One robin does not make a spring, but Harry Shearer sent a link to a new route by which Main Street interests are starting to take ground back from Wall Street. One of the county supervisors of California’s Santa Cruz County recommended that the county end, to the extent possible, its business dealings with the four banks that had admitted to criminal conduct in a settlement with the Department of Justice and paid a total of $6 billion in fines. Here’s the Reuters recap of the deal reached last month:
Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global probe into the $5 trillion-a-day market.
Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N), Barclays Plc (BARC.L), UBS AG (UBSG.VX)(UBS.N) and Royal Bank of Scotland Plc (RBS.L) were accused by U.S. and UK officials of brazenly cheating clients to boost their own profits using invitation-only chat rooms and coded language to coordinate their trades.
All but UBS pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the FX spot market. UBS pleaded guilty to a different charge. Bank of America Corp (BAC.N) was fined but avoided a guilty plea over the actions of its traders in chatrooms…
The misconduct occurred until 2013, after regulators started punishing banks for rigging the London interbank offered rate (Libor), a global benchmark, and banks had pledged to overhaul their corporate culture and bolster compliance.
We’ve embedded the memo below, which shows it was put on the agenda for the June 9 supervisors’ meeting. I do not know if it was approved or sent for further review before making a decision.
Author Ryan Coonerty points out that it is the established policy of Santa Crux County to sever the investment relationships of the County’s treasury with dealers who have been involved in bid-rigging scandals. Santa Cruz removed Barclays, JP Morgan, and Bank of America from their approved dealer list as a result of their role in earlier market-fixing scandals. Mr. Coonerty recommends strengthening the current policy by setting an explicit prohibition period of five years (rather than leaving its continuation at the discretion of the Treasurer) and unwinding other businesses relationships with these banks to the extent possible.
This proposal is based on the recognition that the flip slide of Too Big to Fail is Too Crooked to Trust. State and local governments are badly outmatched when they deal with major banks. Witness how they’ve been fleeced on municipal bond deals with complex swaps that go bad (Jefferson County, Alabama is the poster child, but there are plenty of other costly fiascoes out there) and privatizations. Not only do these entities have limited in-house expertise and legitimate difficulties in getting good advice, municipal finance has also long been a cesspool of corruption (see David Sirota’s dogged coverage of shady dealings with Big Finance in New Jersey and Chicago for examples).
Santa Cruz is blazing an important path, and I hope readers will press their local officials to take similar actions. Treasury officials make short-term investments in highly liquid and supposedly fairly price markets and instruments. The fact that major banks successfully gamed the most liquid market of all, foreign exchange, says that no trading market can be assumed to have fair prices. An obvious protection (and it is far from perfect) is to stay away from known crooks.
I ENJOY NAKED CAPITALISM FOR MANY YEARS AND FOR ITS BREADTH AND DEPTH OF INTERESTS AND ANALYSIS AND I DESPISE MANY OF THE ABUSES OF WALL STREET AND I WISH WE COULD THROW 2000 OF THOSE CLOWNS IN FEDERAL PRISON BUT THIS BORDERS ON DERANGED DON QUIXOTE WISHFUL THINKING AND CALIFORNIA DREAMIN’. LET US DO OUR BEST TO GET BERNIE SANDERS ELECTED AGAINST THE STATUS QUO SLIGHTLY MODIFIED SECRETARY CLINTON AND LET US HOPE THAT ELIZABETH WARREN WILL ACCEPT THE POST OF TREASURY.. THESE ARE SOUND ACHIEVABLE DREAMS BUT THIS VERY NEARLY LITERAL TWO-BIT UPRISING IN SUNNY AND PARCHED CALIFORNIA IS NOT WORTH INVESTING HOPE OR ENERGY IN … I EVEN NOW REGRET RAILING AGAINST IT… WE HAVE BIG FISH TO FRY AND WE MUST STAY FOCUSED ON BIG PRIZES ESPECIALLY IN THIS ELECTION CRITICAL TIME… THINK BIG, THINK BERNIE, HOPE FOR WARREN AT TREASURY AND TELL HILLARY THAT HER DAY AND TEDIOUS HUSBAND BILL’S TIME HAS PASSED.. LET’S GET TO WORK AND FIGHT AS MEAN AND AS HARD AS THE AMERICANS WHO FOUGHT MEAN AND HARD IN 1905 AND 1915 AND 1925 AND 1935….. THINK BIG, FOLKS AND SWING FOR THE FENCES….
I disagree. There are plenty of banks that can handle the business of state and local Treasuries. And local governments are far more amenable to citizen opinion and action that the national government. This is a multi-front effort and the name of the game is to deligitimize Big Finance. A state-local Treasury effort is not at the expense of national efforts. In fact, it complements them.
