Five Big Banks Plead Guilty to Host of Financial Crimes, Agree to Pay Billions in Fines
Well, this certainly isn’t going to win Wall Street any friends. Under a deal announced by the Justice Department on Wednesday, five major banks will plead guilty to manipulating global currency markets and interest rates, and will pay more than $5 billion in combined penalties as a result. None of the traders involved in the crimes, however, has been indicted.
Under the deal, Citigroup, JPMorgan Chase, Barclays, and the Royal Bank of Scotland will all plead guilty to conspiring to manipulate the price of U.S. dollars and euros. According to federal authorities, traders at those banks used coded messages to share customer orders via online chat rooms, while also misleading their clients about the true price of currencies. In the words of one Barclays employee cited by federal authorities: “If you ain’t cheating, you ain’t trying.”
A fifth bank, UBS, was given immunity in that antitrust case, according to the Wall Street Journal, but will plead guilty to separate charges that it manipulated the London Interbank Offered Rate, or Libor, a benchmark interest rate that banks charge each other for short-term loans.
The banks are expected to formally enter their guilty pleas later on Wednesday. Here’s the New York Times’ DealBook with some of the most infuriating details involved in the first four banks’ dirty dealings:
The traders were supposed to be competitors, but much like companies that rigged the price of vitamins and automotive parts, they colluded to manipulate the largest and yet least regulated market in the financial world, where some $5 trillion changes hands every day, prosecutors said.
Underscoring the collusive nature of their contact, which often occurred in online chat rooms, one group of traders called themselves “the cartel,” an invitation-only club where stakes were so high that a newcomer was warned, “Mess this up and sleep with one eye open.” To carry out the scheme, one trader would typically build a huge position in a currency and then unload it at a crucial moment, hoping to move prices. Traders at the other banks agreed to, as New York State’s financial regulator put it, “stay out of each other’s way.”
The banks say they long ago dismissed most of their employees involved in the schemes. While none of the traders is facing prison time for their role in the crimes, the banks’ guilty pleas still offer something of a symbolic victory for federal prosecutors. Until now, most banks implicated in the numerous scandals since the 2008 financial crisis had avoided directly shouldering legal responsibility by forcing their smaller subsidiaries or specific banking units to plead guilty.
Of course, Wednesday’s plea deal comes with its own silver lining for Wall Street: The banks have already obtained waivers from the Securities and Exchange Commission that will allow them to continue to conduct business as ususal. “In fact,” the Times reports, “the cases were not announced until after the S.E.C. had time to act.”
Netanyahu Cancels Bus Segregation Plan Amid Coalition Chaos
Israeli Prime Minister Benjamin Netanyahu scrapped a proposed plan on Wednesday that would have prevented Palestinians from riding on buses in the West Bank alongside Jewish settlers. The pilot program would have required Palestinians who travel into Israel for work to return to the West Bank via the same checkpoints they entered and would have barred them from riding Israeli bus lines.
The plan, proposed by Defense Minister Moshe Yaalon, had come under fire not just from the opposition and human rights groups but from some backers of the settlements who felt it would unnecessarily tarnish Israel’s image abroad.
President Reuven Rivlin, a member of Netanyahu’s Likud Party, warned that it “could have led to an unthinkable separation between bus lines for Jews and Arabs.”
It is, after all, hard to counteract accusations of racism when you’re proposing a plan this reminiscent of one of the iconic policies of Jim Crow-era America. Yaalon has said that only security considerations were behind the plan and he has promised to submit a revamped version of it.
The plan is exactly the sort of thing expected from Netanyahu’s brand-new coalition, which is dominated by right-wing and religious parties. With a slim majority of just 61 seats in the 120-seat Knesset, the coalition got off to a rocky start last week, with parties arguing over appointments until the last moment before it was sworn in. The swearing-in ceremony was delayed for two hours and met with heckling by the opposition. Netanyahu is still hoping to broaden the coalition, holding the position of foreign minister open for Labor leader Isaac Herzog, but Herzog seems to have no intention of helping Netanyahu out of the mess he’s created. “You did not create a government, you created a circus,” Herzog crowed just last week.
Even Likud’s own ministers, many disappointed that they had to give up prime appointments to the smaller coalition partners, are saying the government is unlikely to last the full four years. At this point it would be impressive if it outlasted the 26 months of Netanyahu’s last government.
California Pipeline Break Sends Oil Into Ocean, Onto Beach Near Santa Barbara
The Los Angeles Times reports that a pipeline break Tuesday near Santa Barbara, California, sent oil into the Pacific Ocean, where it is washing up on shore in Refugio State Park. Oil from the 24-inch below-ground pipeline first leaked onto land, collecting in a culvert under the 101 freeway before spilling into the water on the other side of the road.
