The big American banks are starting to look more like criminal enterprises than a well managed financial system that is put forward as 'the envy of the world."
Just yesterday a whistle blower stepped forward and named J. P. Morgan in a price manipulation scheme in the metals markets that reaps millions in profits by cheating investors. The CFTC commissioners said in this same public meeting that the markets have never been more transparent and efficient, even as they had known of this allegation for months, and apparently failed to seriously investigate. And there was no mention of this in the mainstream media.
Until the public demands serious reform the cheating and the looting and malinvestment will continue, until the currency and bonds collapse like some Third World kelptocracy.
Time for a 'distraction?' Perhaps. But this will not solve the basic problem, that the world's largest economy is grinding lower, crushed by inefficiency and corruption. And the impact on the rest of the world may be quite serious because of the position of the Dollar as the world's reserve currency.
The Banks must be restrained, and the financial system reformed, and the economy brought back into balance, before there can be any sustained recovery.
Bloomberg
JPMorgan, Lehman, UBS Named in Bid-Rigging Conspiracy
By William Selway and Martin Z. Braun
March 26 (Bloomberg) -- JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and UBS AG were among more than a dozen Wall Street firms involved in a conspiracy to pay below-market interest rates to U.S. state and local governments on investments, according to documents filed in a U.S. Justice Department criminal antitrust case.
A government list of previously unidentified “co- conspirators” contains more than two dozen bankers at firms also including Bank of America Corp., Bear Stearns Cos., Societe Generale, two of General Electric Co.’s financial businesses and Salomon Smith Barney, the former unit of Citigroup Inc., according to documents filed in U.S. District Court in Manhattan on March 24.
The papers were filed by attorneys for a former employee of CDR Financial Products Inc., an advisory firm indicted in October. The attorneys, as part of their legal filing, identified the roster as being provided by the government. The document is labeled “list of co-conspirators.”
None of the firms or individuals named on the list has been charged with wrongdoing. The court records mark the first time these companies have been identified as co-conspirators. They provide the broadest look yet at alleged collusion in the $2.8 trillion municipal securities market that the government says delivered profits to Wall Street at taxpayers’ expense.
‘Sufficient Evidence’
“If the government is saying they are co-conspirators, the government believes they have sufficient evidence that they can show they were part of the conspiracy,” said Richard Donovan, a partner at New York-based law firm Kelley Drye & Warren LLP and co-chair of its antitrust practice. Donovan isn’t involved in the case.
The government’s case centers on investments known as guaranteed investment contracts that cities, states and school districts buy with the money they receive through municipal bond sales. Some $400 billion of municipal bonds are issued each year, and localities use the contracts to earn a return on some of the money until they need it for construction or other projects.
The Internal Revenue Service sometimes collects earnings on those investments and requires that they be awarded by competitive bidding to ensure that governments receive a fair return. The government charges that CDR ran sham auctions that allowed the banks to pay below-market interest rates to local governments.
CDR Fights Case
CDR, a Los Angeles-based local-government adviser, was indicted in October along with David Rubin, Zevi Wolmark and Evan Zarefsky, three current or former executives. The company and the three men have denied wrongdoing. Since last month, three former CDR employees who weren’t charged in the initial indictment have pleaded guilty and agreed to cooperate with the Justice Department.
More than a dozen financial firms are also facing civil suits filed by municipalities over the alleged conspiracy. Yesterday, U.S. District Judge Victor Marrero in Manhattan refused to toss out a lawsuit brought by Mississippi and other bond issuers....
‘Absolute Disaster’
Laura Sweeney, a Justice Department spokeswoman in Washington, declined to comment.
Banks may choose to cooperate with prosecutors because in light of the government bailout funds they’ve received “ a guilty plea would just be an absolute disaster for some of these companies,” said Nathan Muyskens, a partner at Shook, Hardy & Bacon in Washington and former trial attorney with the Federal Trade Commission’s Bureau of Competition.
“There have been antitrust investigations where there have been companies involved that were just never indicted,” he said in a phone interview.
At the same time, the government will probably focus on seeking to convict individual bankers, he said.
“When someone goes to jail for five years, that resonates,” he said. “When a company pays $200 million, it’s simply a balance sheet issue. Jail time is what captures corporate America’s attention...”
October Indictments
The indictments released in October didn’t identify any of the sellers of the investment contracts involved in the alleged conspiracy. They were identified only as Provider A and Provider B. They paid kickbacks to CDR after winning investment deals brokered by the firm, according to the indictments.
The firms did this by paying sham fees tied to financial transactions entered into with other companies, prosecutors said. Kickbacks were paid from 2001 to 2005, ranging from $4,500 to $475,000 each, according to the Justice Department.
According to the list contained in the court filing this week, the investment contracts involved were created by units of GE and divisions of Financial Security Assurance Holdings Ltd., a bond insurer formerly part of Brussels-based lender Dexia SA.
The kickbacks were paid out of fees generated by transactions entered into with two financial institutions that weren’t identified in the October court filing. The March 24 list filed by the defense named the two firms as UBS and Royal Bank of Canada..."
Read the rest of the story here.