Thomas — your aspirations for Sanders etc are admirable and important — and at the level of ‘global thought’. Still both global thought AND local action has always been the essence of wisdom. I, for one, hope Santa Cruz county supervisors stop doing business with these criminal banks. And I hope many other county, city, and state officials do the same. One additional point, Thomas: when folks like those in Santa Cruz take action in this manner, it increases the odds that someone like Sanders prevails. AND, it increases the odds that if Sanders wins, his policies are supported and enacted.
Well I agree with Yves and Doug. But probably more local – setting aside the national / international discourse, after the last few decades I think to myself some of these banks are criminal organizations, and you know, I’m not comfortable giving my money to a criminal organization. I don’t want my business to have transactions with them, I don’t want my local government to deal with them. It’s that simple, really.
There is a key on your keyboard to the left of the “A” key, which is labelled “CapsLock”. Please press that key. Otherwise it SEEMS LIKE YOU’RE SHOUTING like some raving loon….
I fail to see how one has anything to do with the other. Is there anything about an effort at the local level to divest from criminal banks that impedes a Sanders’ candidacy?
I think the ultimate Don Quixote naive thinking is thinking we can change power at the level of say the presidency. That seems to me failure to understand the system we are dealing with (yes including the most obvious and incontestable thing, the vast money flow in politics at that level).
Aim high and swing for the bleachers perhaps in aims, that’s about ends, so yes have high aims of a better world. But I don’t think obsessing about the Presidency is a realistic way to get their in terms of means. Whether bank divestment is I don’t know, obviously not if it’s just Santa Cruz.
Unless I miss my guess, hadn’t the large profits already been made by being on the right side of an interest rate swap bet?
Would a municipal budget the size of Santa Cruz even be missed by some of the institutions of scale ?
I think it’s the county not the municipality but I don’t think there’s much difference in this case. This post makes me want to take a vacation to Santa Cruz badly (I’m in CA), if only I had any money for such.
Optics are important -until actions are taken and publicized, big banks roll along quite nicely while the general population sleeps on. The financial consequences of one municipality are obviously tiny, but bad press and nervous, outspoken citizens in California magnify the message of Sanders and Warren and give them legitimacy. I look forward to the day people associate Sanders with pushing for financial reform instead of “being a socialist”. It’s way easier to write off a “socialist” as nothing to worry about than to write off a guy who is pushing reforms when even municipalities believe that certain banks cannot be trusted.
Well, suppose Santa Cruz boycotted the banks and nobody noticed — Santa Cruz would still be dealing with non-criminal banks, at least not convicted ones and that, I submit, would be a huge plus for the citizens of Santa Cruz.
I am thinking of a more general bank boycott movement, in which case, more cash, not less, will be needed.
If the Danish government wants to go cashless, but the Danes boycott banks, what then?
Santa Cruz is now Santa Barbara with slightly longer hair. As late as the 1990s it was a left leaning liberal bastion. Nude sun bathers in the parks, drugs and a leftist attitude. THIS WAS THE WAY IT ONCE WAS. Moreover it was possible for a person of limited means to live there.
Then came the tech boom in the late 1990s and a tidal wave of money poured over the place. You must remember Santa Cruz is ‘beach access for San Jose”.
Land was bought out in anticipation of further rises (see Henry George) and one by one the locals were pushed out for tech billionaires and prius driving elites. As rents and home prices are some of the highest in the nation I don’t see how this place can be called Liberal anymore. There is nothing dynamic or growing or progressive about the place.
Controls on rent and land appreciation would have done more to help the people of Santa Cruz than pretend outrage at banker’s misdeeds.
Everybody can’t live where they want. I’ve lived in Key West, and now the Bay Area, and the foolish ranting about land and house prices goes on and on.
Inequity exists, but the question is the least damaging path to more fairness, and rent control has already proven a failure.
Indeed? How so?
Yea on the one hand move wherever it’s cheap, and the other we bemoan the lack of extended families and long lasting human connections, as if both were possible. Connection to place like every other real value a human might want is “being spoiled”.
Rich people buying up the land lots of a places is a real problem, but perhaps it’s mostly just the problem of inequality.
The official minutes have not yet been published, but the local paper says the item was approved (scroll down to the third item).
It would be my duty as a county supervisor to stop all county business with any concern that had engaged in illegal activities which rob clients. And I would also expect that to to be part of the law governing prudent handling of county funds.
But I might be biased, I moved all of my banking to credit unions thirty years ago and never once looked back.
This is outstanding. I wonder how many other municipalities have similar provisions in the books? How many federal agencies? If criminal conduct started choosing banks some money, perhaps they would lean towards more ethical behavior. The other possibility is that regulators would just stop seeking any criminal indictments.
That would be up to us to do.
It’s certainly a positive step, but culturally Santa Cruz is an outlier and I’d be surprised if any larger municipalities followed suit. Now, if state governments were to pursue this path, that would be fantastic.
