons from handling pension monies.
LikeLike
‘Long past time to convict real people of these crimes, not just fine banks and pretend no people are criminals. WTF, ‘Bama? Theatre is right…
LikeLike
Did the SEC have any “fake” take overs this week in Edgars:)
LikeLike
Seems the warnings of the sniveling weasel former head of the criminal division of the DOJ Lanny Breuer are being heeded to. Which is a shame. I’d rather have the CEO heads and the boards of directors of UBS and Barclay’s placed on pikes as a warning to the CEO’s and board of directors of JPM, C, BA, and WFC in the United States that some favors come with very high prices. Of course, it goes without saying that all the above institutions should be forced to restate their earnings for the years due to the fradulently-based earnings-and stand back for the massive lawsuits against C, BA, JPM and WFC due to rate manipulations on securities and credit cards based on LIBORs. By the time the dust settles, they may have been wished they have been broken to pieces.
LikeLike
It’s a shame bankers are such assholes because as a math nerd, the quantitative side of trading seems really interesting to me. It’d be nice to be able to do that kind of work without having to sell your soul.
LikeLike