A number of large financial institutions are preparing to settle with the U.S. Justice Department over allegations they engaged in a massive price-rigging scandal that involved many trillions of dollars in foreign currency trades.
The Justice Department has promised the settlement in this case will be far tougher than those negotiated in the past over other alleged wrongdoings by banks. Of course, as The New York Times‘ editorial board recently pointed out, “tougher than the last” isn’t saying too much.
We’re talking about a system where banks have committed crimes involving not just the rigging of interest rates and foreign currency trades, but mortgage fraud, money laundering, securities fraud, conspiracy to aid tax evasion and foreclosure abuse. When banks struck settlements with the government for these actions, very rarely did they even have to concede they’d done anything wrong. Most of the time, prosecutions were deferred or foregone entirely in exchange for payment of fines or other penalties. In four cases, all involving foreign institutions, banks pleaded guilty to criminal charges, but none of the penalties had any real impact on the firms’ day-to-day operations. And how many top-level bank executives were held civilly and/or criminally? A grand total of zero.
One wonders, then, what we might expect from the foreign exchange settlements. The Justice Department has stated that it will not settle with JPMorgan Chase and Citigroup unless the companies agree to plead guilty to criminal charges. The allegations involve manipulation of currency prices. If this indeed does happen, it would be the first time in decades that an American bank has admitted guilt in a crime.
Two other banks – European firms Royal Bank of Scotland and Barclays – have also reportedly been told they must plead guilty.
But in terms of what that actually means, it’s likely there will be little real consequence. Our Miami foreclosure lawyers fully expect a deal in which the goal is to minimize damage to the institution and spare high-ranking executives any accountability. We may, however, see lower-level traders pursued by prosecutors aggressively in the future. After all, someone should be accountable, right?
Ultimately, this kind of approach does very little to punish the real culprits or to prevent such action in the future. Innocent employees and shareholders often bear the brunt of these consequences, and those at the top are never even named, let alone charged.
Outgoing U.S. Attorney General Eric Holder Jr. directed federal prosecutors to return with a report in three months determining whether to file criminal or civil charges against individual bank executives while the fraud cases are pending. However, Holder will likely be out of office at that time, leaving the ultimate decision up to the next attorney general. We don’t expect any major action on this front.
Until we see criminal prosecutions of top-level banking executives for felony crimes against the public, the promises of reform will continue to ring hallow.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Tuesday at 6 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
Talking Tough With the Banks, Feb. 20, 2015, The Editorial Board, The New York Times
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Banks Argue for Reduced Fines for Zombie Foreclosures, Feb. 17, 2015, Miami Foreclosure Lawyer Blog