Wall Street Greed

Dishonest Bankers Are At It Again

                In the 1976 film “Network,” anchorman Howard Beale goes off the deep end and delivers one of the greatest soliloquies of American cinema, a long and loud tirade about banks, unemployment, and crime. He urges his television viewers to throw open the windows and yell, “I’m mad as hell and I’m not going to take it anymore!” 

                Recently I wanted to channel Howard Beale when the news broke that foreign exchange traders at six major banks manipulated currency markets for personal profit.

               Just as the U.S. economy is healing after six long years of pain induced by the 2008 Wall Street financial collapse, we learn that Citigroup, JPMorgan Chase, Bank of America, USB, Royal Bank of Scotland and HSBC Holdings employed liars and cheats who hoodwinked millions of investors.

With apologies for vulgarity, the average consumer once again has been screwed and tattooed.

         Regulators suspect that the money perps used their knowledge of what currencies their clients wanted to buy and sell to nudge market prices against them (and in their own favor).  By rigging the benchmarks they got bigger bonuses. 

        More than $5 trillion changes hands every day on the global foreign exchange market, also known as forex.  Manipulation of the exchange rates has "a profound effect on the economy," says Aitan Goelman, director of the U.S. Commodity Futures Trading Commission.  A host of financial investments bought and sold by major investors such as pension funds are based on benchmark rates, set daily, for pairs of currencies.  As for individual investors, it’s fair to say that millions hold positions in forex investments in their retirement account mutual funds.

                The theft aggravates wounds that have not yet healed.  When the global financial collapse occurred in 2008 --what some have called the “heist of the century” -- the cost was tens of trillions of dollars in wealth destruction.  It also caused vast, unquantifiable human suffering, from unemployment, home foreclosures, lost retirements, and obliterated college funds.  For many it caused a loss of faith in the American Dream. 

                A hefty $4.3 billion in fines have been leveled against the banks that employed the corrupt forex traders by regulators in the U.S., the U.K. and Switzerland.  Yet they are just another bullet point in a long list of penalties for banking misdeeds. The reality is corruption is endemic on Wall Street.

                According to John Maxfield, who covers banking for The Motley Fool, between 2012 and 2013 eight banks -- UBS, The Royal Bank of Scotland, Rabobank, Deutsche Bank, Societe Generale, Barclays, JPMorgan Chase, and Citigroup -- paid $6 billion to settle allegations they manipulated the interbank lending rates.  Maxfield notes a bevy of other recent misdeeds. 

                In 2013, JPMorgan Chase paid $410 million in penalties and disgorgement for rigging electricity markets in California and the Midwest. That same year more than a dozen major banks paid a combined $9.3 billion to make amends for systematically submitting fraudulent documents to courts in foreclosure proceedings.

                In 2010, Bank of America paid $137 million to settle charges of securities fraud for rigging bids in the municipal bond market.  It was joined by JPMorgan Chase, UBS and others.

                Goldman Sachs was hauled before Congress in 2010 to answer for its role in constructing toxic derivatives that it then sold to unwitting clients just as the subprime mortgage market started to buckle – a move that was duplicated at JPMorgan Chase.

                Meanwhile, the investigation into the exchange rate ruse continues. The U.S. Justice Department has given banks until mid-December to come clean about their wrongdoing. Attorney General Eric Holder said the department will finish its investigation soon, moving toward both civil and criminal resolutions.

               I think I can speak for millions of everyday investors: The noxious odor of corruption emanating from Wall Street must be stopped before we resort to stashing our hard-earned dollars under our mattresses.