A group of the world’s largest banks admitted to manipulating the global foreign exchange market and will pay billions in fines, reported CBS News. However, we won’t see anyone go to jail.
Citicorp, JPMorgan Chase, Barclays, and Royal Bank of Scotland not only admitted to manipulating foreign exchange markets, but they also rigged benchmark interest rates that affected credit card, car, and home loans. The U.S. Department of Justice announced that the banks will pay $5.8 billion in fines as a penalty. Chances are that the banks already had that much on retainer in case they get in legal trouble. Basically, the fines won’t do anything.
In a scam called “the fix,” a group of international traders who proudly referred to themselves as “The Cartel” conspired to use the global exchange close time of 4 p.m. London time to coordinate their scam.
“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,” said U.S. Attorney General Loretta Lynch. “They acted as partners rather than competitors to push the exchange rate in directions favorable to their banks, but detrimental to many others.”
“The fix” is the one-minute time frame beginning at 4 p.m. where all global exchange market trading ceases. During those 60 seconds, traders colluded in chat rooms to push the value of any chosen currency into the direction that was most lucrative for any given international bank. The New York Times gave a pretty simple rundown of the scam.
Now that these financial institutions have pleaded guilty, they are beginning the process of blaming a handful of people. JPMorgan noted that the charge was “principally attributable to a single trader,” and Citi has fired nine people in relation to the scam, reported CBS News. However, it is possible that more people knew about the scam.
While it’s good to hold the banks, as an entity, responsible for these crimes, it’s best to remember that these banks are run by people. These people need to be prosecuted.
“Banks don’t commit crimes, bankers do,” said Dennis Kelleher, CEO of market transparency group Better Markets. “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.”
Despite this cry, AG Lynch isn’t shaping up to be much different than former AG and Wall Street coddler Eric Holder. Banks have money to pay fines. But executives still need to go to jail.