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Five Big Banks Plead Guilty to Rigging Currency Markets and No One Goes to Jail

249 points by snowy 11y ago

shameerc 11y ago
Because - https://www.youtube.com/watch?v=iFDe5kUUyT0 https://www.youtube.com/watch?v=iFDe5kUUyT0
- sillygoose 11y ago
  Excellent video.
- sobkas 11y ago
  Calling gold coin a true money is so funny, because it doesn't have inherent value by itself. It's only have value because people agreed to exchange things and services for it. Like a printed money. And if someone thinks gold coins didn't lost value over time...
mootothemax 11y ago
According to the radio this morning, the bankers who did this and the LIBOR fixing are facing jail - it's just that their cases are taking time to progress. I think it's safe to save the scandal for a little longer.
- rcarrigan87 11y ago
  I think the article was more focusing on higher level execs that insulate themselves from any criminal charges.
  - hueving 11y ago
    If a UPS truck driver drives drunk, do you expect the CEO to go to jail?
    - toyg 11y ago
      The company has a duty of care (which varies across legislations).
    - 13years 11y ago
      Yes, if he new about it and didn't stop it, or even in some way condoned it then he is certainly has responsibility.
      - Sven7 11y ago
        Yup. The sort of leadership Obama and Bush have demonstrated when things go wrong. It flows down the food chain.
    - sobkas 11y ago
      Well, it depends if driver can crash Worlds economy or not. And if it can, there is something wrong with economy, UPS, UPSs CEO, truck and a driver.
    - noonespecial 11y ago
      This seems a little more like the CEO entering a lucrative shipping deal with a mexican drug cartel and then having the driver go to jail for trafficking when caught.
    - codingdave 11y ago
      Not jail, no... but I do expect the CEO to act to prevent (or at least try to prevent) it in the future, or else some consequence should absolutely hit the CEO.
    - yohoho22 11y ago
      I can think of a whole host of such situations where virtually everyone would agree that the CEO should go to jail. What do you have to say to that?
      - tedunangst 11y ago
        I can think of a whole host of such situations where virtually everyone would agree that the CEO should not go to jail. What do you have to say to that?
  - cm2187 11y ago
    Are you suggesting Obama should go to jail if a GI commits a crime in Irak?
    - rcarrigan87 11y ago
      That's really not a fair comparison...
      - donatj 11y ago
        I think that's a dead on comparison.
    - tinco 11y ago
      If that crime was implicit in a direct order of Obama, why not? If someone creates a climate of "do whatever it takes" they should be held at least partially and possibly fully liable. At least that seems like good morale to me.
  - dheera 11y ago
    "Higher"-level execs shouldn't be automatically held responsible for decisions they didn't make. Punish the manager(s) or employee(s) or exec(s) who held power and made the bad decision. Those execs don't really own or control the company anyway, for such large, post-IPO companies. That's like punishing the mayor for a crime someone committed on the street.
    - barrkel 11y ago
      I have news for you - Sarbanes-Oxley makes high-level executives criminally responsible for a certain subset of the company's operations. More broadly, executive control is more complete than you suggest. Delegated powers can be audited and controls used to ensure the integrity of the decision-making process. Communications can be monitored, and usually are in banks. Not enacting such controls, or not enforcing them strongly enough, could be seen as negligence.
      - threeseed 11y ago
        > Communications can be monitored, and usually are in banks. So ? You just join a chat room on your 4G phone or iPad. Regardless banks are no different to every other enterprise. The firewalls just capture the URLs and white/black list against some subscribed set. They aren't monitoring every bit of traffic that goes out. Except for maybe PCI compliance e.g. checking for 16 digit numbers passing through the firewall.
        jsprogrammer 11y ago
        Some enterprises MITM all PKI encrypted channels so that they can monitor all of its communications.
    - fnordfnordfnord 11y ago
      It's like punishing the mayor for a crime one of their employees made on the job, after the mayor had been put on notice that mayors are responsible for their employees' on-the-job conduct.
rcarrigan87 11y ago
Increased regulation in some regards has just driven further consolidation in the banking industry. It also makes it more and more difficult for would-be competitors to try and disrupt these banks. I'm not sure that increased penalties, sending execs to jail, or more regulation will fix banking. If the banks are "too big to jail/fail" then maybe we should make them smaller...
- raverbashing 11y ago
  > Increased regulation in some regards has just driven further consolidation in the banking industry. This a million times. As regulation increases, you make sure only the big guys follow it to their satisfaction. And of course in the end there will be a lot of "hows, ifs, buts" falling through the cracks. Some regulation of course is needed, but it seems the best regulation is not giving anyone the advantage to be the dominant player.
  - astazangasta 11y ago
