1 00:00:00,040 --> 00:00:02,360 Speaker 1: When five of the world's biggest banks last year pleaded 2 00:00:02,360 --> 00:00:05,720 Speaker 1: guilty to US currency rigging charges, they also agreed to 3 00:00:05,760 --> 00:00:09,959 Speaker 1: cooperate with the Justice Department's ongoing investigation. This week, there 4 00:00:10,000 --> 00:00:12,960 Speaker 1: are new indications that that cooperation is bearing fruit for 5 00:00:12,960 --> 00:00:17,160 Speaker 1: the government. Three banks, Barkley's, JP, Morgan Chase, and City Group, 6 00:00:17,600 --> 00:00:20,959 Speaker 1: have provided evidence of a potential new antitrust conspiracy in 7 00:00:21,000 --> 00:00:24,520 Speaker 1: the spot currency market. It's one that prosecutors say involves 8 00:00:24,560 --> 00:00:26,840 Speaker 1: different currencies from the ones that were at the center 9 00:00:26,880 --> 00:00:30,040 Speaker 1: of the guilty please. That's according to court filings described 10 00:00:30,040 --> 00:00:32,800 Speaker 1: in a new story on Bloomberg News. With us to 11 00:00:32,840 --> 00:00:35,400 Speaker 1: talk about this development and what might be next for 12 00:00:35,440 --> 00:00:39,760 Speaker 1: the international currency rigging investigation are Bloomberg News reporter Tom 13 00:00:39,760 --> 00:00:42,240 Speaker 1: Schoenberg was one of the reporters who wrote the story, 14 00:00:42,640 --> 00:00:45,920 Speaker 1: and Robert Hockett, a professor at Cornell University Law School. 15 00:00:46,320 --> 00:00:49,960 Speaker 1: Tom is here with me in the Bloomberg studios. Tom, 16 00:00:49,960 --> 00:00:53,760 Speaker 1: thanks for rushing back from federal court to talk about this. Um, 17 00:00:53,880 --> 00:00:56,880 Speaker 1: let me just start with you, Uh, what did we 18 00:00:57,000 --> 00:01:00,160 Speaker 1: learn from these these new court filings? Share? So, what 19 00:01:00,280 --> 00:01:04,720 Speaker 1: we saw in sentencing papers was that really kind of 20 00:01:04,720 --> 00:01:08,200 Speaker 1: a first kind of public acknowledgement from the Justice Department 21 00:01:08,280 --> 00:01:16,640 Speaker 1: that there's an active criminal conspiracy investigation into additional currency 22 00:01:16,760 --> 00:01:22,520 Speaker 1: pairs in its currency rigging investigation. The banks the five 23 00:01:22,560 --> 00:01:25,479 Speaker 1: banks that played guilty last year to current to charges 24 00:01:25,560 --> 00:01:30,040 Speaker 1: related to currency rigging um those involved the euro and 25 00:01:30,080 --> 00:01:34,160 Speaker 1: the US dollar. What we see here is that additional 26 00:01:34,200 --> 00:01:37,040 Speaker 1: currency pairs are being looked at, and that this probe 27 00:01:37,120 --> 00:01:39,399 Speaker 1: is kind of being assisted by at least three of 28 00:01:39,400 --> 00:01:42,840 Speaker 1: the banks who pled guilty last year. And we should 29 00:01:42,840 --> 00:01:45,240 Speaker 1: just just clarify I should have clarified. These are papers 30 00:01:45,280 --> 00:01:47,640 Speaker 1: that were filed in connection with the sentencing of the banks, 31 00:01:47,640 --> 00:01:49,840 Speaker 1: which is coming up this week, right, that's correct. The 32 00:01:49,880 --> 00:01:54,760 Speaker 1: banks are scheduled to be sentenced on Thursday in Connecticut, Bob. 33 00:01:55,280 --> 00:01:58,480 Speaker 1: When Loretta Lynch announced the guilty, please she said that 34 00:01:58,520 --> 00:02:01,880 Speaker 1: there would be almost three billion dollars in penalties. Now, 35 00:02:01,920 --> 00:02:07,120 Speaker 1: these three banks are cooperating with prosecutors and they are 36 00:02:07,160 --> 00:02:11,280 Speaker 1: going to be rewarded well for their cooperation. Tell us 37 00:02:11,320 --> 00:02:15,720 Speaker 1: about what they're going to be facing when they're sentenced. Well, 38 00:02:15,760 --> 00:02:17,760 Speaker 1: it looks like what's been talked about now is reducing 39 00:02:18,240 --> 00:02:20,839 Speaker 1: the fines by about anywhere's been one third and one 40 00:02:20,919 --> 00:02:25,200 Speaker 1: half so from a bit over one billion in all cases, 41 00:02:25,240 --> 00:02:28,960 Speaker 1: we'll get down to the hundreds of millions, between basically 42 00:02:28,960 --> 00:02:33,200 Speaker 1: six hundred and nine hundred million. Tom Of course, the 43 00:02:33,280 --> 00:02:36,080 Speaker 1: judge doesn't have to accept that recommendation. It is below 44 00:02:36,120 --> 00:02:39,080 Speaker 1: the federal sentencing guidelines. What if any indications do we 45 00:02:39,120 --> 00:02:41,560 Speaker 1: have about how the judge up in Connecticut might be 46 00:02:41,720 --> 00:02:44,639 Speaker 1: planning on