Remember the LIBOR scandal?
[P]erhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.”
Well, imagine my surprise to see this story in the NY Times today. It looks as if someone in the DOJ has finally had enough with coddling the criminals who wrecked our economy and then profited from TARP and the Federal Reserves policies. Especially nice to see real people possibly facing jail time. Maybe being a lame duck Attorney General has emboldened Eric Holder. Who can say?
With evidence mounting that a number of foreign and American banks colluded to alter the price of foreign currencies, the largest and least regulated financial market, prosecutors are aiming to file charges against at least one bank by the end of the year, according to interviews with lawyers briefed on the matter. Ultimately, several banks are expected to plead guilty.
Interviews with more than a dozen lawyers who spoke on the condition of anonymity to discuss private negotiations open a window onto previously undisclosed aspects of an investigation that is unnerving Wall Street and the defense bar. While cases stemming from the financial crisis were aimed at institutions, prosecutors are planning to eventually indict individual bank employees over currency manipulation, using their instant messages as incriminating evidence.
Traders at competing banks met in private chat rooms. Some traders became so cozy that they earned the nickname “the cartel” and “the bandits club.”
Then again this may simply be a scare tactic that leads nowhere but a higher settlement by the banks involved in this currency manipulation scheme. I’ll be watching to see how high up the chain of command these potential indictments go. The Times ‘reports’ the latter is more likely the case:
The charges will most likely focus on traders and their bosses rather than chief executives. As a result, critics of the Justice Department might view the cases as little more than an exercise in public relations, a final push to shape the legacy of Attorney General Eric H. Holder Jr., who was blamed for a lack of criminal cases against Wall Street executives.
Yes, that’s shoddy journalism by the Times, having speculation inserted in a supposedly ‘just the facts’ report. Still, I hope these prosecutions don’t stop with the underlings. The CEO’s of these Banks had to know what their currency traders were up to. In a world other than the Wall Street Bubble, this sort of thing would lead to those executives getting fired and going to jail (admittedly with a nice golden parachute as they’re kicked out the door). Somehow I don’t believe that will be the case here, though it did in the UK.
A senior financier at a major UK bank has become the first Briton in the country to plead guilty to conspiracy to defraud in relation to the benchmark interbank lending rate Libor.
To bad the British court refused to allow the news media to reveal his name or the bank in question. Some things never change. Too big to fail has its privileges after all.
Holder had been protecting them.
Well, they have certainly been protected, though I do not know if Holder is the person who, as the Gofdather movies say “gave the order.” My guess is that this was a decision decided early on in the Obama administration on the advice of Summers and Geithner with backing from the Fed and perhaps political advisers such as Axelrod. But the LIBOR scandal, coming so soon after bank fraud and deceit caused the real estate and derivatives bubble that collapsed, may have finally changed some minds. I’m not prepare to lay this at the feet of Holder alone. Ultimately the President is responsible, and the Democratic party relied heavily on Wall Street money to win elections in 2008 and to a lesser extent, 2012.
OK, I’ll go with that.
I’ll point out the Holder is still there and this has been building for several years with Holder in charge.
But it is only happening now that Holder has announced his departure. Was Holder pushed out? Or, as you seem to suggest, was Holder held back and now doesn’t care about repercussions because he has quit?
Meanwhile, a lawsuit that was viewed as something of a joke may now be giving some powerful people the jitters or vapors. Yves Smith at Naked Capitalism has a good roundup AIG Bailout Trial Bombshell I – Paulson Rejected Chinese Offer and AIG Bailout Trial Bombshell II – Fed-Treasury Cornered Board Taking Legally Dubious Bailout.
A couple of comments. The two big AIG financial holes that ostensibly led to the FED/Treasury bailout were mostly created after Hank Greenberg was ousted as CEO and Chairman in 2005. However, that’s neither here nor there in this lawsuit with AIG stockholders as the plaintiff.
The financial holes were the credit default swaps (CDS) sold by AIGFP (a unit under the AIG holding company) and the securities lending operation of the treasury department of the insurance company. Both tanked pretty much simultaneously because the underlying financial product was collateral debt offerings (CDOs) and the “collateral” was residential mortgages. Those demanding payment (the “counterparties”) were the TBTF banks.
In bailing out and essentially taking over AIG (which the lawsuits claims was a fraudulent takeover), FED/Treasury paid out a 100% (or some very high percentage) on those CDS. That’s not how the NY Insurance Commissioner handled similar financial guarantees when AMBAC and MBIA tanked.
Should the defendants try to settle with Greenberg? Would he take a payoff that forever seals all the dirty dealings that his lawsuit is likely to expose further?