    I don't know if you've been reading any news, but too much regulation is not the issue here. There are something like a few hundred SEC employees to investigate the entire banking sector. In addition we have evidence of overt sycophancy in the New York Fed and a general refusal to correct bad behavior (see Carmen Segarra). Finally, the pattern of laws has been deregulatory, not vice versa. Enron was able to engage in fraudulent trade in energy derivatives because the derivatives market was deregulated. I don't know where you are getting this story (ideology, I suspect), but it is deeply wrong.
    - raverbashing 11y ago
      Apparently you missed the part where I said "Some regulation of course is needed", which is not surprising given your shallow interpretation of facts Over regulation is a problem exactly because it builds too big to fail corporations. It eliminates competition due to regulatory capture "Enron was able to engage in fraudulent trade in energy derivatives because the derivatives market was deregulated." Fraud is fraud. > I don't know where you are getting this story (ideology, I suspect) Yes, my ideology is opposed to having idiot bureaucrats stifling progress while regulatory capturing incumbents to their friends. See: Tesla vs. Car dealerships, Uber vs. taxi monopolies, this: http://www.motherjones.com/kevin-drum/2013/10/heres-why-your-asthma-inhaler-costs-so-damn-much http://www.motherjones.com/kevin-drum/2013/10/heres-why-your...
TheAlchemist 11y ago
It's really increadible. 3% of one year profits, for multiple year huge scale robery. Not surprising, given the industry track record, but still mind blowing when you think about the big picture.
- alfiedotwtf 11y ago
  It's operational cost, already factored in, and paid for by clients.
- evanpw 11y ago
  That's because banks do a lot of things other than FX trading. It's a much bigger chunk if you use a more relevant denominator: http://www.bloombergview.com/articles/2015-05-20/bank-fine-scorecard-follow-along-at-home- http://www.bloombergview.com/articles/2015-05-20/bank-fine-s...
- cm2187 11y ago
  Did you read the report? http://im.ft-static.com/content/images/ee8b6f40-fef5-11e4-84b2-00144feabdc0.pdf http://im.ft-static.com/content/images/ee8b6f40-fef5-11e4-84... The sort of profits the regulator mentions is $16,000, $14,270, $59,000. Even if they did that every day for 10 years, it is still pocket money compared to the fine.
  - TheAlchemist 11y ago
    That are the sums that can be directly priced. The report also points to tens of cases when the client/industry prejudice cannot be directly priced - for example: "FX traders involved in the USD/Brazilian Real market colluded together to manipulate markets in a more straightforward manner—by agreeing to boycott local brokers to drive down competition. On October 28, 2009, an RBC trader wrote “everybody is in agreement in not accepting a local player as a broker?” A Barclays FX trader responded “yes, the less competition the better." Those benefits, while impossible to calculate, where an order of magnitude bigger than the direct ones. Also, don't forget that those banks have huge privilegies (gov backing, FED money, gov bonds dealership etc) in exchange for which they provide a fair market and services. For instance, in theory those banks should have a lot of their privilegies removed as the result of this case. I can assure you that they are extremely happy to pay only the ~$6bn to keep those safe.
stygiansonic 11y ago
Here is a better explanation of what these traders did: http://www.bloombergview.com/articles/2014-11-12/banks-manipulated-foreign-exchange-in-ways-you-can-t-teach http://www.bloombergview.com/articles/2014-11-12/banks-manip... Some additional reading: http://www.bloombergview.com/articles/2015-05-20/bank-fine-scorecard-follow-along-at-home- http://www.bloombergview.com/articles/2015-05-20/bank-fine-s... Quote: "They also got together in chat rooms to, essentially, lay off some of their client risk to one another prior to the fixing. That laying off of client risk, again, looks a bit conspiratorial, but it probably made markets more efficient, and is not obviously bad or illegal. Then they went beyond that efficient laying off of risk, trying to move the price in their favor. They seem to have made some money doing this, at the expense of their clients, but my suspicion was that they were "tinkering at the edges of real supply and demand," optimizing how they made money trading their combined customer order book rather than truly rigging the FX market." This is an alternative viewpoint: https://medium.com/bull-market/oranges-and-lemons-the-fx-scandal-in-perspective-cd3456089ce4 https://medium.com/bull-market/oranges-and-lemons-the-fx-sca... Quote: "Although there was some behaviour that was clearly on the other side of the line, the regulators also made clear that lots of the practices involved were not intrinsically criminal; this was an investigation into a grey area, not a straightforward case of lying. Of course, the industry has less than zero claim to the benefit of anyone’s doubt, and people will be instantly suspicious of claims that “it’s more complicated than that”, so maybe I can explain what went on in the FX market through the medium of a series of examples..."
- marcosdumay 11y ago
  Or, in other words, they abused the trust their clients had to get their money. Sounds like fraud, but if some administrative body decided fraud was legal, that really makes it so... And don't look at that small book governing your nation laws, it's irrelevant anyway.
  - pjc50 11y ago
    No, read the Medium article again; the clients always had the option to specify "best execution" or their own trading strategy, but for simplicity and lowest broker fees chose to transact at the 4pm price. The clients (which are also large financial entities) are generally not screaming about fraud, they're just getting a deal that isn't as good as they thought.
