Back in 2011 I wrote a post asking Why Are You Still Using Big Banks?. In that post I was talking about all these new fees that banks were getting ready to charge for checking and savings accounts, as well as jacking up fees on credit cards.

Bank Building
Creative Commons License Mark Gstohl via Compfight

What I meant to ask back then is the question I’m finally asking today; can we trust big banks to do things not to hurt us?

Seems that answer is no, as today 5 major banks came clean and admitted that they tried to game the system by trying to manipulate foreign currencies and interest rates. This occurred from 2007 through 2012; in clearer terms, this was during the lead up to a major recession, the bailing out of some of these banks, bonuses paid to supposed banking geniuses, some CEOs being accused of fraud and questions about CEO compensation.

Who are the banks that have plead guilty and will be paying upwards of $5 billion in penalties? The first four, Citigroup, JPMorgan Chase (these 2 I’ve picked on in the past), Barclays and the Royal Bank of Scotland have plead guilty to antitrust violations because they colluded with each other to increase their profits while everyone else was competing against them, unaware of what was going on. Collusion means they went behind the backs of regulators and came up with a scheme that would be beneficial to them, which is against the law.

The fifth bank is someone called UBS, a name I didn’t recognize, who plead guilty to trying to influence the interbank rate in London, which indirectly affected U.S. currency prices. They’re also paying the lowest penalty, around $500 million.

All of this comes on the heels of Deutsche Bank’s admission of guilt in April of wire fraud for manipulating benchmark interest rates, which is the lowest interest rate level banks can get away with for certain types of treasury securities investors might want to put their money into. They ended up having to pay a $2.5 billion dollar fine; I wonder how much that hurt them.

Here’s the thing. These are only some of the things major banks are owning up to lately. Back in 2010 Wells Fargo was accused of unfair minority mortgage practices. They also lost a lawsuit where they were charged with overcharging fees for overdraft accounts illegally.

Many other banks, when challenged by justice departments across the country about multiple foreclosures that came about because of their own sneaky mortgage practices, the speed at which they snapped up those properties, their collusion with assessment companies that were robo-signing paperwork that wasn’t ever being reviewed, eventually led to banks forgiving billions of dollars in home loans to get the government to go away.

I only have one dealing with a major bank. It’s for my home loan, and that’s because they purchased it from a smaller local bank my wife and I originally got the loan through. Otherwise I deal with a smaller regional banking system, one without the ability to even think about manipulating rates of any kind.

For my bank, having to pay a billion dollar penalty to the federal government would actually mean something. For the large banks above… another day at the office.

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