By late Tuesday, a thick layer of crude had begun to wash ashore, with black tar smearing the rocks as the brackish tides arrived.
"It is horrible," said Brett Connors, 35, a producer from Santa Monica who said he spotted sea lions swimming in the oil slick. "You want to jump in there and save them." [...]
During the several-hours-long leak, about 21,000 gallons escaped the pipeline, Coast Guard officials estimated. State officials and the pipeline's owner declined to say how much oil had leaked.
The pipeline was initially believed to belong to Exxon but is owned by Plains All American Pipeline. The company released a statement saying that it “deeply regrets this release has occurred and is making every effort to limit its environmental impact.”
State officials have closed Refugio Beach and banned fishing in the area, and the Coast Guard warned vacationers with reservations to camp in nearby state parks for the upcoming Memorial Day weekend to make other arrangements, Los Angeles CW affiliate KTLA reported. “I don’t know how long it will take, but I know the state beaches are closed now,” said Coast Guard Lt. Jonathan McCormick. “It’s going to be quite an operation.”
In January 1969 the Santa Barbara Channel was the site of what remains the third-largest oil spill in U.S. waters, topped only by the Deepwater Horizon and Exxon Valdez spills. A blowout on an offshore oil platform caused ruptures in the seabed, with oil bubbling to the water’s surface for days. The spill had a devastating effect on wildlife and acted as a catalyst for the national environmental movement, contributing to changes including the passage of the Clean Water Act and the creation of the Environmental Protection Agency.
When California legislators considered a bill in 2014 to ban drilling in state waters off Santa Barbara, Democratic Assemblyman Das Williams cited the 1969 disaster as proof that California “should not be drilling for oil in our equivalent of the Amazon rain forest.” The bill failed in the state assembly, garnering only 28 of the 41 votes needed for passage.
North Korea Abruptly Cancels U.N. Chief’s Groundbreaking Visit
U.N. Secretary-General Ban Ki-moon’s scheduled Wednesday visit to North Korea was set to be a milestone for the country—not only would it be the first trip by the U.N. Secretary-General in more than twenty years, Ban, who hails from South Korea, was once the foreign minister North Korea's southern neighbor. On Tuesday, however, on the eve of the symbolic visit to the Kaesong economic zone, a decade-old joint industrial project meant to bolster economic cooperation, Pyongyang unexpectedly cancelled the visit.
"Early this morning, the authorities of the Democratic People's Republic of Korea informed us, through their diplomatic channels, that they were reversing their decision for me to visit the Kaesong Industrial Complex," Ban announced at a meeting in Seoul on Tuesday.. "No explanation was given for this last-minute change.”
“The South Korean U.N. chief's visit was intended to pave the way for increased cooperation at a time when North Korean leader Kim Jong-un has purged his military, including the alleged assassination of his Defense Minister, and tested nuclear capable missiles,” CBS News reports.
Texas Bans Fracking Bans in the State
Six months ago, the city of Denton, Texas became the first in the state to ban hydraulic fracturing, or fracking. Fearing similar bans could be imposed by other municipalities in the state, Texas Republican Governor Greg Abbott took preemptive action on Monday, signing into law a statewide ban on banning fracking. The law also restricts local governments’ control over where drilling takes place in their communities and “will pre-empt cities from enacting a variety of other ordinances, including regulations on wastewater disposal wells, which numerous studies have tied to earthquakes,” the Dallas Morning News reports.
“Similar efforts are cropping up in states including New Mexico, Ohio, Colorado and Oklahoma, where both chambers of the legislature have passed a bill that limits local governments to ‘reasonable’ restrictions on oil and gas activities,” the Wall Street Journal reports. “This is all part of a broader legislative and judicial effort, backed by the oil industry, to limit local governments’ ability to regulate drilling.”
“Oil and gas is already regulated at the state level by multiple agencies, at the federal level by multiple agencies,” Gov. Abbott told the Morning News. “The last thing we need is an encroachment on private property rights at the local level.” Fears of health and environmental risks that may result from fracking have spurred communities across the country to enact local ordinances to prohibit the practice. State governments, however, have been fighting these local restrictions in court and have been largely successful in getting them overturned, the Journal notes.
NFL to Move Extra Point Back to 15-Yard Line to Bring Fans More Fabled NFL Kicking Action
NFL owners voted on Tuesday to change the league's extra point rules for the 2015 season, moving the placement of the ball for a potential extra point kick back from the two-yard line to the 15-yard line. A rule change had been bandied about—including consideration given to eliminating the extra point altogether—because, basically, the extra point kick had become so utterly automatic it had become a pointless ceremonial exercise. After the 2013 season, Roger Goodell estimated there were only five missed extra points all year—across the entire league.