randomname2 11y ago
One SEC commissioner has issued a "Dissenting Statement" as she was furious that the SEC has made a mockery of "recidivist criminal behavior" by banks https://www.sec.gov/news/statement/stein-waivers-granted-dissenting-statement.html https://www.sec.gov/news/statement/stein-waivers-granted-dis...
- rcarrigan87 11y ago
  wow, that pretty much sums it up. We have more than enough regs on the book to reign in banks. We just choose not to enforce them.
  - m_alexgr 11y ago
    This. A result of the proverbial revolving door between regulators and the banks. You can have regulations up the wazoo and it won't make a spec of difference if they are not properly enforced. Even with the odd criminal conviction bank regulation is kabuki theatre for mass consumption. These guys get away with murder - literally. EDIT: yes, literally the murder of thousands in Mexico. HSBC bank & Sinaloa cartel. HSBC in particular has a long history of enabling drug cartels. The Opium Wars.
    - fennecfoxen 11y ago
      Literally, hmm? I'd be quite interested to hear about these murder cases you allege (who murdered, who died, which jurisdictions and courts were involved, et cetera).
- fnordfnordfnord 11y ago
  The solution is clear. Modify (gut) the regs to bring banks into compliance. Or simply ignore it. How will the SEC dress it up and sell it (to itself)?
randomname2 11y ago
The total costs of keeping everyone out of prison: http://i.imgur.com/16KcuHu.jpg http://i.imgur.com/16KcuHu.jpg
- pas 11y ago
  Sources? Timeframe? Which year's dollars?
moopling 11y ago
The invisible hand, was nowhere to be seen...
- rcarrigan87 11y ago
  the invisible hand left banking a long time ago when the banks consolidated into mega banks. For capitalism to work you need a high degree of competition...
randomname2 11y ago
For some reason, Bloomberg seemed amazed that the public yawned at the guilty plea: http://www.bloomberg.com/news/articles/2015-05-20/once-unthinkable-criminal-pleas-by-u-s-banks-get-investor-meh- http://www.bloomberg.com/news/articles/2015-05-20/once-unthi... Quote: "For all the muted response to Wednesday’s news, Donaldson Capital Management LLC’s Greg Donaldson expressed concern that criminal charges may now become routine. “Once you cross that line and admit you’ve done something bad, you open up Pandora’s box,” said Donaldson, chairman of the Evansville, Indiana-based firm that manages about $1.1 billion. “This settlement just moved the goal post.” If convictions become too commonplace, the government may have to pursue even tougher penalties. " No wonder the public yawns at this though. Here's Zerohedge listing all confirmed rigged markets: Libor - interest rates: http://www.zerohedge.com/news/shocking-details-barclays-epic-lie-bor-fraud-duuuude%E2%80%A6whats-ur-guys-345-3m-fix%E2%80%A6tell-him-get-it http://www.zerohedge.com/news/shocking-details-barclays-epic... ISDAfix - swaps: http://www.bloomberg.com/news/articles/2013-04-14/banks-drop-off-isdafix-panel-amid-rate-rigging-probes http://www.bloomberg.com/news/articles/2013-04-14/banks-drop... Platts - oil prices: http://www.zerohedge.com/news/2012-10-09/libor-gate-comes-crude-total-exposes-price-fixing-energy-market http://www.zerohedge.com/news/2012-10-09/libor-gate-comes-cr... JP Morgan / BP - FX: http://www.zerohedge.com/news/2014-12-30/rigging-triangle-exposed-jpmorgan-british-petroleum-bank-england-cartel-full-frontal http://www.zerohedge.com/news/2014-12-30/rigging-triangle-ex... WM/Reuters - FX: http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-latest-market-rigging-and-collusion-scandal-foreign-exchange http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-la... High-Frequency Trading - equities: http://www.zerohedge.com/news/2013-06-11/hft-stock-manipulation-action http://www.zerohedge.com/news/2013-06-11/hft-stock-manipulat... UBS - gold: http://www.zerohedge.com/news/2014-11-09/another-conspiracy-theory-bites-dust-ubs-settles-over-gold-rigging-many-more-banks-f http://www.zerohedge.com/news/2014-11-09/another-conspiracy-...
randomname2 11y ago
It's also interesting how the stocks of UBS, Barclays and RBS immediately rose despite a hefty $5.8 billion in fines. Which in practice aren't actually paid by the banks, it's the shareholders, taxpayers (through bailouts) and customers (through higher fees) who end up paying for this.
- pas 11y ago
  It's not interesting. 6B is much less than a year of profit for all the companies involved, and now with uncertainty cleared, they are now cash cows in the eyes of more people, hence the rise in prices. Also, the "paid by ..." is a very-very interesting topic. Due to their sheer size and market share, they set the price for banking services. They don't even need to collude, but since there are not too many global banking conglomerates, they naturally have a sort of cooperation and competition, which basically leads to similar prices. (Though a bit different price structure, but that's irrelevant for a sizeable enough basket of financial products and sample of consumers.) So, it's quite impossible to force them to eat the fines, because for that you'd need a bank that wasn't on in this "market optimalization", but is large enough to absorb/caputre the market share if the culprits rise prices. But there doesn't seem to be. (And local smaller banks are already doing as good as they could to charm customers away from the big ones, so it's unlikely that they'll help keeping prices down.) However, if it's shareholders, that's not a problem. They should exercise some responsibility when voting with their money. And while we're at that, the same goes for taxpayers and customers too.
