Criminal Banks Enlist GOP Legislators to Drive Getaway Car for Next Heist

May 26, 2015

By Joe Rothstein
Editor, EINNews.com

Why are we even having this conversation?

Since 2009 the biggest banks in the U.S. and Europe have paid more than $160 billion—BILLION—to settle rap sheets that include rigging interest rates, manipulating currencies, selling bogus insurance, evading taxes, knowingly packaging and misrepresenting mortgages, and other sins against their customers and the public generally.

As I write this (May 25) the first of a platoon of financial traders is going on trial in London for manipulating the LIBOR interest rate (London Interbank Offered Rate) used to price $350 Trillion---TRILLION---in mortgages, securities, student loans, credit cards and other instruments.

Public trust in banks, as measured by polling firms, is understandably at an all-time low.

Yet with all of this criminality and bad faith hanging out there in plain sight, the Republicans in Congress are working hard to ease regulations and oversight of the banking industry. Sort of like the cops offering to drive the get-away car when the crooks pull their next job. The conversation we SHOULD be having is how to break up the mob.

The closer you look at the banks’ dirty laundry the worse it is. Tom Hayes, the financial trader now on trial, was not a top manager, but neither was he an anonymous drone running a rogue operation. Citibank paid millions to lure him away from competitor UBS. That was in 2009, when banks were gasping on life support, still operating only because of taxpayer bailouts. Hayes had been trading yen derivatives in UBS’s Tokyo office. Derivative trading was at the heart of the huge losses suffered by the major banks. Yet Citibank recruited him as if he was a star, even though caution lights were blinking at full intensity.

The case against Hayes is being pursued by Britain’s Serious Fraud Office, based on volumes of internal bank documents that show traders intentionally manipulated rates to make their own deals more profitable.

A few days before Hayes’ trial began, UBS, Citigroup, J.P. MorganChase, Barclays and the Royal Bank of Scotland pleaded guilty to rate manipulation and agreed to collectively pay $5.6 billion in fines. Bank of America was fined by the Federal Reserve in a separate action. That’s a bundle to pay to settle serious charges if you consider yourself innocent, which the banks in question obviously don’t.

While the fines for all the banking criminality that’s been uncovered in recent years are unprecedented, it’s not hard to connect the dots and see that fines are barely speed bumps for those driving the banking goliaths. Bank fines are corporate, paid by shareholders and customers. Meanwhile the board room denizens feel no pain. In fact, Jamie Dimon at J.P. MorganChase, Lloyd Blackfein at Goldman Sachs and many others who steered their companies onto the rocks in 2008 are still at the helm, and enjoying richer pay days. Lesson learned: Crime pays.

Well, not for everybody. Lower down the corporate rung Mr. Hayes is in the docket, facing jail time. About 20 other brokers and traders have been indicted and will have to fend off criminal charges. And that’s it.

Across the U.S. millions have lost their homes, their retirement savings, their jobs. Across Europe, Greece and Spain and Portugal and others have become financial basket cases, their people suffering Depression-era unemployment rates. Not since the 1930s has the world seen the type of financial collapse that marks the Great Recession.

Yet, Republicans in Congress voted en mass against Dodd-Frank, a moderate effort to rein in the runaway banking industry. And now, with congressional majorities, they are doing everything possible to make those controls meaningless.

Since Congress went on its binge of de-regulation U.S. taxpayers have paid hundreds of billions to bail out failing savings and loans (back in the 1980s) and literally trillions to save the banking system. Shouldn’t it be obvious that the banking industry is demonstrably incapable of effectively governing itself? The public gets it. In 1980, before the banking system was totally unleashed, 60% of Americans had confidence in the banks. Now 80% of Americans don’t.

Note to 2016 candidates: Side with the 80%. It’s very good politics. Even better, it’s essential to keep the bankers from continuing to rob us blind.

(Joe Rothstein can be contacted at joe@einnews.com)