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NERMEEN
SHAIKH: We turn now
to the felons on Wall Street. Five of the world’s top banks will pay over $5
billion in fines after pleading guilty to rigging the price of foreign
currencies and interest rates. Citigroup, JPMorgan Chase, Barclays and Royal
Bank of Scotland pleaded guilty to conspiring to manipulate the price of
U.S. dollars and euros exchanged in the five trillion foreign exchange—$5
trillion foreign exchange spot market. UBS pleaded
guilty for its role in manipulating the Libor benchmark interest rate. On
Wednesday, U.S. Attorney General Loretta Lynch announced the deal.
ATTORNEY
GENERAL LORETTA
LYNCH: We are
here to announce a major law enforcement action against international
financial institutions that for years participated in a brazen display
of collusion and foreign exchange rate market manipulation, and will, as
a result, pay a total of nearly $3 billion in fines and penalties. As a
result of our investigation, four of the world’s largest banks have
agreed to plead guilty to felony antitrust violations. They are
Citicorp, JPMorgan Chase & Co., Barclays PLC
and the Royal Bank of Scotland PLC.
AMY
GOODMAN: No one who
works with the banks was hit with criminal charges as part of the
settlements.
For more, we’re joined by Matt Taibbi, award-winning
journalist with Rolling Stone magazine. His most recent book,
The Divide: American Injustice in the Age of the Wealth Gap, is now out
in paperback.
Welcome back to Democracy Now!,
Matt.
MATT
TAIBBI: Good to see
you, Amy.
AMY
GOODMAN: OK,
explain what these banks are charged with. And what does it mean when you
say banks are charged, but all the people go free?
MATT
TAIBBI: Right, they
filed—actually, these banks, the companies, pleaded guilty to felony charges
in this case, which means it was not individuals of the company, it was the
actual company itself, which is actually a step forward, because for a long
time in the post-2008 period we were having a lot of settlements where there
was a sort of a neither-admit-nor-deny agreement between the government and
these companies, and in this case they actually did have to admit to
wrongdoing and did have to plead guilty to a criminal charge, in addition to
the money changing hands.
AMY
GOODMAN: And what
was the wrongdoing?
MATT
TAIBBI: The
wrongdoing was manipulating the prices of currencies, which is about as
serious a financial crime as you can possibly get, I think. You know, you
and I sat here a few years ago and talked about the Libor scandal. This is
very similar.
AMY
GOODMAN: In as
simple terms as you can make it, because I think that’s why nobody goes to
jail: No one can—
MATT
TAIBBI: Right.
AMY
GOODMAN: You can
understand if someone steals a candy bar.
MATT
TAIBBI: Right.
AMY
GOODMAN: And a
person can go to jail for years for that.
MATT
TAIBBI: Right.
AMY
GOODMAN: But when
it comes to this, what did they do?
MATT
TAIBBI: They were
monkeying around with the prices of every currency on Earth. So, if you can
imagine that anybody who has money, which basically includes anybody who’s
breathing on the planet, all of those people were affected by this activity.
So if you have dollars in your pocket, they were monkeying around with the
prices of dollars versus euros, so you might have had more or less money
fractionally, depending on all of this manipulation, every single day. And
again, Attorney General Lynch went out of her way to say that this activity
went on basically every single day for the last five years or so. So every
single day, that $5 in your pocket was worth a little bit more or a little
bit less, based on what these people were doing. And if you spread that out
to everybody on Earth, it turns into a financial crime that’s on a scale
that, you know, you would normally only think of in Bond movies or something
like that.
NERMEEN
SHAIKH: Well, the
Justice Department says traders used online chat rooms and coded language to
manipulate currency exchange rates. One high-ranking Barclays trader
chatted, quote, "If you ain’t cheating you ain’t trying." And another
responded, quote, "Yes, the less competition the better." So, could you
comment on that, Matt? And also explain why, in this particular case, the
companies pleaded guilty.
MATT
TAIBBI: Well, I
think part of it is because they had this very graphic online record of
these people chatting and admitting to essentially a criminal conspiracy in
writing. That’s one of the things that’s really interesting about this
entire era of financial crime, is that you have so much of this very
graphic, detailed documentary evidence just lying around. The problem is the
government has either been too overwhelmed or too disinclined to go and get
it and do anything with it. In this case, you have people openly calling
themselves the cartel or the mafia, and then openly talking about monkeying
around or manipulating, you know, the price of this or that. The
CFTC, the Commodity Futures Trading Commission,
actually released chats from a different case involving interest rate swaps
yesterday, where they—where one guy was bragging about how he was holding up
the price of interest rate swaps like he was bench-pressing at. They were
bragging about this, you know, in these chat rooms. So these—what you have
to understand about a lot of these people, they’re very testosterone-laden,
souped-up young people who think that they’re indestructible. They’re very
arrogant. And they’re doing all this in chat rooms, thinking they’re never
going to get caught. And they got caught.