The owners, however, voted to go in the opposite direction by making extra point attempts just a smidge more challenging. Two-point conversions will still be snapped from the two-yard line, but the defense will now be able to return a blocked kick for two points. Snapping the ball from the 15-yard line should still be a pretty easy shot for NFL kickers—and a 32-yard kick certainly isn’t hard enough you’d expect teams to start going for two every time (but perhaps every once in a while). It will, however, add just enough uncertainty to keep you in your seat and put more emphasis on the kicking game, which, after all, is why fans go to the stadium on Sunday—to see their favorite kicker until he gets waived.
The RNC’s Debate Debacle
The Republican National Committee has backed itself into a corner with no easy way out. Never before have more than 10 candidates squared off on stage for a televised GOP presidential debate—but by the time the first party-sanctioned event kicks off in less than three months time, there could be more than twice that number of officially declared candidates.
That reality has left the GOP in a pickle. Party officials want enough candidates on stage to avoid having it look like they’re playing favorites, but they will also need to winnow the field considerably or risk having the candidates’ opening statements followed immediately by their closing ones. How they decide to strike that balance could effectively end the dreams of as many as a dozen GOP hopefuls months before the first nominating contest even happens.
Late last week, the RNC official who chairs the debate committee suggested there could be an automatic 9-to-12-candidate cap for each debate. That plan, though, was met by near-immediate pushback from a host of GOP contenders and pretenders, and has since been ruled out completely by backtracking party officials. Other options that appear to remain on the table include using a national polling threshold for invitations (something networks have done in the past), relying on some combination of state polling, fundraising, and infrastructure factors, or even breaking each official debate into two separate heats. Either way, it’s safe to expect plenty of second-guessing from pundits and hurt feelings from politicians.
Some candidates are fretting more than others. There are eight men that currently appear destined to be standing behind a podium later this year: Jeb Bush, Scott Walker, Marco Rubio, Rand Paul, Mike Huckabee, Ted Cruz, Ben Carson, and Chris Christie are all polling above five-percent in RealClearPolitics’rolling average of national polls. After that, however, things start to get a little dicey. There’s only about one point currently separating the next six candidates, all of which have averages south of 2.5 percent: Rick Perry, Rick Santorum, John Kasich, Carly Fiorina, Bobby Jindal, and Lindsey Graham.
The situation has grown so fraught that the RNC has begun scrambling to publicly foist much of the responsibility for who get’s invited—and who doesn’t—onto the network that will televise each debate. “Ultimately, it’s the networks’ decision,” RNC spokesman Sean Spicer said over the weekend. “There’s an obligation for the party to make sure the standard is fair. But it’s not our decision.” Translation: If you don’t like what you see on stage, blame the media!
While it’s true that the networks are traditionally the ones to decide which candidates get an invite, no one expects the Republican Party to cede complete control over the guest list. The party simply has too much at stake. The debates will represent a rare chance to impose order on what promises to be a chaotic field, and the RNC can’t risk staying on the sidelines entirely.
Making matters more interesting still is the fact that party officials chose Fox News to host the first RNC-sanctioned debate, set for August 6 in Cleveland. While there’s nothing preventing CNN—which will host the second debate the following month—from inviting a candidate that Fox News excluded, anyone who doesn’t make it on stage in Cleveland is likely to lose ground to the bevy of candidates who do, making their case for standing on the CNN stage or the ones that follow that much weaker.
GOP officials, then, may not be the ones choosing debate season kings—but they may have already chosen their kingmaker. Luckily Roger Aisles has had plenty of training.
Japanese Company Says 34 Million Air Bags Are Defective in Largest U.S. Auto Recall Ever
A Japanese auto parts supplier says 33.8 million air bags in United States vehicles are defective; those vehicles will be recalled for air-bag replacement in the largest-ever auto recall in U.S. history. The affected automakers are BMW, Chrysler, Daimler Trucks, Ford, General Motors, Honda, Mazda, Mitsubishi, Nissan, Subaru and Toyota. From the AP:
The chemical that inflates the air bag can explode with too much force, blowing apart a metal inflator and sending shrapnel into the passenger compartment. The faulty inflators are responsible for six deaths and more than 100 injuries worldwide.
The announcement was made Tuesday afternoon by the heads of the Department of Transportation and the National Highway Traffic Safety Administration, which reached an agreement with Takata after sparring with the company for the past year over the size of the recalls and the cause of the problem.
This National Highway Traffic Safety Administration website will be updated so drivers can check whether their car is subject to recall.
The previous largest-ever recall occurred in 1980 and involved a transmission problem in 21 million Ford cars. In 2014, General Motors issued a number of different recalls, which ultimately affected a total of 30.4 million vehicles.
