Last week, JP Morgan, Citigroup, Barclays, and Royal Bank of Scotland pled guilty to felony charges of conspiring to manipulate currency prices, and UBS pled guilty to manipulating benchmark interest rates. Regulators and prosecutors found the misconduct because the traders left extensive, written tracks — in chatrooms called “The Cartel” and “The Mafia.”...When an individual is convicted of a felony, they face years of disenfranchisement — from being denied the right to vote in many states, to facing barriers to finding work, felony convictions have real-world consequences for people. But when it comes to banks, regulators and law enforcement work together to ensure collateral consequences don’t occur.....
When a bank is charged with a crime, there are certain penalties that automatically kick in. Here is what the banks were facing as a result of their felonies:
- Disqualification from managing mutual funds and exchange-traded funds for RBS, JP Morgan, Citigroup and UBS.
- New barriers for issuing securities. All the convicted banks are “well-known seasoned issuers,” which is a special status that lets them quickly raise capital without having to get SEC approval first. A criminal conviction automatically disqualifies a bank from this status.
- No more immunity for earnings projections. Since you can’t verify the accuracy of the future, the law gives companies a “safe harbor” that allows them to make forward-looking statements anyway — without fear of lawsuits. The felony pleas would disqualify UBS, Barclays and JP Morgan from this immunity, thus subjecting all of their statements to the normal liability standards for fraud.
But before the banks agreed to plead guilty, they were told that the penalties would be waived. And they were.
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Wow. I can't believe this is still happening. Also these penalties (even if implemented) don't seem like they would really stop this kind of activity. I'm shocked that these repercussions would get waived in order to get them to plead guilty. While this may damage their reputation its not going to have a big impact on their bottom line I think.
ReplyDeleteThe financial crisis and the bailout and the struggle with the implementation of the Dodd-Frank and now this. It doesn't seem like the immoral money seeking actions of big banks and mortgage firms are ever going to end. Usually financial companies settle these issues by writing a big check to US officials to make it go away, so it is a rather big deal that these settlements are coming with guilty pleas. But it's still a mere slap on the wrist, threatening to punish the firms and then not going through with it simply perpetuates these type of actions. It is absolutely horrible that they actually called themselves "the Cartel" something that is so inherently illegal, and these huge financial corporations that run the economy treat the term as a joke. That is a sure and scary sign that these guys are actually too big to jail.
ReplyDeleteI'm pretty amazed that things like this are still happening this long after the financial crisis, but at the same time I'm not surprised. I do not think the repercussions should be waved just to get them to plead guilty. Like Taylor said, it may damage their reputation a little, but not enough to have a significant impact.
ReplyDeleteIt seems as though corruption has been inevitable in the financial sectors since the financial crisis. The action of charging the banks for illegal activity and then waiving the charges is a simple slap on the wrist as Shelby stated above. The banks will not learn unless one of them is punished severely. Even then the banks will most likely look for methods (in this case: currency and interest rate manipulation) that will benefit them.
ReplyDeleteI agree with Veeral that without actual punishment these large banks are unlikely to really change behavior. It's amazing to me that even after the extensive problems caused by the financial crisis the government is still being so easy on large financial institutions. Piketty talked about the fact that we began to roll back regulations and allow banks more freedom when the Great Depression was largely forgotten about, however, the financial crisis has definitely not been forgotten yet and we are still protecting banks a lot.
ReplyDeleteI agree with Veeral and Bronte that these banks can't be expected to act less corruptly if they benefit from this behavior and see no consequences. It's disappointing that financial institutions that have huge amounts of influence can get away with crimes that individuals would be severely punished for.
ReplyDeleteI agree with the previous comments made above. I am lost for words as to why we're still facing these issues considering the fact that, lax regulations for the too big to fail companies have lead to the recent financial crisis. I was surprised that these companies were told beforehand that their guilty plead would be waived and the fact that it was gives further incentives for these companies to continue future behavior. I truly do not understand why the financial sector is failing to properly charge these companies and punish them. I think if the ineptitude of the financial sector to charge and convicte the too big to fail companies continues then, it may be possible to expect another financial crisis to occur in the future.
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