Thursday, May 21, 2015

No Jail Time for Bankers

From comments at
http://www.peakprosperity.com/blog/92663/4-factors-signaling-volatility-will-return-vengeance

As happened, yet again, today:

Global Banks to Pay $5.6 Billion in Penalties in FX, Libor Probe

May 20, 2015

Officials said a 19-month investigation in which FBI agents conducted 175 interviews and reviewed a terabyte of trading data showed traders withholding bids or offers to avoid moving the rate in directions that would hurt open positions held by other members of the group, in violation of antitrust laws.

Members of the group discussed whether to allow one Barclays trader to join the chat room and ultimately decided to let him in for a “1 month trial,” but advised him: “mess this up and sleep with one eye open at night,” according to the New York Department of Financial Services.

The fines, which include penalties from the Federal Reserve and other regulators, come on top of a combined $4.3 billion many of the same banks paid in November to resolve similar charges from U.S. and U.K. regulators.

Bank of America Corp. will also pay a $205 million penalty to the Fed to resolve the regulator’s foreign exchange probe. Bank of America didn’t face similar action from the Justice Department.

Citigroup, which was accused of being involved in the misconduct from December 2007 through January 2013, is paying the largest criminal fine of $925 million, in addition to a Fed penalty of $342 million. The other banks were accused of engaging in the conduct for various periods within that time frame.

Note that not one single person will be facing any jail time. No indictments were handed down. This is despite specific email exchanges with people’s names on them.

Were this a normal prosecution of something or some entity that the Justice Department really hated and wanted to make an example out of, say an environmental organization or perhaps a raw milk collective, the normal procedure would have been to start with the persons on the email strings, threaten them with hundreds of potential years in the Federal Penitentiary, and then lean on them to name names higher up the ladder. You don’t stop until you reach as high into the organization as you can.

You see, the idea behind criminal probes is that you want to both catch and punish the prior wrong doings but also deter future criminal acts.

Let’s see how they did. Citi was fined fined the most and dinged for $925 million. First quarter 2015 revenues for Citi were $19.7 billion. This means that 4.5% of a single quarter’s incoming cash flows, or roughly 0.5 weeks of operational cash flows were dinged.

This would be like you robbing a bank, being caught, and then having the prosecutor come out and hit you for a half a week’s pay.

Not only is nobody else deterred by your “punishment” but you probably aren’t either.

While the Justice Department wanted to appear they were being tough, it was yet another massive failure on their part to do anything meaningful, and that means Obama's administration is literally the very worst on record for going after Wall Street fat cats.  The bar is now so low, there's really no further to go...except to just default into overt Ukrainian style plutocracy.