The Questions Reporters Should Actually Have Asked Hillary Clinton
For the first time in 28 days, Hillary Clinton on Tuesday took questions from reporters. During a brief unscheduled Q&A in Cedar Falls, Iowa, members of the press asked Clinton about the enormous income she and her husband earned from speaking gigs, the eventual release of her State Department email archive, and her receipt of advice from Sidney Blumenthal, a longtime ally who had reportedly been blocked from holding an official State Department job by the Obama White House. Unfortunately, the questions that were put to the Democratic front-runner were vague enough that she was able to run out the clock without actually answering them.
Blumenthal, for example, is reported to have given Clinton Libya-related advice at the same time he was working as an adviser to a group that was hoping to do business in Libya after the fall of Muammar Qaddafi. Did Clinton know about Blumenthal’s apparent conflict of interest when she was weighing the U.S. government’s options in that country? It’s still not clear, because the reporter who asked about Blumenthal merely inquired whether Clinton would maintain relationships with “old friends” if she became president. Welp.
What follows are suggestions for specific questions about Clinton’s Libya deliberations and her private email use that would be more likely to provoke a newsworthy answer.
1. When Sidney Blumenthal was sending you advice and information about Libya, were you aware that he was also working for a group with a financial interest in certain political outcomes in Libya?
2. Did you ever consider hiring Sidney Blumenthal as an empoyee in your State Department? And, if so, did the Obama administration block such a move, as has been reported? Did the White House know that he provided you with unofficial advice nonetheless?
3. Several lawyers have suggested that, by law, Blumenthal should have registered as a foreign agent given that he provided you with information on behalf of a politician in the former Soviet republic of Georgia. Do you agree that he should have? If not, why?
4. In 2007 you described the use of private email accounts by several Bush administration officials as an insult to the Constitution. How was your use of a private email account as secretary of state any different?
5. In 2009, while you were secretary of state, a regulation was released stating that official email sent or received on a private email server should be turned over to the government for recordkeeping. Why did it take you five years—until December 2014—to follow this guideline by turning over your emails to State?
6. You said in March you used private email for convenience at State so you wouldn’t have to carry around a smartphone for official email in addition to your regular phone. But in other interviews, you’ve told audiences you use an iPhone and a BlackBerry and also have an iPad and an iPad mini. Don’t those statements about your device preferences contradict each other?
7. Did Tom Brady know about the deflated footballs, or what?
Let’s hope Clinton takes questions again sometime soon, and that the reporters covering her don’t go straight to No. 7.
U.S. Charges Chinese Citizens With “Economic Espionage”
A Chinese professor was arrested today and five other Chinese citizens indicted for “conspiracy to commit economic espionage” in what U.S. authorities say was a decades-long plan to steal American microelectronics designs. According to the indictment, several of the men studied in the United States and worked at U.S. tech companies, where they obtained secrets and brought them back to Tianjin University, where the professor teaches, to sell them to military and commercial customers.
This is the first big indictment of Chinese citizens for espionage since the Justice Department charged five Chinese military officers with hacking U.S. computers to steal trade secrets last year. However, that was mostly a symbolic gesture, as all the suspects were in China and are unlikely to ever be brought to trial in the U.S. This time, one of the men was arrested at LAX as he arrived for a conference.
(Expect the Chinese government, which denies that it sponsors economic espionage, to issue a furious denunciation of the charge.)
China’s espionage works a bit differently that other countries’ efforts. It relies less on placing undercover officers in sensitive positions than on recruiting and periodically debriefing Chinese businesspeople, academics, and travelers to obtain small amounts of information that can be assembled over years into valuable intelligence. Many of these assets aren’t full-time spies, and some may not think of themselves as spies at all. This type of distributed espionage can be extremely difficult to counteract. It’s believed that the hack of Google’s servers several years ago was aimed at uncovering information about Chinese intelligence assets under U.S. surveillance.
U.S. firms long viewed a certain amount of economic espionage as the price of doing business with China, but have grown more alarmed as the practice has seemed to expand dramatically in recent years. There’s been more pressure on the U.S. government to put a stop to it.
China has been reluctant to discuss the issue with the U.S. It claims that U.S. accusations are unfounded and also accuses the U.S. of hypocrisy, citing documents leaked by Edward Snowden that purportedly show that American and British spy agencies were hacking into Chinese networks.
The U.S. government has sought to draw a distinction between government spying—which all countries do—and espionage for economic gain, a distinction that may not always translate in China, where much of the economy is controlled by the state. Talks between the two governments have been faltering for a while, and today’s arrest may be a sign that the Obama administration felt it wasn’t making much progress on the diplomatic front.