Big bucks, but no bankers jailed in $5.7B settlement
Six of the biggest names in global finance shelled out billions of dollars Wednesday to settle charges of rigging currency markets, but liberal lawmakers complain the government is just doling out slaps on the wrist.
On Wednesday, the Justice Department announced a settlement that also saw five banks plead guilty to illegal gaming of financial markets. But the new settlement, the latest in a long series of hefty payouts by bad-acting banks, did little to tamp down vocal criticism from the left that the Obama administration is doing little to actually change Wall Street’s course and culture.
Sen. Elizabeth Warren (D-Mass.) criticized the new settlement hours after the Justice Department hailed its historic nature — specifically that no individual bank employees faced criminal charges, even as the overall institutions pleaded guilty to criminal wrongdoing.
“The big banks have been caught red-handed conspiring to manipulate financial markets … but not a single trader is being held individually accountable,” she said in a statement. “That’s not accountability for Wall Street. It’s business as usual, and it stinks.”
Since the financial crisis, nearly every major financial institution has struck some sort of government deal to close probes on a sundry list of wrongdoing, including mortgage servicing flaws, offshore tax evasion and aiding rogue nations like Iran in evading U.S. sanctions.
But while the government has pulled in the largest monetary settlements in history during that time, with several reaching billions of dollars, the continued failure to prosecute high-ranking executives at any of these firms remains a sore point for some groups and lawmakers.
Liberal critics lament that the fines appear to be doing little to change the culture of the financial sector, making them just the cost of doing business.
“Since 2009, huge financial institutions have paid $176 billion in fines and settlement payments for fraudulent and unscrupulous activities,” Sen. Bernie Sanders (I-Vt.), who is running for president, said Wednesday. “The reality is that seven years after too-big-to-fail banks crashed the economy, fraud still appears to be the business model on Wall Street.”
The latest settlement announced by the Justice Department saw the government assessing penalties and accepting guilty pleas from a host of banks for conspiring to rig currency markets to maximize profits.
Attorney General Loretta Lynch said the agreement brings to an end a manipulation scheme of “breathtaking flagrancy,” in which traders conspired across institutions to artificially alter currency exchange markets to obtain illicit profits, forming a group they dubbed “the cartel.” Dating back to 2007, Lynch said traders “acted as partners rather than competitors” in a “brazen display of collusion.”
The settlement marked the first against the financial industry since Lynch took over the Justice Department. Her predecessor, Eric Holder, was dogged by comments he made during a congressional hearing, which he later refuted, that seemed to imply the government was wary of bringing serious charges against large banks because it could damage the economy.
The banks will pay the Justice Department and the Federal Reserve a total of $5.7 billion in criminal penalties, with most of the institutions also agreeing to plead guilty to some criminal charges.
Barclays, Citigroup, JPMorgan and the Royal Bank of Scotland all agreed to plead guilty to charges of conspiring to fix prices. UBS agreed to plead guilty to charges stemming from a previous investigation after the bank’s role in this new probe led the Justice Department to toss out a prior agreement not to seek criminal charges. Bank of America agreed to pay a fine as well.
The announcement is just the most recent in a string of settlements the government has struck with huge banks over industry-wide bad behavior.
In April, Deutsche Bank agreed to pay a record $2.5 billion in fines, and fire several employees, for its role in rigging benchmark interest rates. And in November, five large banks agreed to pay a combined $4.25 billion in penalties to U.S. and British authorities on the same matter.
That’s on the heels of Bank of America agreeing to pay $16.6 billion for its role in the financial crisis, $2.6 billion by Credit Suisse for helping wealthy Americans evade taxes, and $1.9 billion by HSBC after laundering money for Mexican drug cartels and violating sanctions against Iran, Libya and Sudan, among others.
In many of those cases, bank executives assigned the bad actions to a handful of rogue employees. As part of the most recent settlement, the Justice Department threw out a non-prosecution agreement it struck with UBS following a rate-rigging probe in 2012.
The discovery of new illegal behavior during the currency-rigging investigation prompted the U.S. to toss out that deal, and forced the bank to plead guilty to charges. But UBS said Tuesday that the $545 million it was paying to settle the new claims, after paying $1.5 billion during the previous investigation, was due to “a small number of employees.”
But Wall Street critics argue the settlements are sign that bad behavior is a cultural issue in the finance sector. Federal Reserve Chairwoman Janet Yellen has expressed concern that banks are failing to properly police themselves, sometimes “brazenly” breaking the law.
And recent research seems to back up that sentiment. One day before the new settlement was announced, a survey of 1,200 financial services workers found that 47 percent of executives believe their competitors have engaged in illegal or unethical behavior — up from the 39 percent found in 2012.
The poll, from the law firm Labaton Sucharow and the University of Notre Dame’s Mendoza College of Business, also found 23 percent of Wall Street professionals suspect their colleagues of serious wrongdoing, up from 12 percent in 2012.