[Vision2020] Another Questionable Bank Settlement

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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December 20, 2012
Another Questionable Bank Settlement

The Department of Justice would like you to believe it has finally gotten
tough with a too-big-to-fail bank. As part of the global investigation into
interest-rate-rigging at the world’s biggest banks, it has extracted a
guilty plea for felony wire
fraud<http://dealbook.nytimes.com/2012/12/19/as-unit-pleads-guilty-ubs-pays-1-5-billion-in-fines-over-rate-rigging/>from
UBS Securities Japan, a subsidiary of UBS, the Swiss bank.

It has also charged two former UBS traders with crimes that include
conspiracy, wire fraud and violation of antitrust laws. The subsidiary will
pay a $100 million fine, and the traders, if extradited and convicted,
could go to jail. But the deal leaves UBS itself relatively unscathed. In
all, it will pay $1.5 billion to settle allegations of rate-rigging that
span nearly a decade and implicate the bank and its bankers far beyond the
wrongdoing of two rogue traders. According to the investigation by the
Financial
Services Authority <http://www.fsa.gov.uk/>, the British regulator, 40
individuals at UBS, including 11 managers, were directly involved in
rate-rigging that was carried out to boost trading profits, while at least
two more managers and five senior managers were aware of the practice.

In addition, the bank’s settlement with the Justice Department says that
“certain UBS managers and senior managers” in the bank’s Group Treasury,
which oversees the financial resources of the entire bank, repeatedly
disseminated directives to underlings to “err on the low side” in setting
rates, a practice that was intended to deflect concerns about its health
during the financial crisis.

Seen in that light, a subsidiary’s plea on a single criminal charge appears
to shield the parent company and the prosecution of two traders appears to
shield their managers. And even though a $1.5 billion penalty is large by
historical standards, there is little reason to believe that such fines,
disconnected from criminal charges against bank officers, will deter future
wrongdoing.

The Justice Department
referred<http://www.justice.gov/opa/pr/2012/December/12-ag-1522.html>to
the UBS rate-rigging as an “epic” scandal. But, as yet, there has been
nothing epic in the department’s response.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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