On Wednesday, a handful of Wall Street banks pleaded guilty to criminal charges and agreed to pay a combined $US5.8 billion in fines for their roles in the LIBOR interest rate and currency rigging scandal.
The market barely reacted.
As Bloomberg’s Hugh Son and Elizabeth Dexheimer put it, investors responded to the news with a resounding “meh.”
The New York Times’ Peter Henning noted that, at this point, the fines and the guilty pleas kind of just feel like the cost of doing business.
No individual traders from the banks, which include Barclays, Citi, JPMorgan, RBS, and UBS, have been held criminally accountable. But the banks themselves, having admitted to criminal activity, are literally felons.
So why do none of them seem to care?
Because, days before Wednesday’s guilty pleas and criminal charges, all five banks obtained waiver fees from the SEC to allow them to carry on with business as usual. Here’s UBS’ request for a waiver.
Bloomberg reports that the waivers will allow the banks to carry on managing funds and raising capital. There’s even rumour that the reason the DOJ settlements were pushed back by a week was in order to give the banks more time to secure the SEC waivers.
Congresswoman Maxine Waters picked up on the issue last week and wrote a letter to SEC Chair Mary Jo White urging the SEC not to waive the automatic disqualifications the banks would otherwise face.
In a statement following the guilty pleas, she said, “the Securities and Exchange Commission appears to have rubber-stamped waivers for these institutions, allowing them to continue doing business as if no crime was committed.”
The waiver thing isn’t totally unheard of. After a probe into Deutsche Bank earlier this year for its role in manipulating the LIBOR rate, the SEC issued a similar waiver to that bank. One commissioner was not happy about it and wrote a dissenting statement, condemning it.
“In granting this waiver, the Commission continues to erode even this lowest of hurdles for large companies, while small and midsize business appear to face different treatment,” commissioner Kara Stein wrote.
For what it’s worth, all the banks agreed to a 3-year probation period in which they would “not commit another federal crime during the term of probation” in signing the document. We’ll see how that works out.
So how are the bank execs themselves taking the news?
They’re more or less blaming everything on a few bad apples for manipulating interest rates.
Antony Jenkins, the CEO of Barclays, which got hit with $US2.4 billion in total fines, said, “I share the frustration of shareholders and colleagues that some individuals have once more brought our company and industry into disrepute.”
“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,” said JPMorgan’s Jamie Dimon in a statement.
JPMorgan issued a statement Wednesday saying the bad conduct was “principally attributable to a single trader…and his coordination with traders at other firms,” the WSJ reported.
And that trader is already fired. So everything’s fine now.