TRNN: "Five Big Banks Plead Guilty to Rigging Currency Markets and No One Goes to Jail"

[KoKo]

Five Big Banks Plead Guilty to Rigging Currency Markets and No One Goes to Jail

James S. Henry say the $5.89 billion they are collectively required to pay in penalties won't even get at 3% of their annual earnings. - May 21, 2015

Bio

James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co and as an investigative journalist his work has appeared in numerous publications like Forbes, The Nation, and the The New York Times. He was the lead researcher of the recently released report titled 'The Price of Offshore Revisited.'


PARTIAL Transcript after VIDEO for THOSE WITH SLOW INTERNET SPEED

SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I'm Sharmini Peries coming to you from Baltimore.The five biggest banks, Citigroup, JP Morgan Chase, Barclays, The Royal Bank of Scotland, and UBS, have all pleaded guilty to multiple crimes involving foreign currencies, interest rates, and collusion. The traders, according to the New York Times, had formed a, quote, “an invitation-only club where the stakes were so high that newcomers were warned: mess this up, and sleep with one eye open.” The pleas are expected to be heard this afternoon in federal court. Joining us now from Sag Harbor, New York to discuss all of this is James S. Henry. James is a leading economist, attorney, and investigative journalist.Thank you so much for joining us today, James.

JAMES S. HENRY, SENIOR ECONOMIST, TAX JUSTICE NETWORK:

You're very welcome.

PERIES: James, so let's start off, and can you explain to us exactly what these banks were involved in?

HENRY: They set up a cartel to rig one of the largest financial markets in the world. The $5.3 trillion per day foreign exchange market. And some of them, most of them were also involved in rigging what's called the LIBOR interest rate market, as well. Which is a--.PERIES: Explain that.HENRY: --of fundamental importance for all kinds of interest rate markets all over the world.PERIES: Explain the LIBOR scandal.HENRY: Well, the LIBOR scandal was very similar to the foreign exchange scandal. You had traders who were involved in colluding on pricing financial securities and agreeing on what interest rate they would bid on the part of their banks, rather than compete on an arm's-length basis. So this is a clear cut [inaud.] case of where the invisible hand was nowhere to be seen.These are critical markets for all kinds of corporate investors, financial investors of all kinds, housing markets, you know. It's trade--anyone involved in international trade. This is absolutely outrageous, and it's an example of really bad behavior by essentially a cartel of very large institutions that have been behaving as if they are too big to jail, too big to penalize.

PERIES: Now, explain further in terms of what this pleading guilty actually means, and what is expected in terms of the next steps in this case.

HENRY: Well, they've agreed under this settlement to pay $5.89 billion in fines in disgorgement of profit. But they've also, the five institutions here, four of them have pleaded guilty. Which is a corporate plea submission. And that's really unusual. The problem is that in advance of this settlement, essentially the collateral consequences that would have applied to a guilty plea by a corporate institution such as losing the right to be a prime dealer for Federal Reserve securities, or losing other rights to represent the pension funds and the U.S. pension fund system, those rights were all shielded, protected. So essentially this is a plea that has been deprived of any collateral consequences.So we also see nobody going to jail here. The traders involved may have lost their jobs. But the profits from this activity were recorded by these banks years ago, and now finally after six or seven years, lots of litigation, they have finally come to this settlement.You know, you have to ask whether the settlement has any real impact on their bottom lines. And I think the best answer to that is given by today's stock market price. Which, for this bank group as a whole, their market capitalization actually rose. In the case of UBS the stock price rose 3 percent. In the case of Barclays it rose 3.7 percent.

PERIES:
What's the calculation there? Why is that happening?

HENRY: I think investors are looking at this as a light, as a kind of slap on the wrist. I mean, if you look at JP Morgan for example. JP Morgan is being fined under this agreement about a billion dollars. Little bit less than that. About $900 million. But JP Morgan in the first quarter of 2015, this largest U.S. bank, had net income of $5.9 billion. On a year basis--I mean, if they describe this penalty as less than 3 percent of JP Morgan net income last year, it would come off as a more realistic appraisal of how light the penalty is.And this is an important thing for us to look at. These 22 largest global banks, in general, I have compiled a database of all the corporate crimes they've been fined or had to pay penalties for, or settle private lawsuits for from 1998 to 2015. There's a grand total of 255 felony-scale offenses. Not only LIBOR rigging and currency markets, but money laundering, bribery, mortgage fraud, financial sanctions and [inaud.], wrongful foreclosures. Total of 14 different offenses, and a grand total of, for this group of the largest 20 banks in the world, more than 650 such fines. For which they received a grand total of $246 billion of fines.But it hasn't affected their behavior.

PERIES:

And it'll continue to not affect their behavior, unless key leaders of these organizations or banks are held accountable. Now, I know in other countries like Ireland actually took the bankers to court and convicted them. Why is that not happening here?

HENRY:

I think there's a mentality in the part of the Justice Department that they really can't hold senior bankers responsible. In the 1980s under the first Bush administration something like 880 bankers went to jail in the United States for the savings and loan crisis and the financial fraud that was committed there. Here we have banks that are engaged in much more damaging global activity, costing tens of billions of dollars to financial markets, and no one's going to jail.There may be jail for lower-level traders going forward. But none of the CEOs at these institutions have experienced any kind of penalties. In fact, their payment schedules are going up as the stock market increases. JP Morgan's stock price has appreciated 20 percent in the last year alone.The main point about this is that if you look at this strictly on a business basis, this is a very profitable kind of crime. Because the profits are all realized five or six years ago, at least, from this kind of activity. It's been going on for a long time. And finally, after a lot of litigation, a lot of settlement negotiations, maybe five to six years after the fact, they finally have to pay a fine. So on a net present value basis, putting aside the ethics or the morality of this, it's been a profitable business for the banks and there's no reason they shouldn't be expected to continue doing it?

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[mother earth]

1. The whole system is corrupt. nt

[KoKo]

2. Yes...It Is... That's why we've got to keep working to stop it...

So much is being revealed about the Corruption. It's our duty to keep shoveling it out there. Eventually people will HAVE TO...WAKE UP!

Things aren't good here in the USA these days. But, still, few want to admit it and work to find Solutions. Hopefully we will get there in a few years. I don't know how much longer it can go on like this before masses of people wake up and call an end to it.

[Enthusiast]

5. Every aspect of this nation has been corrupted.

It really is corruption from sea to shining sea.

And I firmly believe the TPP and TTIP are efforts to extend this corruption to other shores.

[Midnight Writer]

3. I read recently that the total take of robberies in US was 550 million a year

When we catch a robber, they go to jail, rightfully.

These guys steal billions, cheat common folk, then their corporation pays a minor fine and they walk away free to start again tomorrow.

Until these thieves face a personal consequence for their crimes, they will continue to commit crimes. It is past time for them to face the same justice system that the rest of us do.

[AtomicKitten]

4. too big to prosecute