I support this boycott. After the 2008 crash, TX had many small banks bought out by the very banks that caused the problems. I switched banks when mine was taken over by a racist and criminal bank. I have urged others to do the same. I think this has more impact than my vote does. I only wish I could get my local politicians to do the same. It has worked in the past with AZ tourism, CA lettuce, and FL produce. I would argue that that is the only thing that works. Thank you, Santa Cruz County.
Yes, thank you, Santa Cruz County. I hope this move gets traction with state and local governments nationally.
Google Bank of North Dakota. And Credit Unions are an alternative though they’ll try to steal your money too!
My point is that there are simple solutions to the most pressing problems if you’ll just ah, pull the trigger.
We really don’t have to live like this. I travel all over America and I see young people waking up. There already are big changes afoot.
The Three Ring Circus of government is inevitably doomed.
Only the true believer Fox News crowd support “conservatives” now. They are aging out. Brown Americans will soon dominate American politics.
America 25 years from now will be a vastly different place!
You mean, like Mexico? Philippines? India? Pakistan?
Skin color is a BAD metric.
I’m proud of Ryan Coonerty for making the move that all public officials should have made long ago. Virtually all of the Wall Street gambling is accomplished using municipal, county, state, and federal funds — the so-called “dumb” money of bond borrowing, pension savings, and day-to-day banking. They don’t screw their golfing partners quite so often — although the conduct of Paulson and Geithner recently exposed in Starr Investments v. NY Fed demonstrated that you aren’t immune without the “right” golfing cronies.
I have lived in Santa Cruz since 1976 and have known Ryan and his family for many years (his dad Neil is a longtime independent bookseller who was targeted to be crushed first by Crown Books and then Borders — Bookshop Santa Cruz still thrives while they lay in the boneyard of empires). He is smart, experienced, ethical, and very cognizant that political change in this country starts with “Think Global but Act Local.”
It has been easy for Wall Street to corrupt the few at the top in D.C. — but John Arnold’s failures to crush police and fire pension savings over the Hill in San Jose show how difficult a task it will be for the klepto-oligarchs to bribe every local politician when they have willingly branded themselves as felons unworthy of our trust.
What happened to the post-crisis movement of ordinary customers taking their money out of crooked banks and putting it into credit unions? Was that a wise move, either for the individuals involved or for protesting the banks’ abuses? I recall reading that, in retaliation, the banks’ allies in Congress introduced legislation to cripple credit unions. Was that legislation passed? My reason for asking is that, very recently, the two major banks in my small (100,000 pop.) town renamed themselves and, in the process, eliminated the word “national” in their names. I recall my parents, who lost their savings in the Great Depression, advising me never to put my money in a bank that did not have “national” in its name, because its absence meant that the bank was not adequately regulated or insured by the Federal Government. Not sure about that, but when I asked the assistant manager at one of the banks why the name change, he admitted that one motive was to avoid at least some kinds of federal regulation, which avoidance, he claimed, would better enable the bank “to serve its customers.” Being suspicious, and always remembering what happened to depositors’ funds in Cyprus, I’m reconsidering taking my money to a local credit union. Would that be prudent? Are there any ways I can learn about the relative soundness and probity of different credit unions?
Pull your money, in twenties. Interest rates are very low anyway. Buy a fireproof floor safe, bolted in. Profit. It also means the cops don’t know your worth. Buy a few months worth of dried food or MRE’s, and a fifty gallon garbage can of water. You’ll sleep better.
Appealing as that sounds, there are huge problems with that idea.
If you pull more than $10K, the bank has to report it to the authorities. Just ask Dennis Hastert how that works.
If the cops know there is so much cash in your house, I can only imagine you become a target for “civil asset forfeiture,” which amounts to robbery by the authorities. With this, of course, they can fund further misconduct. It’s a perfect self-licking ice cream cone.
I don’t know what the yield on money market funds these days, but once the cops raid your house, I imagine the return on your assets would fall well below zero percent per annum.
This is the kind of thing that gives people hope. “Too Crooked to Trust” is a criteria that nearly everyone respects. Let’s hope this spreads.
The observation that Santa Cruz is not the progressive bastion it once was is fairly accurate, but this is at least a start. I’d like to know why Berkeley hasn’t done something like this; as a city it’s far more gentrified than it was even 10 years ago, but politically it’s still way to the left of just about everywhere else in the US.
Next…public banking. Worth a listen: http://prn.fm/its-our-money-with-ellen-brown-monetary-reform-trending-06-03-15/
What is surprising is how many average Americans continue to bank and use these Too Crooked to Trust banks. Actually, if you were to delve into the pocketbooks of even your own readers, I would suspect that there would be a Bank of America or a Chase “Freedom” card found there.
I went out to lunch with a foreclosure defense attorney and she paid the bill with a BANK OF AMERICA credit card. I was shocked that there was no connection between having a whore’s credit card and the fact that every day in the courtroom, that attorney is supposedly fighting against that same whore.