Oh my goodness, the financial scandals! I am always reading about them, and they are more frequent than few and far in between.
This month didn’t necessary pinpoint more scandals than usual, but there was definitely no absence of fraud, inaccurate accounting reporting, and banking discrepancies.
- Let’s start with the Libor scandal, which is not new, but is still ongoing.
It has been concluded that several international banks were involved in rigging Libor rates. These rates have a significant effect on a range of derivatives and loans. Simply put, the impact…could be huge.
This calls to mind several questions…
- What are the ramifications (and what will they really result in)?
- How loose are some areas in the financial industry for this to occur (and for such a long period of time)?
- What and how are changes going to be made in response to collusion of this magnitude?
- How does this affect investor trust and confidence in the banking industry?
So far, results have yielded fines and firing of different individuals. Criminal prosecution has been said to be on the horizon for some time, but little has come to fruition on that front. Also, there is speculation concerning the billions of dollars that will be paid out in response to private lawsuits.
As far its effect on the current system, there are different thoughts out there on how it should be handled, ranging from a complete overhaul to gradual changes.
Overall, things still remain to be seen and the fallout is still ongoing. Scandals of this size always baffle me, especially in considering the mindset of white collar criminals. It causes one to consider what the banks (who were involved) are thinking now that this has been uncovered and is widely known. “We need to make some changes,” or “Damn, we were caught” come to mind. Unfortunately, I think it was the latter.
*An interesting addition to these events, is the role chat rooms play in the collusion. Bloomberg terminals played a large part in this, and there is much talk and speculation about banning this form of communication, or how it could possibly be regulated (even though chatting can still commence on other platforms).
- Moving on, I’ll quickly touch on another bank scandal.
Five banks have been found to be colluding and doing business as a cartel. They also utilized chat rooms to manipulate foreign currency markets, and they are a key component in the piecing everything together.
How this plays out is still up in the air, but it is hard to forget that a couple of the banks in question are still involved in the Libor scandal. Ouch.
This lends to the idea that banks don’t care for consumers or investors as they should; they care for the almighty dollar (on a future blog I will touch on how banks report reserves in terms of accounting).
- Lastly, a different type of scandal I found interesting is related to the IRS.
An IRS official was recently indicted on 28 counts of mail and wire fraud, falsifying returns, moonlighting as a tax preparer, identity theft, and lastly, perjury. In relation to preparing others’ taxes (and misrepresenting and misreporting), he also ran a business based in consumer goods to fudge his income and refund. In the end, he lied about it under oath. There are several no-no’s there per IRS regulations, but then it is magnified by the falsifications.
As a representative of a government entity, one would hope an official would hold themselves to a higher standard. It calls people to question the character of those in certain positions, and has them wondering who else is trying to get ahead in similar ways.
This “scandals” post is the first of many. I will keep you all up to date on some of the on-goings in the financial world.
– Erica O.