In Wednesday's case, Royal Bank of Scotland was charged with manipulating the process of setting the Libor rate for loans denominated in the Japanese yen and the Swiss franc. The Commodity Futures Trading Commission said the bank's traders had manipulated the benchmark lending rates in periods that stretched from mid-2006 to 2010, and that this unlawful conduct had continued even after the traders were aware that the commission was investigating the bank.
Knowing that they were under investigation late in the process, the traders agreed to move their conversations from instant messaging to the telephone. But, Meister said, they chose a line that the bank taped, and enforcement officials were able to access those recorded conversations.
What's remarkable about the manipulation is that the traders were so open about it in instant messages. In many messages, the traders are asking the bank to set its rate at a made-to-order level and sometimes in line with what other banks said they'd do.
In one instant message that the Commodity Futures Trading Commission shared, a senior trader involved in foreign exchange markets and the Japanese yen tells another trader that "its just amazing how libor fixing can make you that much money."
In another message, a senior trader says that the British Bankers' Association, which collects the submitted interest rates from banks, called and the trader at the other end of the mail asks whether it was to complain. The senior trader responds that the association was calling about the six-month rate, "just to make sure i was happy with it."
The other trader says some other bank must be unhappy, and the senior trader responds that "he called b4 any of the other banks saw our data at about 11:15 to check it was ok."
It all sounds like a Hollywood script, and it's what many critics of Wall Street imagined that the email traffic of big global banks might sound like.
"It looks like the type of thing you'd expect in a big blockbuster Hollywood movie, because it is so over the top in its complete disregard that their actions are going to have on average people and their lack of concern for the public well-being and their assumption that rules are for suckers," said Barbara Roper, the director of investor protection for the Consumer Federation of America, a watchdog organization.
What troubles Roper is how the message traffic exposes the culture thought to be rampant in financial markets.
"To the degree that that is the culture of our financial system, we should expect to continue to be beset by these scandals and calamities on a regular basis," she said. "How do you respond in an effective way to rein in this system, if this is the attitude that's reflected in the day-to-day actions of these financial institutions?"
Added Meister, the Commodity Futures Trading Commission's enforcement chief, "What we try to do is make high-impact cases that will influence market behavior. And I would consider this case (and the Barclays and UBS settlements) high-impact cases. If you read public comments by senior bank officials, they are saying out loud that they get it. If that's the case, we're doing our job."
The collective fines in the Libor probe reflect records for the commission, but they aren't crippling for the banks. For example, Barclays reported that third-quarter 2012 pretax profits were up almost 30 percent, the quarter after it was socked with what then was a record fine from the commission.
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