June 27, 2012
Barclays Penalty Demonstrates Need for Stronger Reforms, Full Funding for Wall Street Police
Barclays’ Fine Was Double the Budget Allocated for Industry’s Police
Washington, D.C.– The $450 million in penalties imposed today by United States and United Kingdom officials on UK’s Barclays Bank for market manipulation highlights the ongoing need for implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act to protect the public and hold financial institutions accountable, Public Citizen said today.
“The occurrence of sweeping frauds committed daily by numerous traders and supervisors at Barclays reinforces the need for implementing strong reforms and equipping Wall Street police with needed resources,” said Tyson Slocum, director of Public Citizen’s Energy Program.
The Dodd-Frank Act established important new reforms, such as limiting the size of the market any one trader can control; moving more trading activity into formats directly regulated by federal officials; limiting the role speculators play in driving prices; and implementing the Volcker Rule, which prohibits casino-style banking.
Wall Street sympathizers in Washington, D.C., should be chilled by details of this case, Slocum said. The fact that violations were often committed daily at Barclays shows the need for expedited implementation of strong rules, he said.
“Barclays’ manipulation of a key interest rate index demonstrates the tissue-thin protection of world financial markets that led to the financial crash of 2008,” said Bartlett Naylor, Public Citizen’s financial policy advocate. “Investigations since the Barclays scheme have revealed corruptions far more profound. Credit rating agencies produced fallacious ratings, and banks falsified mortgage applications and disguised toxic assets from regulators.”
“Barclays’ manipulations affected the rates consumers paid for mortgages, car and student loans,” added Slocum. “Even today, evidence shows that financial speculators – and not supply/demand fundamentals – drive oil and gasoline prices.Wall Street sympathizers in Congress aiming to gut the Commodity Futures Trading Commission’s budget must understand that consumers will suffer if Congress removes these market police from the beat. For context, the $450 million fine is double the budget approved by the Republican-led U.S. House of Representatives for the CFTC, the lead U.S. investigator in the Barclays case.”
Also of concern is the level of penalties that Barclays faces.
“Executives at Barclays rightly volunteered to forego bonuses,” said Naylor. “But evidence in this case demonstrates fraud by individuals. As one trader confessed in an email, ‘I’m guilty as hell.’ We should not rely on voluntary pay cuts and penalties that may punish shareholders rather than those guilty of the crimes.”
“Unfortunately, the Justice Department chose to resolve the serious case with a non-prosecution agreement, continuing a disturbing trend of not holding corporate wrongdoers accountable through criminal prosecution or plea agreements,” said Public Citizen President Robert Weissman.
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.