The Strong Penalty for Banks That Wasn’t

You have have read that some of the biggest Wall Street firms, including JP Morgan and Citigroup, got hit with a seemingly massive fine in the billions of dollars for manipulating currency markets. But as ThinkProgress points out, those fines are little more than a drop in the bucket.

Despite a slate of criminal fines with eye-popping dollar figures announced on Wednesday, five banks that conspired to rig foreign currency exchange rates in recent years face only minor real-world consequences that are more a cost of doing business than a significant punishment for breaking the law.

The banks admit they engaged in a years-long conspiracy to manipulate currency exchange rates on a daily basis in ways that would boost profits and limit losses. Currency traders from JP Morgan, Royal Bank of Scotland (RBS), Citigroup, and Barclays met in a secret chatroom they dubbed “The Cartel” to collude on the size, timing, and nature of their buy and sell orders for U.S. dollars and euros. Those four banks pleaded guilty to criminal charges Wednesday. The Department of Justice (DOJ) announced the guilty pleas and fines totaling $2.5 billion, as well as its decision to tear up a prior non-prosecution agreement with british bank UBS and force the company to plead guilty to separate, related charges. The Federal Reserve announced its own set of corresponding fines on Wednesday for those same five banks and Bank of America.

Combined with a prior slate of penalties, the total charges to the banks over “The Cartel” approach $9 billion. But even that large figure is piddling relative to the overall size of these banks. The real-world impact of all that showy enforcement activity is likely to be almost nil thanks to related decisions by other executive branch agencies in the case. And the stock market response to Wednesday’s announcement almost immediately pushed the banks back into the black.

Fines are supposed to be just one of the consequences of this kind of criminal confession by a major financial company. Pleading guilty is also supposed to put a sort of scarlet letter on the banks to protect everyone else in the financial system from doing business with people who broke the law. But the Securities and Exchange Commission (SEC) is reportedly set to waive these additional systemic consequences and allow the banks to continue operating normally. The DOJ’s authority to bring fines will not be reinforced with financial regulators’ authority to apply longer-lasting reputational and functional punishment, if the Bloomberg report that the SEC will grant the banks waivers is correct…

Waivers may defang the DOJ’s work to hold banks accountable to the law, but at least the fines themselves still give these deals some teeth, right? Wrong. The fines will get paid by shareholders, not by individual executives or traders who benefited personally and professionally from the crimes their firms are admitting to.

In other words: Business as usual. Not a single executive who actually carried out these criminal acts has been held accountable. Not a single one of them will be fined personally or spend a single day in jail. A much smaller fish who embezzled $100,000 from his company would be punished severely, but manipulation of currency markets that may have cost others literally hundreds of billions of dollars, perhaps even trillions? Not even a slap on the wrist. Just another reminder that we have two entirely different criminal justice systems, one for the rich and one for everyone else.

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  • StevoR

    Fiens for crimes need to be percentages of income /money they really do.

    What’s a lot for one person or company is fuck all to a richer one.

    Law should be just and fair and equal and ain’t.

  • StevoR

    “Fiens” = fines, natch.

    Yes this is disgusting and wrong and needs to be spoken about, condemned and most of all changed.

  • zenlike

    Slap on a nice suit and wear a tie, and you can commit crimes worth millions or billions times more then what would get a regular jack-off some serious jail-time, and walk away scot free. Every. Fucking. Time.

    It is past time that laws would get enacted that puts the people behind corporate criminal acts in jail.

  • favog

    There’s at least one country, Sweden or Switzerland I think it was that I heard it of, where that’s exactly how it works when you get like a speeding ticket — the size of your ticket is based on your income.

    In the case of fines like these, it shouldn’t be based on the total income of the company, however. It should be based on how much money the violation made for them. I think double at least, so “hey, we made a million illegal dollars!” becomes “we lost that, and got fined another million!” Turning the profit into a loss is the only way to accomplish anything in this arena with a capitalist system in place.

  • Modusoperandi

    Look, we can’t really go after these banks, because massive fines and jail terms could shut down the banks, which would damage the economy, because the stability of the Market rests on the certainty provided by these banks, which are manipulating the Market.


    It’s like how the police can’t shut down chop shops because people need to know that when they park their car it won’t be stolen by the chop shops you that you won’t shut down.


    Plus, harming the banks also harms the employees who aren’t involved in the scams, and if their banks went away and left a hole in the Market, no other institutions would expand to fill the Supply for the ensuing Demand (because that’s how the Market works) and the innocent employees wouldn’t be able to find new employment after losing their jobs at criminal banks.

  • Modusoperandi

    favog “There’s at least one country, Sweden or Switzerland I think it was that I heard it of, where that’s exactly how it works when you get like a speeding ticket — the size of your ticket is based on your income.”

    It’s Sweden. I got pulled over between Bohuslan and Goteborg for doing fjördteen kilömetaars over the limit and, after the officer wrote down my income and did some maath, fined me a hundraad and fjördy krona. True story.

  • frankgturner

    Maybe we could just re-institute cruel and unusual punishment. Naaaah, that will just get people into S&M.

  • Who Cares


    That are just fines for individuals.

    That said corporations are (usually) not to happy when the EU (not the member countries but the EU itself) decides to step in and levy fines since those are percentages of the income in the EU.

  • llewelly


    Fiens for crimes need to be percentages of income /money they really do.

    A percentage that needs to be a significant multiple of 100, because banks have quality financial analysts, who can multiply the odds of getting caught (low) with the penalty for getting caught, and subtract that from the expected profit from the scheme.

    Furthermore – in most cases, a culture that treats these scams as no big deal, and a culture that has highly capable financial analysts, will just find a superior scam, rather than reform. So in fact it is essential to dismantle the organization, and make it as difficult as possible, including even by imprisonment, for those people to get into any finance-related position ever again.

    And if we do not do that, we will suffer more major global financial and real estate crashes like the last one.

  • Modusoperandi

    llewelly “And if we do not do that, we will suffer more major global financial and real estate crashes like the last one.”

    What? It’s called “Creative Destruction”, which is Capitalist and, therefore, good. And the bailouts, which [after Obama’s election] were bad, supported the Job Creators, which are good.


    In any event, if that was bad it’s all Carter and Clinton’s fault.

  • jufulu

    The big problem seems to be that the high level executive use the bank as their own cash cow without being affected by what happens to the company. If we can fine the banks enough that the shareholders are really hurt, maybe there will be some impetus to change management. One of the bank’s had their share value increase, wiping out the loss due to fines. Ouch (/s).

  • lorn

    Fines based upon income sounds like a grand idea. Another alternative would be allocation of community service time for crimes. A poor person’s time is just as valuable to them as a rich persons time. Another way of making the punishment meaningful for rich and poor alike.

    Neither are perfect solutions. They will, inevitably, be gamed. Wealthy retirees will claim zero income and people with wealth and power will most likely get kid glove handling but it is a step in the direction of both fairness and justice.

  • busterggi

    So banks are treated no differently from other corporations?

  • Kermit Sansoo

    The snakes in suits don’t really care if the company they run crashes and burns or not. We need to hols the people who made the decisions pay, preferably with a combination of money and jail time. This won’t happen, or course.