NEW YORK – In her first major action as attorney general, Loretta Lynch announced Wednesday that five big banks – Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland PLC and UBS AG – have agreed to plead guilty to felony charges for manipulating the foreign exchange currency markets, FOREX, and to pay nearly $6 billion in fines.
The fines, while large when measured as absolute dollars, are relatively small when compared with the size of the FOREX market. The Bank of International Settlement estimated the market was averaging $5.3 trillion in trading per day in April 2013, up from $4 trillion in April 2010 and $3.3 trillion in April 2007.
The settlement was also controversial because fines were assessed instead of criminal prosecutions of the bank directors, senior managers or traders involved in what the Justice Department called a massive fraud perpetrated by banks’ backroom trading departments. The objective, the DOJ said, was to lock in huge profits by manipulating interest rates that affect large trades based on the future value of foreign currencies.
As WND previously reported, Sen. David Vitter, R-La., criticized Lynch during her Senate confirmation hearings for the role she played as U.S. Attorney for the Eastern District of New York in agreeing not to prosecute any directors or managers of HSBC bank.
HSBC was allowed to pay a $1.9 billion fine after admitting drug and terrorist money was laundered through its U.S. bank.
As WND reported in February, Lynch’s confirmation vote initially was postponed after Vitter’s staff quizzed HSBC whistleblower John Cruz and then decided to open an investigation of Lynch’s role in the decision not to criminally prosecute the bank.
Lynch’s announcement in the FOREX settlement was reminiscent of the statement she issued Dec. 11, 2012, when she announced the HSBC settlement.
Regarding FOREX, she said: “Today’s historic resolutions are the latest in our ongoing efforts to investigate and prosecute financial crimes, and they serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers.”
Lynch said the “penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct.”
“It is commensurate with the pervasive harm done,” she said. “And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare.”
Assistant Attorney General William Baer emphasized that the five banks had engaged in a conspiracy to fix the rate of exchange between the U.S. dollar and the euro, “affecting currencies that are at the heart of international commerce and undermining the integrity and the competitiveness of foreign currency exchange markets which account for hundreds of billions of dollars worth of transactions every day.”
“The seriousness of the crime warrants the parent-level guilty pleas by Citicorp, Barclays, JPMorgan and RBS,” Baer stressed.
One of the most vociferous critics of both the FOREX settlement this week and the HSBC settlement in December 2011 is one of the Senate’s most liberal members, Sen. Elizabeth Warren, D-Mass., a potential rival to Hillary Clinton for the Democratic Party’s presidential nomination in 2016.
Warren, who called the FOREX settlement a “wrist slap,” grilled officials from the Treasury Department, the Federal Reserve and the Office of the Comptroller of the Currency in a Senate hearing March 7, 2013, about why no one at HSBC was prosecuted.
See video of Warren in Senate hearing:
Another critic on the political left was Teamsters President James Hoffa, who combined his criticism of the FOREX settlement with the union’s opposition to the Trans-Pacific Partnership the Obama administration is trying to speed through Congress. Obama wants a bill allowing “fast-track authority” so the treaty can be ratified with no amendments in an up-or-down majority vote.
“Fast track is a vehicle that will speed a race to the bottom for our nation’s economy,” Hoffa said in a statement Thursday. “It will allow currency manipulation to flourish under the TPP and could leave U.S. taxpayers on the hook to cover the costs of foreign corporations who sue our government seeking compensation for laws they don’t like.
“The future of America and for hardworking Americans isn’t better with fast track,” Hoffa continued. “And that should be the most important consideration.”