eternalban 11y ago
They should take out student loans ..
mattmcknight 11y ago
This article is bullshit. People are going to jail. http://rt.com/uk/193872-london-banker-libor-guilty/ http://rt.com/uk/193872-london-banker-libor-guilty/
- caseysoftware 11y ago
  I think they mean "no one in the US is going to jail" but that's a way less offensive headline.
  - mattmcknight 11y ago
    According to the Guardian, two people in the US (employees of Rabobank) have pleaded guilty. http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing http://www.theguardian.com/business/2014/oct/07/banker-plead... I am sure there is more detail on this out there that I don't have time to research, but the linked article is still bullshit.
- teh_klev 11y ago
  That article doesn't say that at all. It says that the unnamed banker is being prosecuted and "faces up to 10 years in jail". The cynic in me reckons at best he'll get a fine, a suspended sentence and we'll never know who he was. Not exactly justice.
  - mattmcknight 11y ago
    The initial article is still bullshit. Just a cursory google search reveals a number of people in multiple countries on trial, many of whom have pleaded guilty and are awaiting sentencing... http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing http://www.theguardian.com/business/2014/oct/07/banker-plead...
solve 11y ago
How about we ban anti-finance hate articles like this from hacker news? Certainly, the intent of these is not to spur in-depth intelligent conversation.
- yohoho22 11y ago
  So, on the one hand, you are a proponent of in-depth, intelligent conversation. On the other, you want to prohibit all discussion of news that might somehow reflect negatively on certain people involved with some kinds of finance. Is that right?
  - deleted 11y ago
    [deleted]
  - solve 11y ago
    No, that's wrong.
- randomname2 11y ago
  Few of us here "hate" finance, or big banks for that matter. Likely the reason this article is upvoted is that it truly boggles the mind that after years and years of blantant fraud and rigging there is yet one banker to go to jail and instead the politicians, judiciary, regulators and central bankers happily cover for, or even join in on the manipulation and rigging. If markets were to be un-rigged and allowed to function, banks were to stop getting hand-outs and fraud started to be persecuted, this would only be a good thing for 99.9% of people involved in the finance industry. Maybe this knee-jerk "anti-finance" climate you speak of would even disappear.
  - randomname2 11y ago
    Meanwhile in other banana republics: Guatemala: http://www.theweek.co.uk/middle-east/48250/banker-bashing-iran-style-four-fraudsters-sentenced-death http://www.theweek.co.uk/middle-east/48250/banker-bashing-ir... Vietnam: http://www.bloomberg.com/news/articles/2013-11-12/ex-bank-executive-may-face-death-in-vietnam-fraud-trial http://www.bloomberg.com/news/articles/2013-11-12/ex-bank-ex... Iran: http://www.theweek.co.uk/middle-east/48250/banker-bashing-iran-style-four-fraudsters-sentenced-death http://www.theweek.co.uk/middle-east/48250/banker-bashing-ir...
hatheyn 11y ago
Is there some way of incentivising prosecutors to focus their efforts on the biggest problems? For example, the prosecution of Aaron Swartz seemed gratuitously disproportionate.
appleflaxen 11y ago
Even before the 2008 financial crisis, these behaviors were happening. Unchecked, cheating by bankers distorts the market equilibrium and creates a bubble. The easiest example to see/understand for me is the pretend real-estate value on banks' books during the housing/mortgage bubble. We had a chance to deflate the bubble completely, but by failing to prosecute the individuals, we only did it partially. Without criminal prosecutions, this is going to happen again soon. With criminal prosecutions it would still happen again, but we would be insulated/innoculated for at least one generation of bankers and bank managers. We had an opportunity at that time to
jackgavigan 11y ago
Most people don't realise that the foreign exchange market was regulated very differently from other financial markets for a long time. Regulators acknowledged that the market was so liquid, transparent and competitive that front-running simply wasn't an issue and, in fact, was an appropriate way to fill client orders without exposing oneself to unnecessary risk. Here's an article from May 2006 about the debate over whether the market needs best execution regulations imposed upon it: http://www.euromoney.com/Article/1039431/From-the-archive-Does-FX-need-best-execution-regulations.html?single=true http://www.euromoney.com/Article/1039431/From-the-archive-Do...
- j_lev 11y ago
  Absolutely. Even today, you can't compare it to other markets where execution takes place on an exchange. "Honor among thieves" is the expression that comes to mind when talking about FX.
rasz_pl 11y ago
This happens all the time, for example movie The International (2009) is based on a true story :o. Banks are above the law.
deleted 11y ago
[deleted]
shit_parade2 11y ago
One law and process for the biggest banks and another law and process for everyone else. That poor sucker currently rotting in a London jail for allegedly being the cause of a flash crash probably wishes he had worked for a big bank. It is a farce to call this a criminal act when waivers remove all punishment beyond a fine.

