DOJ gets unprecedented guilty plea by five banks for rigging currency markets

Five major banking institutions pleaded guilty to rigging currencies and manipulating the foreign exchange market in a case brought by the Department of Justice and other authorities. The banks were accused of manipulating the world's largest and least-regulated trading market, and have agreed to pay more than $5 billion in total. Judy Woodruff learns more from Keri Geiger of Bloomberg News.

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    Big banks and their behavior are again at the heart of a new criminal case brought by the Department of Justice and other authorities today. Five major institutions pled guilty to rigging currencies and manipulating the foreign exchange market.

    The banks also agreed to pay more than $5 billion combined in new penalties. The fines were some of the biggest brought to date by the federal government. The banks were accused of manipulating the world's largest and least regulated trading market, where trillions of dollars change hands. Among those pleading guilty, J.P. Morgan Chase, Citigroup, Barclays, the Royal Bank of Scotland, and UBS.

    At a press conference in Washington, Attorney General Loretta Lynch spelled out how the rigging worked.

  • LORETTA LYNCH, Attorney General:

    Starting as early as 2007, currency traders at several multinational banks formed a group that they dubbed the Cartel.

    It's perhaps fitting that they chose that name, as it aptly describes the brazenly illegal behavior that they were engaged in on a near five-year basis. Almost every day for more than five years, traders in this cartel used a private electronic chat room to manipulate the spot market's exchange rate between euros and dollars, using coded language to conceal their collusion.


    Let's learn more about how this worked and punishment that is and is not being handed down.

    Keri Geiger is covering the story for Bloomberg News and she joins me now.

    Welcome again to the NewsHour.

    You were saying this is an historic first, what happened today. How so?

  • KERI GEIGER, Bloomberg News:

    Well, it really is a fascinating case.

    I mean, to put it into perspective, one year ago, we had no banks on Wall Street that had ever pleaded guilty to criminal charges. And, today, we have eight banks in total. We have had two banks last year, Deutsche Bank earlier this year, and now today specifically we have five more banks.

    So it really shows a shift in how the Department of Justice is doing enforcement actions and policing Wall Street. They're taking much harsher penalties for criminal activity that maybe a year or two ago would not have warranted a guilty plea.


    Tell us a little bit more about what was going on. We heard just a little bit of it from the attorney general and how they used the term — they called themselves the Cartel. But how did this work?


    So you have a handful of traders at each of these five banks, as Loretta Lynch said, participate in these chat rooms.

    And, basically, what they do is, they coordinate really large multimillion-dollar currency exchange orders for their clients on when they're going to execute those orders. So, there, they get a — all at the same time, they're going to buy and sell large orders of the same amounts of currency.

    And what that did is, it drove the price of that currency either up or down right before the end of the closing day. So they were actually able to manipulate the currency markets. This is actually an antitrust case. So, these banks are guilty of colluding to manipulate the foreign exchange market.

    And it's very rare that you see a financial institution that actually has to plead guilty to any charges, much less an antitrust charge.


    So it sounds as if there's no question the people involved knew what they were doing was wrong, was illegal. What about higher-ups, Keri Geiger? Did they know what was going on? And if they didn't, why not?


    Well, I mean, this — this calls into the question of basically how banks' compliance works.

    And banks — these Wall Street banks are huge, giant operations, and it looks like that the senior executives at these bank addition did not know this activity was going on. I'm sure, if they did, it would have been stopped, because they, obviously don't want illegal activity happening in their banks.

    But the larger problem is that it's become virtually impossible, as we have seen over the last couple of years with all these enforcement actions against Wall Street, to police every individual that's working in these banks. And so you have the result of today, where you have five banks pleading guilty to very serious criminal charges, you know, without the knowledge of senior — you know, senior executives don't have the knowledge that this is going on.


    But they knew big money was being made in these departments, in these divisions.


    Right. It's very difficult to tell how much the banks actually profited off these trades.

    It looks like these trades were basically done for the individual trader's benefit, as opposed to larger profits for the banks.


    Why — Keri Geiger, why no individual charged? We know there are some names named in what the government said today, but this is a fine on the institution. Why aren't they going after the individuals involved?


    We fully expect that there will be charges against the individuals. Those cases take a little bit longer to develop. They require cooperation from both the banks, as well as individuals involved in this. So we absolutely do expect the Department of Justice to come down with some individual charges in this case.


    And what about the penalties? Over $5 billion. You add that to what they were fined, I guess it was last November. It's about $9 billion altogether.

    What — how much of a hit is that on the bank account — on the accounts of these banks?


    I mean, surprisingly, while the numbers are very big and the banks obviously don't want to be shelling out this much money for fines, they are very small. They have been provisioned, quarter after quarter.

    Basically, what the banks do is, they set aside this money each quarter with the expectations that they're going to have to pay it out. They have been under investigation for a long time. So they have been preparing for these fines for a long time. And it doesn't really hurt the bottom lines. And typically on the days these big settlements are announced — and we have seen this with other settlements with other banks — the share prices go up or they stay flat.

    So, it typically doesn't hurt the share prices either. So it's difficult to tell that if these large fines coupled with guilty pleas actually do deter bad behavior at these banks, even though they're necessary to prosecute for these crimes.


    Well, it certainly does raise that question.

    Keri Geiger with Bloomberg News, we thank you.


    Thank you.

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