AMY
GOODMAN: On
Wednesday, Citigroup CEO Michael Corbat said,
quote, "The behavior that resulted in the settlements we announced today is
an embarrassment to our firm, and stands in stark contrast to Citi’s
values," unquote. Meanwhile, JPMorgan CEO Jamie
Dimon called the investigation findings, quote, "a great disappointment to
us." He went on to say, quote, "The lesson here is that the conduct of a
small group of employees, or of even a single employee, can reflect badly on
all of us, and have significant ramifications for the entire firm," said the
CEO, Jamie Dimon.
MATT
TAIBBI: Well,
what’s humorous about this is that virtually all of these so-called
too-big-to-fail banks now have been embroiled in scandals of varying degrees
of extreme seriousness since 2008. So for them to say, "Oh, it’s just a few
bad apples in this one instance," is increasingly absurd. They have been
dinged for everything from bribery to money laundering, to rigging Libor, to
mass fraud in the subprime mortgage markets and now the forex markets. It’s
one mass crime over—you know, after another, and there’s no consequence.
AMY
GOODMAN: Now,
aren’t these banks competitors?
MATT
TAIBBI: Well, sort
of. But that’s the main problem in this case, is what’s happening is that
they’re colluding, which is a far more dangerous kind of corruption than
what we saw, for instance, in 2008, when you saw a lot of banks, in house,
committing fraud against their own clients and against the markets. This
behavior, where you have a series of major banks colluding to fix the price
of a currency, that is extremely dangerous. And if that behavior is allowed
to go unchecked, the negative possibilities that could stem from that are
virtually limitless.
NERMEEN
SHAIKH: Well, the
foreign exchange market is the largest, and yet the least regulated, market
in the financial world.
MATT
TAIBBI: Mm-hmm.
NERMEEN
SHAIKH: Do you know
why that is? And who would be in charge of its regulation?
MATT
TAIBBI: Well, a
variety of regulatory bodies would have what you would describe as a general
purview over this kind of activity. Obviously, they got them on an antitrust
violation, so this—it falls under the purview of the Department of Justice.
The Fed, the banking regulators, the Commodity Futures Trading Commission,
they all have a kind of a general mandate to look out for this sort of
stuff. But the problem with the forex markets is that there isn’t a specific
body that’s specifically looking at this all the time. It’s not like, let’s
say, you know, the commodities market, where you do have a
CFTC that’s specifically looking at that. This is
one of many markets that simply falls between the cracks in the regulatory
scheme, where there isn’t a single—you know, a targeted effort to look at
this all the time.
AMY
GOODMAN: Earlier
this month, independent Senator Bernie Sanders of Vermont, who’s now running
for president, introduced the Too Big to Fail, Too Big to Exist Act.
SEN.
BERNIE SANDERS:
The bill that I am introducing today with Congressman Brad Sherman would
require regulators at the Financial Stability Oversight Council to
establish too-big-to-fail list—a too-big-to-fail list of financial
institutions and other huge entities whose failure would pose a
catastrophic risk on the United States economy without a taxpayer
bailout. This list must include, but is not limited to, JPMorgan Chase,
Bank of America, Citigroup, Goldman Sachs, Wells Fargo and Morgan
Stanley.
It should make every American extremely nervous that
in this weak regulatory environment—weak regulatory environment—the
financial supervisors in our country and around the world are still able
to uncover an enormous amount of fraud on Wall Street and other
financial institutions to this very day. I fear very much that the
financial system is even more fragile than many people may perceive.
This huge issue simply cannot be swept under the rug. It has got to be
addressed.
AMY
GOODMAN: So that is
Democratic presidential candidate Bernie Sanders, senator of Vermont,
independent senator. About a decade ago, you stayed with Sanders for about a
month, covering him for Rolling Stone, doing a profile.