249 points by snowy 11y ago

shameerc 11y ago

Because - https://www.youtube.com/watch?v=iFDe5kUUyT0 https://www.youtube.com/watch?v=iFDe5kUUyT0

sillygoose 11y ago
Excellent video.
sobkas 11y ago
Calling gold coin a true money is so funny, because it doesn't have inherent value by itself. It's only have value because people agreed to exchange things and services for it. Like a printed money. And if someone thinks gold coins didn't lost value over time...

mootothemax 11y ago

According to the radio this morning, the bankers who did this and the LIBOR fixing are facing jail - it's just that their cases are taking time to progress. I think it's safe to save the scandal for a little longer.

rcarrigan87 11y ago
I think the article was more focusing on higher level execs that insulate themselves from any criminal charges.
- hueving 11y ago
  If a UPS truck driver drives drunk, do you expect the CEO to go to jail?
  - toyg 11y ago
    The company has a duty of care (which varies across legislations).
  - 13years 11y ago
    Yes, if he new about it and didn't stop it, or even in some way condoned it then he is certainly has responsibility.
    - Sven7 11y ago
      Yup. The sort of leadership Obama and Bush have demonstrated when things go wrong. It flows down the food chain.
  - sobkas 11y ago
    Well, it depends if driver can crash Worlds economy or not. And if it can, there is something wrong with economy, UPS, UPSs CEO, truck and a driver.
  - noonespecial 11y ago
    This seems a little more like the CEO entering a lucrative shipping deal with a mexican drug cartel and then having the driver go to jail for trafficking when caught.
  - codingdave 11y ago
    Not jail, no... but I do expect the CEO to act to prevent (or at least try to prevent) it in the future, or else some consequence should absolutely hit the CEO.
  - yohoho22 11y ago
    I can think of a whole host of such situations where virtually everyone would agree that the CEO should go to jail. What do you have to say to that?
    - tedunangst 11y ago
      I can think of a whole host of such situations where virtually everyone would agree that the CEO should not go to jail. What do you have to say to that?
- cm2187 11y ago
  Are you suggesting Obama should go to jail if a GI commits a crime in Irak?
  - rcarrigan87 11y ago
    That's really not a fair comparison...
    - donatj 11y ago
      I think that's a dead on comparison.
  - tinco 11y ago
    If that crime was implicit in a direct order of Obama, why not? If someone creates a climate of "do whatever it takes" they should be held at least partially and possibly fully liable. At least that seems like good morale to me.
- dheera 11y ago
  "Higher"-level execs shouldn't be automatically held responsible for decisions they didn't make. Punish the manager(s) or employee(s) or exec(s) who held power and made the bad decision. Those execs don't really own or control the company anyway, for such large, post-IPO companies. That's like punishing the mayor for a crime someone committed on the street.
  - barrkel 11y ago
    I have news for you - Sarbanes-Oxley makes high-level executives criminally responsible for a certain subset of the company's operations. More broadly, executive control is more complete than you suggest. Delegated powers can be audited and controls used to ensure the integrity of the decision-making process. Communications can be monitored, and usually are in banks. Not enacting such controls, or not enforcing them strongly enough, could be seen as negligence.
    - threeseed 11y ago
      > Communications can be monitored, and usually are in banks. So ? You just join a chat room on your 4G phone or iPad. Regardless banks are no different to every other enterprise. The firewalls just capture the URLs and white/black list against some subscribed set. They aren't monitoring every bit of traffic that goes out. Except for maybe PCI compliance e.g. checking for 16 digit numbers passing through the firewall.
      - jsprogrammer 11y ago
        Some enterprises MITM all PKI encrypted channels so that they can monitor all of its communications.
  - fnordfnordfnord 11y ago
    It's like punishing the mayor for a crime one of their employees made on the job, after the mayor had been put on notice that mayors are responsible for their employees' on-the-job conduct.

rcarrigan87 11y ago

Increased regulation in some regards has just driven further consolidation in the banking industry. It also makes it more and more difficult for would-be competitors to try and disrupt these banks. I'm not sure that increased penalties, sending execs to jail, or more regulation will fix banking. If the banks are "too big to jail/fail" then maybe we should make them smaller...

