It looks like the nation’s biggest banks cannot help preying on their own customers, large and small.
The latest case involves the esoteric world of securities lending, which is used for short selling and for hedge funds and is an important means of eliminating “failed” transactions. In exchange, the lender (such as a brokerage firm) charges a stock loan fee to a client for borrowing shares.
The latest news involves three U.S. pension funds which sued six of the world’s largest banks, including Goldman Sachs Group Inc. and JP Morgan Chase & Co. The banks are accused of conspiring to stifle competition in the more than $1 trillion stock lending market, according to an article in The Business Insider.
The plaintiffs are the Iowa Public Employees’ Retirement System, Orange County Employees’ Retirement System and Sonoma County Employees’ Retirement Association. The plaintiffs said in the lawsuit that the banks cornered the market on stock lending in violation of federal antitrust law.
In the words of their lawyer, Michael Eisenkraft, a lawyer for the funds and partner with Cohen Milstein, “the likes of Goldman Sachs and Morgan Stanley have for years colluded to maintain their power over this little-known-but-lucrative corner of Wall Street.”
As numerous lawsuits over the past decades have shown, trading against, and in front of clients is part of the DNA of large banks. Regardless of the fines and investigations and assaults on their reputations, the big banks cannot stem the practice of abusing their own clients.
This is all being facilitated by federal and state regulators who are not arresting the offenders for securities violations and financial frauds. If the bank and investment firm executives and managers have to sign agreements saying they committed the crimes, then regulators and prosecutors should prosecute. But they don’t. This has been the same practice since the Reagan, Bush, Clinton and Obama administrations and will continue under Trump who is vehemently against pro-investor regulations.
All this means we will continue to see large financial frauds that go unpunished. It’s the American way.