The Department of Justice announced the guilty pleas of five big banks:
Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG – have agreed to plead guilty to felony charges. Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc have agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market and the banks have agreed to pay criminal fines totaling more than $2.5 billion. A fifth bank, UBS AG, has agreed to plead guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.
According to plea agreements to be filed in the District of Connecticut, between December 2007 and January 2013, euro-dollar traders at Citicorp, JPMorgan, Barclays and RBS – self-described members of “The Cartel” – used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates. Those rates are set through, among other ways, two major daily “fixes,” the 1:15 p.m. European Central Bank fix and the 4:00 p.m. World Markets/Reuters fix. Third parties collect trading data at these times to calculate and publish a daily “fix rate,” which in turn is used to price orders for many large customers. “The Cartel” traders coordinated their trading of U.S. dollars and euros to manipulate the benchmark rates set at the 1:15 p.m. and 4:00 p.m. fixes in an effort to increase their profits.
In other words, two of the same banks (Citicorp and JPMorgan Chase) that received billions of dollars in taxpayer bailout money during the financial crisis promptly went back to cheating investors and rigging markets. Even worse, Sen. Elizabeth Warren pointed out in March 2015, that these banks received trillions of dollars in backdoor lending from The Fed.
At a hearing on Fed Accountability and Reform, Sen. Warren said, “During the financial crisis, Congress bailed out the big banks with hundreds of billions of dollars in taxpayer money, and that’s a lot of money. But the biggest money for the biggest banks was never voted on by Congress. Instead, between 2007 and 2009, the Fed provided over $13 trillion in emergency lending to just a handful of large financial institutions. That’s nearly 20 times the amount authorized in the TARP bailout. Now, let’s be clear, those Fed loans were a bailout too. Nearly all the money went to too-big-to-fail institutions. For example, in one emergency lending program, the Fed put out $9 trillion and over two-thirds of the money went to just three institutions: Citigroup, Morgan Stanley and Merrill Lynch.”
Two weeks ago, Sen. Bernie Sanders (I-VT) proposed a bill to break up the big banks. The Sanders bill would specifically break up JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Wells Fargo, and Morgan Stanley.
As long as the big banks exist, they will continue to find ways to cheat investors while taking taxpayer money when things go wrong. The fines are a small cost of doing business for these giants. Fines won’t stop the big banks. Prison terms for the criminals and the break up of these gigantic institutions are the only ways to clean up a corrupt financial system that is robbing ordinary Americans.