raverbashing 11y ago
> Increased regulation in some regards has just driven further consolidation in the banking industry. This a million times. As regulation increases, you make sure only the big guys follow it to their satisfaction. And of course in the end there will be a lot of "hows, ifs, buts" falling through the cracks. Some regulation of course is needed, but it seems the best regulation is not giving anyone the advantage to be the dominant player.
- astazangasta 11y ago
  I don't know if you've been reading any news, but too much regulation is not the issue here. There are something like a few hundred SEC employees to investigate the entire banking sector. In addition we have evidence of overt sycophancy in the New York Fed and a general refusal to correct bad behavior (see Carmen Segarra). Finally, the pattern of laws has been deregulatory, not vice versa. Enron was able to engage in fraudulent trade in energy derivatives because the derivatives market was deregulated. I don't know where you are getting this story (ideology, I suspect), but it is deeply wrong.
  - raverbashing 11y ago
    Apparently you missed the part where I said "Some regulation of course is needed", which is not surprising given your shallow interpretation of facts Over regulation is a problem exactly because it builds too big to fail corporations. It eliminates competition due to regulatory capture "Enron was able to engage in fraudulent trade in energy derivatives because the derivatives market was deregulated." Fraud is fraud. > I don't know where you are getting this story (ideology, I suspect) Yes, my ideology is opposed to having idiot bureaucrats stifling progress while regulatory capturing incumbents to their friends. See: Tesla vs. Car dealerships, Uber vs. taxi monopolies, this: http://www.motherjones.com/kevin-drum/2013/10/heres-why-your-asthma-inhaler-costs-so-damn-much http://www.motherjones.com/kevin-drum/2013/10/heres-why-your...

TheAlchemist 11y ago

It's really increadible. 3% of one year profits, for multiple year huge scale robery. Not surprising, given the industry track record, but still mind blowing when you think about the big picture.

alfiedotwtf 11y ago
It's operational cost, already factored in, and paid for by clients.
evanpw 11y ago
That's because banks do a lot of things other than FX trading. It's a much bigger chunk if you use a more relevant denominator: http://www.bloombergview.com/articles/2015-05-20/bank-fine-scorecard-follow-along-at-home- http://www.bloombergview.com/articles/2015-05-20/bank-fine-s...
cm2187 11y ago
Did you read the report? http://im.ft-static.com/content/images/ee8b6f40-fef5-11e4-84b2-00144feabdc0.pdf http://im.ft-static.com/content/images/ee8b6f40-fef5-11e4-84... The sort of profits the regulator mentions is $16,000, $14,270, $59,000. Even if they did that every day for 10 years, it is still pocket money compared to the fine.
- TheAlchemist 11y ago
  That are the sums that can be directly priced. The report also points to tens of cases when the client/industry prejudice cannot be directly priced - for example: "FX traders involved in the USD/Brazilian Real market colluded together to manipulate markets in a more straightforward manner—by agreeing to boycott local brokers to drive down competition. On October 28, 2009, an RBC trader wrote “everybody is in agreement in not accepting a local player as a broker?” A Barclays FX trader responded “yes, the less competition the better." Those benefits, while impossible to calculate, where an order of magnitude bigger than the direct ones. Also, don't forget that those banks have huge privilegies (gov backing, FED money, gov bonds dealership etc) in exchange for which they provide a fair market and services. For instance, in theory those banks should have a lot of their privilegies removed as the result of this case. I can assure you that they are extremely happy to pay only the ~$6bn to keep those safe.

stygiansonic 11y ago

Here is a better explanation of what these traders did: http://www.bloombergview.com/articles/2014-11-12/banks-manipulated-foreign-exchange-in-ways-you-can-t-teach http://www.bloombergview.com/articles/2014-11-12/banks-manip... Some additional reading: http://www.bloombergview.com/articles/2015-05-20/bank-fine-scorecard-follow-along-at-home- http://www.bloombergview.com/articles/2015-05-20/bank-fine-s... Quote: "They also got together in chat rooms to, essentially, lay off some of their client risk to one another prior to the fixing. That laying off of client risk, again, looks a bit conspiratorial, but it probably made markets more efficient, and is not obviously bad or illegal. Then they went beyond that efficient laying off of risk, trying to move the price in their favor. They seem to have made some money doing this, at the expense of their clients, but my suspicion was that they were "tinkering at the edges of real supply and demand," optimizing how they made money trading their combined customer order book rather than truly rigging the FX market." This is an alternative viewpoint: https://medium.com/bull-market/oranges-and-lemons-the-fx-scandal-in-perspective-cd3456089ce4 https://medium.com/bull-market/oranges-and-lemons-the-fx-sca... Quote: "Although there was some behaviour that was clearly on the other side of the line, the regulators also made clear that lots of the practices involved were not intrinsically criminal; this was an investigation into a grey area, not a straightforward case of lying. Of course, the industry has less than zero claim to the benefit of anyone’s doubt, and people will be instantly suspicious of claims that “it’s more complicated than that”, so maybe I can explain what went on in the FX market through the medium of a series of examples..."

marcosdumay 11y ago
Or, in other words, they abused the trust their clients had to get their money. Sounds like fraud, but if some administrative body decided fraud was legal, that really makes it so... And don't look at that small book governing your nation laws, it's irrelevant anyway.
- pjc50 11y ago
  No, read the Medium article again; the clients always had the option to specify "best execution" or their own trading strategy, but for simplicity and lowest broker fees chose to transact at the 4pm price. The clients (which are also large financial entities) are generally not screaming about fraud, they're just getting a deal that isn't as good as they thought.

randomname2 11y ago

One SEC commissioner has issued a "Dissenting Statement" as she was furious that the SEC has made a mockery of "recidivist criminal behavior" by banks https://www.sec.gov/news/statement/stein-waivers-granted-dissenting-statement.html https://www.sec.gov/news/statement/stein-waivers-granted-dis...

