Five of the world’s biggest banks recently pleaded guilty to colluding to manipulate currency and interest rate markets. Apparently, by agreeing not to buy or sell at certain times, the traders protected each other’s positions and suppressed competition in the foreign exchange market.
Collectively, these banks will pay penalties totaling $5.6 billion to the U.S. Justice Department and the Federal Reserve. But according to a Wharton professor of legal studies and business ethics, this fine represents one tenth of a percent of the daily volume of the foreign exchange market. Moreover, at least one of the banks is an admitted three-time repeat offender.
Yet in return for the guilty plea, these banks secured exemptions, waivers and settlements from regulators and are allowed to conduct business as usual going forward — and no one goes to jail.
[CLICK HERE to read the article, “Are Financial Penalties Enough to Deter Banks’ Bad Behavior?” from Knowledge@Wharton, May 21, 2015.]
[CLICK HERE to read the article, “Rigging of Foreign Exchange Market Makes Felons of Top Banks,” from The New York Times, May 20, 2015.]
In sports, the most recent scandal was conspired by leaders of FIFA, the governing body of the soccer world. Forty-seven indictments were levied on soccer officials and sports marketers for racketeering, wire fraud and money laundering over a time span of nearly quarter of a century. A total of 14 people — including nine senior officials with FIFA — are accused of perpetuating a corrupt scheme involving more than $150 million in bribes and kickbacks.
Just days after news of the scandal broke, FIFA president Sepp Blatter was re-elected as head of the global soccer organization. However, the 79-year-old Switzerland native stepped down four days after his re-election amid outside pressure for his inability to stop corruption in the sport.
[CLICK HERE to read the article, “U.S. Indicts 14 in FIFA Corruption Inquiry,” from NPR, May 27, 2015.]
[CLICK HERE to read the article, “FIFA scandal: What comes after Sepp Blatter’s resignation?” from CNN, June 3, 2015.]
Meanwhile, the latest example of bad behavior in politics involves the indictment of former U.S. House Speaker Dennis Hastert, a Republican from Illinois, who is accused of agreeing to pay $3.5 million in hush money to somebody in his hometown for a reported sex scandal. The former congressman made 15 cash withdrawals of $50,000 from bank accounts between 2010 and 2012. Then, in order to avoid the scrutiny that accompanies withdrawals of more than $10,000 at a time, he withdrew $952,000 in increments of less than $10,000 up until late 2014. When questioned why he was making the sizeable withdrawals, he responded that he didn’t trust the banking system.
Sadly, as detailed earlier in this post, that may be true; however, it’s unlikely to be his real reason.
[CLICK HERE to read the article, “Report: former US House Speaker allegedly paid $3.5 million to cover up a sex scandal,” from Business Insider, May 29, 2015.]
[CLICK HERE to read the article, “Public Trust in Government: 1958-2014,” from Pew Research Center, Nov. 13, 2014.]
The thing about bad behavior is that it breeds mistrust. And trust in things like our financial system, elected government officials — and even the leaders of the sports industries where we spend much of our entertainment dollars — truly matter.
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