December 19, 2012
Every so often, folks wonder if some in the financial sector believe that having a business conscience is nonsense. Financial sector violations are hurtling toward us like a spaceship moving through the stars. All too often, penalties have been a simple cost of doing business. That needs to change.
The UBS settlement is serious and significant and will provide a definite deterrent.
This $700 million settlement is the granddaddy of CFTC penalties. Combined with other regulator settlements, UBS will pay $1.5 billion. Even for a mega-bank, that amount serves as a direct deterrent. It serves as a deterrent not only for UBS, but for the biggest of the big schemers in the financial world.
One of the most egregious aspects of this case was that even when the bank knew it was being investigated for these violations of the law, it continued the wrongdoing. It was a corrupt culture.
One of the crooked characters in this debacle went so far as to pay off brokers at other firms in return for falsifying rates. All told, he made at least 2,000 attempts to manipulate the benchmark in a three-year period.
Whether the manipulated rates moved higher or lower (and rates went both ways) really isn’t what matters. They were not true rates. They were fictitious and that can throw off the normal balance of the global economy. When somebody is making false profits, somebody else pays the price.
These interest rate benchmarks are extremely important affecting virtually anything consumers purchase with credit. The entire benchmark rate regime needs to be revisited. We need to ensure that the rates are based upon transparent, actual trades. The numbers should not be consolidated by a trade association and there should never be a profit motive involved in submitting rates.
Finally, I’ve asked Congress to revisit this issue of puny penalty authority for the CFTC. Our authority needs to be revised and enhanced to ensure we continually protect consumers from violations of the law.
Last Updated: December 19, 2012