rcarrigan87 11y ago
wow, that pretty much sums it up. We have more than enough regs on the book to reign in banks. We just choose not to enforce them.
- m_alexgr 11y ago
  This. A result of the proverbial revolving door between regulators and the banks. You can have regulations up the wazoo and it won't make a spec of difference if they are not properly enforced. Even with the odd criminal conviction bank regulation is kabuki theatre for mass consumption. These guys get away with murder - literally. EDIT: yes, literally the murder of thousands in Mexico. HSBC bank & Sinaloa cartel. HSBC in particular has a long history of enabling drug cartels. The Opium Wars.
  - fennecfoxen 11y ago
    Literally, hmm? I'd be quite interested to hear about these murder cases you allege (who murdered, who died, which jurisdictions and courts were involved, et cetera).
fnordfnordfnord 11y ago
The solution is clear. Modify (gut) the regs to bring banks into compliance. Or simply ignore it. How will the SEC dress it up and sell it (to itself)?

randomname2 11y ago

The total costs of keeping everyone out of prison: http://i.imgur.com/16KcuHu.jpg http://i.imgur.com/16KcuHu.jpg

pas 11y ago
Sources? Timeframe? Which year's dollars?

moopling 11y ago

The invisible hand, was nowhere to be seen...

rcarrigan87 11y ago
the invisible hand left banking a long time ago when the banks consolidated into mega banks. For capitalism to work you need a high degree of competition...

randomname2 11y ago

For some reason, Bloomberg seemed amazed that the public yawned at the guilty plea: http://www.bloomberg.com/news/articles/2015-05-20/once-unthinkable-criminal-pleas-by-u-s-banks-get-investor-meh- http://www.bloomberg.com/news/articles/2015-05-20/once-unthi... Quote: "For all the muted response to Wednesday’s news, Donaldson Capital Management LLC’s Greg Donaldson expressed concern that criminal charges may now become routine. “Once you cross that line and admit you’ve done something bad, you open up Pandora’s box,” said Donaldson, chairman of the Evansville, Indiana-based firm that manages about $1.1 billion. “This settlement just moved the goal post.” If convictions become too commonplace, the government may have to pursue even tougher penalties. " No wonder the public yawns at this though. Here's Zerohedge listing all confirmed rigged markets: Libor - interest rates: http://www.zerohedge.com/news/shocking-details-barclays-epic-lie-bor-fraud-duuuude%E2%80%A6whats-ur-guys-345-3m-fix%E2%80%A6tell-him-get-it http://www.zerohedge.com/news/shocking-details-barclays-epic... ISDAfix - swaps: http://www.bloomberg.com/news/articles/2013-04-14/banks-drop-off-isdafix-panel-amid-rate-rigging-probes http://www.bloomberg.com/news/articles/2013-04-14/banks-drop... Platts - oil prices: http://www.zerohedge.com/news/2012-10-09/libor-gate-comes-crude-total-exposes-price-fixing-energy-market http://www.zerohedge.com/news/2012-10-09/libor-gate-comes-cr... JP Morgan / BP - FX: http://www.zerohedge.com/news/2014-12-30/rigging-triangle-exposed-jpmorgan-british-petroleum-bank-england-cartel-full-frontal http://www.zerohedge.com/news/2014-12-30/rigging-triangle-ex... WM/Reuters - FX: http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-latest-market-rigging-and-collusion-scandal-foreign-exchange http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-la... High-Frequency Trading - equities: http://www.zerohedge.com/news/2013-06-11/hft-stock-manipulation-action http://www.zerohedge.com/news/2013-06-11/hft-stock-manipulat... UBS - gold: http://www.zerohedge.com/news/2014-11-09/another-conspiracy-theory-bites-dust-ubs-settles-over-gold-rigging-many-more-banks-f http://www.zerohedge.com/news/2014-11-09/another-conspiracy-...

randomname2 11y ago

It's also interesting how the stocks of UBS, Barclays and RBS immediately rose despite a hefty $5.8 billion in fines. Which in practice aren't actually paid by the banks, it's the shareholders, taxpayers (through bailouts) and customers (through higher fees) who end up paying for this.

pas 11y ago
It's not interesting. 6B is much less than a year of profit for all the companies involved, and now with uncertainty cleared, they are now cash cows in the eyes of more people, hence the rise in prices. Also, the "paid by ..." is a very-very interesting topic. Due to their sheer size and market share, they set the price for banking services. They don't even need to collude, but since there are not too many global banking conglomerates, they naturally have a sort of cooperation and competition, which basically leads to similar prices. (Though a bit different price structure, but that's irrelevant for a sizeable enough basket of financial products and sample of consumers.) So, it's quite impossible to force them to eat the fines, because for that you'd need a bank that wasn't on in this "market optimalization", but is large enough to absorb/caputre the market share if the culprits rise prices. But there doesn't seem to be. (And local smaller banks are already doing as good as they could to charm customers away from the big ones, so it's unlikely that they'll help keeping prices down.) However, if it's shareholders, that's not a problem. They should exercise some responsibility when voting with their money. And while we're at that, the same goes for taxpayers and customers too.