MATT
TAIBBI: Yeah. Sort
of remarkably, he invited me to tag along and just sort of watch how the
process works. I think he felt that the public should know about a lot of
the nooks and crannies of the congressional bureaucracy. And I got this
remarkable education into how things actually work. He didn’t hold anything
back. Sanders is, you know, exactly as advertised. He’s a completely honest,
I think, politician who is just really interested in seeing—you know,
standing up for regular working people. So, his voice on this particular
issue, I think, is really important, because he’s one of the few politicians
who understands that it’s a truly bipartisan issue that affects everybody,
people on both sides of the aisle, equally. And he’s absolutely right about
breaking up the banks. That is the most single most important thing that has
to be done with this issue.
NERMEEN
SHAIKH: Well, there
have been reports, Matt Taibbi, and I’m sure this is the case, that none of
the significant changes that were to be put in place in the financial system
since the crisis occurred several years ago—those changes have not yet taken
place, and so this kind of thing is likely to recur. Could you talk about
that and also the extent to which the new attorney general, Loretta Lynch,
is likely to be tougher on banks and, indeed, on bankers?
MATT
TAIBBI: Well, I
don’t know if that’s exactly true. I definitely hear from people on Wall
Street all the time that there are—there are certain things that are
different. I think, you know, trading—banks trading for their own accounts,
that’s been severely curtailed since Dodd-Frank. You know, there have been a
number of regulations that have made it more difficult to engage in the
kinds of risky activities that we saw before 2008.
But by and large, the general
problem is more unwillingness to enforce existing laws. And it wasn’t so
much an absence of new regulations that was the problem in 2008. It was more
a failure of will on the part of the government. We had laws on the books
that were perfectly sufficient in the late '80s and early ’90s, when we, you
know, conducted over 1,800 prosecutions and put 800 people in jail after the
S&L crisis. We can do the same thing now, if we want to, with this or with
robo signing or with subprime mortgage fraud or any of another dozen other
scandals, and we just haven't done it. And that—I think that’s the main
problem, and it’s a failure of will. And I do hear from people that there is
more serious now—seriousness now, in the waning years of the Obama
administration, more willingness to go after the banks.
AMY
GOODMAN: A new
report from the Corporate Reform Coalition called "Still Too Big to
Fail" says, since 2008, regulators have failed to enact key parts of the
Dodd-Frank Wall Street Reform and Consumer Protection Act. It found, quote,
"The top six bank holding companies are considerably larger than before, and
are still permitted to borrow excessively relative to the assets they hold.
... Banks can still use taxpayer-backed insured deposits to engage in
high-risk derivative transactions here and overseas. Compensation incentives
fail to discourage mismanagement and illegality, given that when legal fees,
settlements, and fines mount, it is usually the shareholders, not the
corporate executives who pay." The report concludes, quote, "Should one of
these giant banking firms fail again, it appears that the damage will not be
contained." So there’s a lot here. One is that the U.S. could descend again.
Number two is that even with the billions that are now—these banks have to
pay, who is actually paying?
MATT
TAIBBI: Oh, the
shareholders. I mean, that’s—the pain is not going to come from the actual
wrongdoers, you know, the people who actually committed these
offenses—although there have been some criminal indictments in the previous
Libor case, so we can’t say that nobody’s going to go to jail, because it is
possible that that could happen. There could be a few low-level players who
will get rolled up in this thing.
AMY
GOODMAN: Because
the non-prosecution agreement was voided because they did it again?
MATT
TAIBBI: Yes, but
even in the Libor case, there were people from other banks. Rabobank, there
were a couple of employees who got—who were criminally indicted, if I
remember correctly. But it was nothing like the roundup that should have
happened. I’m just saying that there were a few individuals who got caught
up here and abroad. But by and large, you know, that quote is absolutely
correct.
There are a couple of points that
are really important here. First, after 2008, we made the system far more
concentrated. We made the too-big-to-fail banks much bigger than before. We
actually did this intentionally. We used taxpayer money to merge banks
together, to make them bigger and more dangerous and harder to regulate. And
we saw, with episodes like the London Whale episode, that massive losses can
happen in the blink of an eye, and we will have no idea when it’s coming.
And so, this kind of activity—we’ve definitely made the system riskier,
harder to regulate. And all those things are certainly true, and Dodd-Frank
has failed to address those.
AMY
GOODMAN: Matt
Taibbi, we’re going to break, and when we come back, you’ve written another
piece called "Why Baltimore Blew Up," and we’re going to take a look at
this. You say it goes far beyond the police killing of Freddie Gray. Matt
Taibbi, award-winning journalist with Rolling Stone magazine. His
recent book is now out in paperback, The Divide: American Injustice in
the Age of the Wealth Gap. Stay with us.
