America Has Become a "Banana Republic Run by Wall Street Criminals"

By Tara Clarke, Associate Editor, Money Morning • @TaraKateClarke • May 22, 2015

Wall Street criminals just won't stop misbehaving.

The latest crime was exposed Wednesday. Five of the biggest names in global finance agreed to pay billions to settle lawsuits alleging they illegally gamed the $5 trillion-a-day foreign exchange market.

JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Barclays Plc. (NYSE: BCS), UBS Group AG (NYSE: UBS), and Royal Bank of Scotland Group (NYSE: RBS) pleaded guilty and settled for fines totaling roughly $5.7 billion.

A sixth bank, Bank of America Corp. (NYSE: BAC), will pay $210 million after being fined by the Fed.

With this week's settlements, big banks have now paid more than $60 billion in fines over the past two years.

"America has become a banana republic run by Wall Street criminals," Money Morning Capital Wave Strategist Shah Gilani said on Wednesday.

Of course, history dictates the fines will have no actual effect on business practices.

"We all know the big banks are above the law," Gilani said. "They are convicted, they admit their guilt (sometimes), and no one goes to jail – they just pay more fines."

Not including this week's, just look at a few of the settlements too-big-to-fail banks have shelled out in the last five years alone:

• In 2015, Deutsche Bank AG (NYSE ADR: DB) paid a $2.5 billion fine for manipulating benchmark interest rates.
• In 2014, Credit Suisse Group AG (NYSE ADR: CS) paid $2.6 billion to the U.S. Justice Department for conspiring to aid tax evasion. It was the first financial institution in more than a decade to plead guilty to a crime.
• In 2013, Bank of America, JPMorgan, Wells Fargo & Co. (NYSE: WFC), and ten other banks paid $9.3 billion to the Office of the Comptroller of the Currency and the Federal Reserve for foreclosure abuses.
• In 2013, JPMorgan paid $13 billion to the U.S. Justice Department for mortgage security fraud.
• In 2012, JPMorgan, Wells Fargo & Co., Bank of America, Citigroup, and Ally Financial Inc. (NYSE: ALLY) paid $25 billion in penalties for foreclosure abuses.
• In 2012, HSBC Holdings Plc. (NYSE ADR: HSBC) paid $1.9 billion to U.S. authorities for shoddy money laundering regulations. It was the third time since 2003 HSBC assured the government it would correct its policies.
• In 2012, UBS paid $1.5 billion and admitted it manipulated interbank lending rates.
• In 2011, Bank of America paid $8.5 billion to mortgage bond holders related to Countrywide.

But the fines don't stop banks from breaking the rules. Instead, the cost of criminality is built into the global financial institutions' balance sheets.

The $5.7 billion the five banks paid out on Wednesday represent the earnings of about a day or two for each bank.

"Too-big-to-fail banking is just a super highway toll road paved with manipulation, fraud, and criminality that leads to egregious profit," Gilani said. "But then again, why would Washington ever pull any big bank's license to do business? They wouldn't, because then they couldn't sit by, watch the banks commit crimes, and tap them on their shoulders and smile at them."

The acts of these Wall Street criminals have had no significant impact on the firms' stock performance. Nor does Gilani expect there to be.

"The only reason you might want to stay away is to avoid the sinking feeling that you are helping fund their legal reserves. And potentially fraudulent behavior," Gilani said.

Follow me on Twitter @TaraKateClarke.

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