As of this week, Citicorp, JPMorgan Chase, Barclays and Royal Bank of Scotland are felons, having pleaded guilty on Wednesday to criminal charges of conspiring to rig the value of the world’s currencies. According to the Justice Department, the lengthy and lucrative conspiracy enabled the banks to pad their profits without regard to fairness, the law or the public good.
Besides the criminal label, however, nothing much has changed for the banks. And that means nothing much has changed for the public. There is no meaningful accountability in the plea deals and, by extension, no meaningful deterrence from future wrongdoing. In a memo to employees this week, the chief executive of Citi, Michael Corbat, called the criminal behavior “an embarrassment” — not the word most people would use to describe a felony but an apt one in light of the fact that the plea deals are essentially a spanking, nothing more.
As a rule, a felony plea carries more painful consequences. For example, a publicly traded company that is guilty of a crime is supposed to lose privileges granted by the Securities and Exchange Commission to quickly raise and trade money in the capital markets. But in this instance, the plea deals were not completed until the S.E.C. gave official assurance that the banks could keep operating the same as always, despite their criminal misconduct. (One S.E.C. commissioner, Kara Stein, issued a scathing dissent from the agency’s decision to excuse the banks.)
Also, a guilty plea is usually a prelude to further action, not the “resolution” of a case, as the Justice Department has called the plea deals with the banks.
To properly determine accountability for criminal conspiracy in the currency cases, prosecutors should now investigate low-level employees in the crime — traders, say — and then use information gleaned from them to push the investigation up as far as the evidence leads. No one has thus far been named or charged. Nor has there been any explanation of how such lengthy and lucrative criminal conduct could have gone unsuspected and undetected by supervisors, managers and executives. The plea deals leave open the possibility of further investigation, but the prosecutors’ light touch with the banks makes it doubtful they will follow through.
An argument has been made that the S.E.C. was right not to revoke the banks’ capital-market privileges because doing so might disrupt the economy. That is debatable. What is not debatable is that bringing criminal charges against individuals and even sending some of them to jail would not disrupt the economy. To the contrary, holding individuals accountable is all the more important in instances of wrongdoing by banks that, for whatever reason, have been exempted from the full legal consequences of their criminal behavior.
The plea deals mimic previous civil settlements. In all, the banks will pay fines totaling about $9 billion, assessed by the Justice Department as well as state, federal and foreign regulators. That seems like a sweet deal for a scam that lasted for at least five years, from the end of 2007 to the beginning of 2013, during which the banks’ revenue from foreign exchange was some $85 billion.
The banks will also be placed on “corporate probation” for three years, which will be overseen by the court and require regular reporting to the authorities as well as the cessation of all criminal activity. And the banks are also required to notify customers and counterparties that may have been directly affected by the banks’ manipulation of the currency markets.
The Justice Department intended the criminal pleas to look tough. Instead, they reflect at bottom the same prosecutorial indulgence that has plagued the pursuit of the banks in the many financial scandals of recent years.
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