If you are heading for Europe or Asia this summer, you better check out several different banks before you plop down your dollars for some Euros or Japanese Yen.
Maybe you should avoid the Bank of New York Mellon altogether. Why? Because the Bank of New York Mellon has just agreed to pay $714 million to settle charges that it cheated investors and government pension funds for more than a decade.
The New York Attorney General and the Unites States Attorney for Manhattan accused the bank of ripping off its own customers. How?
The authorities assert that the bank assured its clients that they would receive the best possible rate when executing a currency trade. In truth, the authorities said that the bank did just the opposite. It provided its clients with prices that were at or near the worst interbank rates. Among the victims were the New York City pension funds, which included teachers and police officers, and prominent private investors. During the 2008 crisis, this enabled the bank to make lots of extra cash.
While $714 million might seem like a lot of money, it is a mere pittance compared to the $2 billion in suspected ill-gotten gains that authorities initially sought as a penalty. Less than half of the settlement will go to the bank's clients, and much of that will go to attorneys who filed class-action lawsuits on behalf of the bank's clients. A total of $30 million will go to the Securities and Exchange Commission; $14 million will go to the Department of Labor; and $334 million will be split between the United States Attorney for Manhattan' office and the New York attorney general's office.
But this is only the tip of the iceberg.
Still pending, is a much larger investigation into the world's biggest banks including JPMorgan and Citigroup. They are being investigated for allegedly colluding to manipulate the world's foreign exchange market.
The foreign exchange market dwarfs any other trading market on Earth, trading $5.3 trillion dollars a day. So even the smallest overcharge can amount to billions of dollars a year in ill-gotten gains. Unfortunately, plunder and subterfuge are nothing new to the big banks. They have been doing for centuries.
The LIBOR scandal and the mortgage backed securities scandal that was at the epicenter of the 2008 banking crisis are just two examples of banks run amuck. The SEC and state regulators seem to always be one step behind the banking hucksters. These mammoth institutions work 24 hours a day coming up with the next scheme to bilk their own customers and even their biggest clients, the pension funds and institutional investors.
Unlike our leaders of today, our founding fathers learned from the past and were very concerned about the future, most particularly banks and the control of money. James Madison said:
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over government by controlling money and it’s issuance."
Thomas Jefferson didn’t pull any punches either:
"I believe that banking institutions are more dangerous to our liberty than standing armies."
So the next time you plan to leave the country for a much needed rest, you might be able to pay for your plane ticket by the money you save from avoiding the big banks and swapping your dollars at the airport or the local kiosk.
John Lawrence Allen, a nationally recognized legal expert, represents investors nationwide in securities arbitration. Mr. Allen’s second book, “Make Wall Street Pay You Back,” was just released. For more information visit www.MakeWallStreetPayYouBack.com.
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