Banks Still Doing Bad Things

In case you missed it: The Federal Energy Regulatory Commission, our country's top energy regulator, accused JPMorgan of Chase of manipulating power markets in California and the Midwest, gaming the market to get consumers to pay more for electricity. JPMorgan is expected to pay a fine of at least $400 million.

The Bank and the Typo that Ruined a Man’s Life

The most tragic part of this story is mentioned in the very first sentence.

Read This Libor Story

With a tweet like that, how could you not pay attention to this Bloomberg feature on the Libor scandal?

For years, traders at Deutsche Bank AG, UBS AG, Barclays, RBS and other banks colluded with colleagues responsible for setting the benchmark and their counterparts at other firms to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. UBS traders went as far as offering bribes to brokers to persuade others to make favorable submissions on their behalf, regulatory filings show.

Members of the close-knit group of traders knew each other from working at the same firms or going on trips organized by interdealer brokers, which line up buyers and sellers of securities, to French ski resort Chamonix and the Monaco Grand Prix. The manipulation flourished for years, even after bank supervisors were made aware of the system’s flaws.

“We will never know the amounts of money involved, but it has to be the biggest financial fraud of all time,” says Adrian Blundell-Wignall, a special adviser to the secretary-general of the Organization for Economic Cooperation and Development in Paris. “Libor is the basis for calculating practically every derivative known to man.”

It’s the biggest financial fraud of all time, yet the general public finds it it too boring? complex? to really give it the attention it deserves. So let’s put this story on our reading lists today.

Update: Heidi’s newest column is about how nobody cares about Libor:

…there is literally no one in the United States who has ever pounded a dinner table in outrage over government complacency, yelling, “But if we’re so tough on financial crime, why haven’t we thrown those obscure Asian bureaucrats of a foreign bank into the slammer for fixing a London-based interest rate?!”

No. What US consumers wanted was the prosecution of American banks, for American crimes. Insider trading. Mortgage fraud. Foreclosure abuses. Unjust, overdone compensation for executives and managers who failed to uphold ethical business standards.

Post Bailout Thank You

In response to AIG’s post-bailout fuck you (PBFY), Heidi N. Moore takes a look back at the “post-bailout thank you (PBTY)” advertisement. (“This genre requires stirring music, lots of pictures of noble municipal statuary in big cities, and weighty reminders of the ineffable beauty of the American embrace of progress.”)

Risky Business Back

According to The Wall Street Journal, investors are looking for a way to juice their returns so bankers in London from J.P. Morgan Chase & Co. and Morgan Stanley are putting together synthetic collateralized debt obligations—you know, those things that helped crashed our economy a few years ago. For a refresher, see this terrific comic by ProPublica.

‘How many billions of dollars do you have to launder for drug lords before somebody says, we’re shutting you down?’

Senator Elizabeth Warren does it again: “If you’re caught with an ounce of cocaine, the chances are good you’re going to go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But apparently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night. Every single individual associated with this. And I think that’s fundamentally wrong.”

Matt Levine on Investment Bankers

Matt Levine's most recent "Ask a Banker" column for Planet Money is one of the best things to read right now, and I'm kiiiiind of jealous we couldn't snap him up to do a column for us.

Why Trust Banks?

The Atlantic's cover story for January and February is this really terrific piece that looks at the immense lack of transparency that banks have when it comes to how, why, and where banks are investing money, and how a recent slew of criminal activity banks have engaged in in the past couple of years (remember LIBOR? Or HSBC helping drug dealers launder money?) have caused not only the general public to lose their trust in banks, but elite investors who have the power to move markets as well.

Alternative Bank of America Email Alerts

Bank of America Alert.

Q: “When Did You Last Take a Wall Street Bank to Trial?” (A: “…”)

Yesterday Senator Elizabeth Warren sat on her first Banking Committee Hearing. Awesome. At least this seven minutes was, minus the part when anyone talks but her. She asked a bunch of regulators when the last time they took Wall Street banks to trial. No one answered properly. (“We have not had to do it as a practical matter to achieve our supervisory goals.”). Warren asked a few more people a few other ways, still got no answer (“I can look that up”) and then followed up with this:

“There are district attorneys and U.S. attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin grounds and taking them to trial in order to make an example, as they put it. I’m really concerned that too big to fail has become too big for trial. That just seems wrong to me.”

Killed it. Killllleeeedddddd it. (Killed it.)

What Kind of Trouble Can the Banks Stir Up?

And these are things that have only come to the surface. Who knows what other things are lurking in the shadows.