eternalban 11y ago

They should take out student loans ..

mattmcknight 11y ago

This article is bullshit. People are going to jail. http://rt.com/uk/193872-london-banker-libor-guilty/ http://rt.com/uk/193872-london-banker-libor-guilty/

caseysoftware 11y ago
I think they mean "no one in the US is going to jail" but that's a way less offensive headline.
- mattmcknight 11y ago
  According to the Guardian, two people in the US (employees of Rabobank) have pleaded guilty. http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing http://www.theguardian.com/business/2014/oct/07/banker-plead... I am sure there is more detail on this out there that I don't have time to research, but the linked article is still bullshit.
teh_klev 11y ago
That article doesn't say that at all. It says that the unnamed banker is being prosecuted and "faces up to 10 years in jail". The cynic in me reckons at best he'll get a fine, a suspended sentence and we'll never know who he was. Not exactly justice.
- mattmcknight 11y ago
  The initial article is still bullshit. Just a cursory google search reveals a number of people in multiple countries on trial, many of whom have pleaded guilty and are awaiting sentencing... http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing http://www.theguardian.com/business/2014/oct/07/banker-plead...

solve 11y ago

How about we ban anti-finance hate articles like this from hacker news? Certainly, the intent of these is not to spur in-depth intelligent conversation.

yohoho22 11y ago
So, on the one hand, you are a proponent of in-depth, intelligent conversation. On the other, you want to prohibit all discussion of news that might somehow reflect negatively on certain people involved with some kinds of finance. Is that right?
- deleted 11y ago
  [deleted]
- solve 11y ago
  No, that's wrong.
randomname2 11y ago
Few of us here "hate" finance, or big banks for that matter. Likely the reason this article is upvoted is that it truly boggles the mind that after years and years of blantant fraud and rigging there is yet one banker to go to jail and instead the politicians, judiciary, regulators and central bankers happily cover for, or even join in on the manipulation and rigging. If markets were to be un-rigged and allowed to function, banks were to stop getting hand-outs and fraud started to be persecuted, this would only be a good thing for 99.9% of people involved in the finance industry. Maybe this knee-jerk "anti-finance" climate you speak of would even disappear.
- randomname2 11y ago
  Meanwhile in other banana republics: Guatemala: http://www.theweek.co.uk/middle-east/48250/banker-bashing-iran-style-four-fraudsters-sentenced-death http://www.theweek.co.uk/middle-east/48250/banker-bashing-ir... Vietnam: http://www.bloomberg.com/news/articles/2013-11-12/ex-bank-executive-may-face-death-in-vietnam-fraud-trial http://www.bloomberg.com/news/articles/2013-11-12/ex-bank-ex... Iran: http://www.theweek.co.uk/middle-east/48250/banker-bashing-iran-style-four-fraudsters-sentenced-death http://www.theweek.co.uk/middle-east/48250/banker-bashing-ir...

hatheyn 11y ago

Is there some way of incentivising prosecutors to focus their efforts on the biggest problems? For example, the prosecution of Aaron Swartz seemed gratuitously disproportionate.

appleflaxen 11y ago

Even before the 2008 financial crisis, these behaviors were happening. Unchecked, cheating by bankers distorts the market equilibrium and creates a bubble. The easiest example to see/understand for me is the pretend real-estate value on banks' books during the housing/mortgage bubble. We had a chance to deflate the bubble completely, but by failing to prosecute the individuals, we only did it partially. Without criminal prosecutions, this is going to happen again soon. With criminal prosecutions it would still happen again, but we would be insulated/innoculated for at least one generation of bankers and bank managers. We had an opportunity at that time to

jackgavigan 11y ago

Most people don't realise that the foreign exchange market was regulated very differently from other financial markets for a long time. Regulators acknowledged that the market was so liquid, transparent and competitive that front-running simply wasn't an issue and, in fact, was an appropriate way to fill client orders without exposing oneself to unnecessary risk. Here's an article from May 2006 about the debate over whether the market needs best execution regulations imposed upon it: http://www.euromoney.com/Article/1039431/From-the-archive-Does-FX-need-best-execution-regulations.html?single=true http://www.euromoney.com/Article/1039431/From-the-archive-Do...

j_lev 11y ago
Absolutely. Even today, you can't compare it to other markets where execution takes place on an exchange. "Honor among thieves" is the expression that comes to mind when talking about FX.

rasz_pl 11y ago

This happens all the time, for example movie The International (2009) is based on a true story :o. Banks are above the law.

deleted 11y ago

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shit_parade2 11y ago

One law and process for the biggest banks and another law and process for everyone else. That poor sucker currently rotting in a London jail for allegedly being the cause of a flash crash probably wishes he had worked for a big bank. It is a farce to call this a criminal act when waivers remove all punishment beyond a fine.