Another set of damning bank-chat transcripts led to a $4.25bn fine for the world’s biggest banks: JP Morgan Chase, Citigroup, Bank of America, Royal Bank of Scotland, HSBC and UBS. Authorities in the US, Britain and Switzerland charge that the bank traders conspired with one another in Internet chat rooms to manipulate benchmark currency prices for the euro, dollar and Swiss franc.
Like so many other cases of egregious financial fraud over the past several years, regulators used softball tactics to go easy on the banks. No bank was even forced to admit wrongdoing in the orders by the US Commodity Futures Trading Commission and the Office of the Comptroller of the Currency. Regulators avoided court and settled for cash, which the traders won’t pay – the bank’s shareholders will. Officials presented a minimal amount of evidence, lacking the full details of the traders’ misconduct. They sought no judicial review.
In short, banks got away with their crimes for a pittance; their stocks even rose on the news of the settlements because the market believes the trouble is over.
The banks are right. The trouble is over. The US Justice Department, which actually has the power to put people in jail, has opened criminal investigations into the currency rigging.
Good news? Not exactly. The DoJ is bringing out the biggest softball tactic of all. The DoJ has increasingly used a relatively new and declawed method to deal with the aftermath of the financial crisis: the deferred prosecution agreement (DPA).
These agreements were created 100 years ago to give juvenile defendants and first-time offenders a chance to for rehabilitate themselves. Only in the last 20 years have DPAs migrated to the field of corporate criminals, treating them like kids who’ve just gone down a bad path in life.