James Kwak writes: One of the central dramas of the early seasons of The Wire is the cat-and-mouse game between Avon Barksdale’s drug operation and the detectives of the Major Crimes Unit. The drug dealers started off using pagers and pay phones. When the police tapped the pagers and the phones, Barksdale’s people switched to “burner” cell phones that they threw away before the police could tap them. By Season 4, Proposition Joe advised Marlo Stanfield not to use phones at all.
Well, apparently, Wall Street currency traders don’t watch The Wire. I don’t think anyone was surprised to learn that major banks including JPMorgan, Citigroup, Barclays, RBS, and UBS conspired to manipulate currency prices — something that regulators have been investigating for over a year and a half. One common strategy was cooperating to time large transactions in order to manipulate daily benchmark rates at which other client transactions are executed.
What is surprising is that these traders — supposedly the smartest people around — carried out their criminal conspiracy in online chat rooms whose contents could be discovered by investigators. (In this day and age, the last thing any bank’s general counsel wants to be accused of is destroying evidence, so you should assume that everything you do over a bank’s networks will be tracked.) Even using their personal cell phones would have been much safer. (Apparently they do watch The Sopranos, however: one of the chat rooms was nicknamed “The Mafia, which is probably not a good idea when you are actually engaged in a criminal conspiracy.)
The game is still to make money any way you can. “If you aint cheating, you aint trying” is the new money quote. The clients are just collateral damage — whether or not JPMorgan says, “Throughout our long and distinguished history, we have been steadfastly committed to putting our clients’ interests first.” The offenses described in the settlement documents extended at least into 2013 — more than four years after the financial crisis. [Continue reading…]