Five major banks have copped a plea in a major foreign exchange rate fixing scandal, In re Foreign Exchange Benchmark Rates Antitrust Litigation, 13-cv-7789 (S.D.N.Y.), Barclays PLC, Citicorp, JPMorgan Chase & Co., and The Royal Bank of Scotland PLC pled guilty to violating US antitrust laws. UBS AG pled guilty to wire and mail fraud. These are criminal, not civil, misdeeds. The fines that come with the pleas total $5.8 billion. The banks have already paid $4.3 billion to the US Commodity Futures Trading Commission, the US Office of the Comptroller of the Currency, the UK Financial Conduct Authority, and the Swiss Financial Market Supervisory Authority (FINMA) over the same matter. Nevertheless, not a single, natural person has been charged with a single offense. Needless to say, no one is facing any jail time.
Forbes explained, “Starting in 2007, traders at banks involved in Wednesday’s settlement formed what they called ‘The Cartel’ to fix daily foreign exchange crosses in currencies as prominent as the dollar and euro so that they’d be able to tilt currency movements in their favor. Using coded language and group instant message chats on their Bloomberg Terminals, the traders and their colleagues worked to influence daily rate settings in the forex market by either bidding up some currencies or withholding markets in others at the close of business.”
Jamie Dimon, CEO of JPMorgan, said, “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.” The same sentiments of contrition and blaming a few bad apples came from the PR departments of the other banks as well.
Who are these bad apples, the fellows who have brought the noble and honorable business of trading currencies for profit such ignominy and shame? The regulators aren’t saying. In Britain, the Daily Mail notes, “The Serious Fraud Office has charged 13 individuals for rigging Libor interest rates and one has pleaded guilty. But it has charged no one yet over the foreign exchange fixing.”
This has the House of Commons in a cross-party uproar. John Mann, Labour MP and former member of the Treasury committee, said, “Name them, shame them and where possible jail them.” Meanwhile, UKIP MP Douglas Carswell said, “If a criminal offence is committed by a constituent of mine I’d expect them to be named. The same should apply to the banksters who criminally rigged markets. This corporatist racketeering gives capitalism a bad name. If we want to safeguard the free market and the system which has made us prosperous we need to treat people guilty of criminal wrongdoing as criminals and throw them in jail.” Rarely does this journal agree with Mr. Carswell, but as they say in the House, “hear, hear.”
Meanwhile in the States, Dennis Kelleher, CEO of Better Markets, a nonprofit group that advocates for more transparency in markets, said, “Banks don’t commit crimes, bankers do. Until the feds personally and meaningfully punish actual executives and supervisors for their wrongdoing, big banks will continue their crime spree at the expense of investors, our markets, and families on Main Street. Pleading guilty to a crime must mean jail time.”
The Justice Department knows what happened. Attorney General Loretta Lynch said at a news conference to announce the settlements, “Almost every day for five years, they used a private electronic chat room to manipulate the exchange rate between euros and dollars using coded language to conceal their collusion. They acted as partners rather than competitors to push the exchange rate in directions favorable to their banks, but detrimental to many others.”
The facts show collusion, conspiracy, RICO violations (a five year period of conspiring), wire fraud and more. Ms. Lynch waited months to be confirmed, but from the looks of things, there was no point to her confirmation at all. She needs to charge someone for these misdeeds and prosecute the case with an eye to imprisonment. Failing that, she must resign.