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.