In the latest financial scandal to come to light, five of the world’s biggest banks are settling charges of currency manipulation. Those banks included JPMorgan Chase and Citigroup, which ended up handing over a combined total of nearly $1.5 billion of the $5.7 billion in fines handed out. In addition, UBS will plead guilty to rigging interest rate benchmarks.
The new criminal charges faced by the biggest Wall Street banks are only the latest in a series of seemingly never ending string of investigations that are the largest since some of the same culprits were implicated in the securities fraud that triggered the Great Recession of 2008.
Currency Dependent Commodities
This is a much bigger crime than most people realize because currency prices impact so many facets of world markets, including commodity trades. This is particularly true when it comes to gold and silver. Gold prices are particularly sensitive to currency valuations because of the metal’s unique ability to function as money. One of the big banks, Barclays, will pay an extra $1.5 billion in fines to the the New York State Department of Financial Services, Commodity Futures Trading Commission.
Previously, big banks were prosecuted for rigging the price of gold outright by manipulating the London Gold Fix. That scandal was bad enough to prompt changes in how the price of gold is determined on world markets. In that incident no individuals beyond a small number of actual traders were held accountable. In the latest currency manipulation scheme it’s the usual suspects being rounded up once again.
No Jail-Time This Time Either
Imagine you run an elite gang of international hackers operating under the banner of a legitimate software company and your team manages to steal $100 million from banks around the world. The FBI would be on you faster than you can digest milk and they’d arrest you and everyone in your company. They would raid your offices, seize all your equipment, freeze your bank accounts and take all your property through civil forfeiture laws. As a convicted felon you would have trouble getting credit, insurance, a professional certification or any of the other licenses and permits you’d need to run a business. You’d certainly never be able to get a series 7 or series 65 license to trade securities.
Now imagine that, instead of all that, which most people would consider an appropriate response by law enforcement, the government gives you a chance to buy your way out of trouble by returning $40 million of the $100 million that you stole. One or two of your low level employees will end up getting a slap on the wrist, but mostly you get off completely free, maybe with a little public embarrassment. Most people would consider that a pretty good deal. Just to make sure you get that deal your local Congressman and Senator will call the FBI and pressure them to cut you some slack.
Business As Usual
That scenario described above is exactly the deal the big banks are getting and that big corporations routinely get when they get caught in criminal activity. The guilty parties buy their way out of trouble with a fraction of the proceeds from their criminal acts and, after a brief period of embarrassment in the public spotlight, it’s back to business as usual.
Citigroup and JPMorgan Chase will specifically get regulatory waivers that let them continue to trade securities and issue new mutual funds and ETFs. The Securities and Exchange Commission is standing by to hand over those waivers the minute Citi and Chase turn in their guilty pleas. The government is bending over backwards to ensure that business as usual continues unimpeded by the fact that both companies are convicted felons; Barclays is even a repeat offender.
The moral to the story is if you want to steal money from people don’t buy a gun and rob them; you’ll get 25 to life in federal prison for going that route. Instead form a bank and steal billions from your depositors a little bit at a time. In the unlikely event you do get caught, you’ll pay a fine and get a slap on the wrist along with a very stern warning. The next time you get caught the government will follow up that stern warning with even stronger language.
