Five of the world’s largest banks, including JPMorgan Chase and Citigroup, were fined some $5.7 billion, and four of them pleaded guilty to U.S. criminal charges over manipulation of foreign exchange rates, authorities said on May 20.
So should U.S. consumers trust these giant institutions, particularly JPMorgan Chase and Citigroup, with their investment accounts?
U.S. Sen. Elizabeth Warren, D-Mass., a frequent Wall Street critic and an advocate for consumers, along with other lawmakers, are now calling for U.S. Department of Labor hearings on whether banks accused of rigging foreign exchange markets should be allowed to manage retirement accounts or pension funds.
Shortly after the banks agreed to plead guilty to the criminal charges, the U.S. Securities and Exchange Commission granted these financial institutions a series of waivers that allows them to continue their securities business. The banks are expected to separately apply to the U.S. Department of Labor for exemptions to deal with pension and retirement savings plans.
“When banks plead guilty to a crime, federal agencies must do more than look the other way,” Warren told the Financial Times. “The SEC has already granted waivers to each of these banks without any detailed explanation, but it is not too late for the Department of Labor to hold a public hearing before it decides that such brazen lawbreakers can be trusted managing workers’ retirement accounts.”
A Labor Department spokesman has said the department has so far received applications from JPMorgan and Citigroup. It has granted waivers to banks in the past because the alleged wrongdoing did not relate to their work with pension funds.
Here’s what the New York Times reported May 20th about the currency market scheme among the banking giants:
The Justice Department forced four of the banks – Citigroup, JPMorgan Chase, Barclays and the Royal Bank of Scotland – to plead guilty to antitrust violations in the foreign exchange market as part of a scheme that padded the banks’ profits and enriched the traders who carried out the plot. The traders were supposed to be competitors, but much like companies that rigged the price of vitamins and automotive parts, they colluded to manipulate the largest and yet least regulated market in the financial world, where some $5 trillion changes hands every day, prosecutors said.
Underscoring the collusive nature of their contact, which often occurred in online chat rooms, one group of traders called themselves ‘the cartel,’ an invitation-only club where stakes were so high that a newcomer was warned, ‘Mess this up and sleep with one eye open.’
Granting waivers to big banks that break the law has become a heated issue at the SEC, where Commissioner Kara Stein, a Democrat, has openly criticized the agency for falling in line behind the big banks’ requests.
“The controversy surrounding waivers should push the Labor Department, SEC, and Congress to reconsider what it means to be a ‘bad actor’ and what penalties should be imposed,” Sen. Sherrod Brown, the senior Democrat on the Senate Banking Committee, told the Financial Times. “Denying waiver requests would send a clear signal to banks that violations matter and breaking the law has consequences.”