handling this. We don't know, you know, exactly 47 00:02:44,639 --> 00:02:47,800 Speaker 1: what he may do. But you know, what I find 48 00:02:47,840 --> 00:02:50,639 Speaker 1: interesting is that these banks are kind of going to 49 00:02:50,720 --> 00:02:54,960 Speaker 1: be sentenced all nearly at the same hearing, and ubs 50 00:02:55,000 --> 00:03:01,359 Speaker 1: which pled guilty to uh charges, uh, not the currency 51 00:03:01,440 --> 00:03:05,000 Speaker 1: rigging charges, but charges you know that stemmed from that investigation, 52 00:03:05,080 --> 00:03:09,360 Speaker 1: is being sentenced just a half hour prior. Um. Also, 53 00:03:09,520 --> 00:03:11,720 Speaker 1: we know that the government, you know, these are the 54 00:03:11,800 --> 00:03:15,480 Speaker 1: fines that the government and the banks announced when when 55 00:03:15,480 --> 00:03:20,320 Speaker 1: all these banks pled guilty in May. So um, you know, 56 00:03:20,440 --> 00:03:23,320 Speaker 1: in all the sort of filings between now and then, 57 00:03:23,600 --> 00:03:25,960 Speaker 1: there's been no indications from the judge that he wouldn't 58 00:03:26,000 --> 00:03:30,119 Speaker 1: accept that. The Justice Department has also gone to great 59 00:03:30,200 --> 00:03:32,680 Speaker 1: lengths in their documents to show the type of cooperation 60 00:03:32,760 --> 00:03:34,800 Speaker 1: the banks have given them in order to sort of 61 00:03:35,000 --> 00:03:39,400 Speaker 1: say why they should get these type of reduced penalties, Bob, 62 00:03:39,760 --> 00:03:43,800 Speaker 1: there's little indication or information as to whether the bank's 63 00:03:43,840 --> 00:03:48,520 Speaker 1: cooperation is helping the prosecutors to build cases against the 64 00:03:48,640 --> 00:03:52,120 Speaker 1: group of traders at the heart of the conspiracy, and 65 00:03:52,240 --> 00:03:57,640 Speaker 1: that was supposedly a mandate. Yeah, So, I mean, I 66 00:03:57,680 --> 00:04:01,240 Speaker 1: think we can presume that what the cooperating banks are 67 00:04:01,280 --> 00:04:04,160 Speaker 1: doing is helping the Justice Department in sort of getting 68 00:04:04,200 --> 00:04:07,280 Speaker 1: more information about the particular traders in question. Um. But 69 00:04:07,360 --> 00:04:09,720 Speaker 1: the thing is, even even assuming that that is the case, 70 00:04:09,760 --> 00:04:13,040 Speaker 1: there's a there's a rather ridiculous irony here, it seems 71 00:04:13,040 --> 00:04:15,960 Speaker 1: to me. So basically, we've got certain markets out there 72 00:04:16,000 --> 00:04:19,680 Speaker 1: that are largely dominated by a comparatively small number of 73 00:04:19,800 --> 00:04:23,159 Speaker 1: large MAGA banks. The very size of these banks, the 74 00:04:23,200 --> 00:04:25,599 Speaker 1: very roles that they have in the global markets, is 75 00:04:25,600 --> 00:04:28,040 Speaker 1: what enables them to engage in the kind or enables 76 00:04:28,040 --> 00:04:31,320 Speaker 1: their personnel to engage in the kinds of manipulative behaviors 77 00:04:31,320 --> 00:04:33,760 Speaker 1: that are are in question here. But by the same token, 78 00:04:33,800 --> 00:04:36,919 Speaker 1: that same size makes it impossible for the Justice Department 79 00:04:37,480 --> 00:04:41,560 Speaker 1: actually to investigate thoroughly without getting the cooperation of the 80 00:04:41,800 --> 00:04:45,800 Speaker 1: offending institutions themselves. Right, So, you know, that many people 81 00:04:45,839 --> 00:04:47,440 Speaker 1: have argued for a long time that the existence of 82 00:04:47,440 --> 00:04:49,840 Speaker 1: these maga banks means that we've got financial institutions that 83 00:04:49,880 --> 00:04:54,080 Speaker 1: are effectively ungovernable even internally by their own boards. Um. 84 00:04:54,200 --> 00:04:56,680 Speaker 1: But in addition, of course, relatively uncomfortable and difficult to 85 00:04:56,680 --> 00:04:59,400 Speaker 1: govern by by regulators themselves, and in the sense what's 86 00:04:59,440 --> 00:05:02,720 Speaker 1: going on here kind of um, it reinforces that point, 87 00:05:02,760 --> 00:05:09,120 Speaker 1: or reinforces that perception, Tom, Who could be if this 88 00:05:09,320 --> 00:05:12,680 Speaker 1: new evidence that has discussed in the court papers amounts 89 00:05:12,720 --> 00:05:15,279 Speaker 1: to something who was potentially on the hook for it? 90 00:05:15,400 --> 00:05:17,840 Speaker 1: Not not the banks in this case, not the ones 91 00:05:17,880 --> 00:05:21,599 Speaker 1: we've already mentioned, right, it's potentially other people. Right, Barklay's, JP, 92 00:05:21,680 --> 00:05:24,560 Speaker 1: Morgan and City Group all would have immunity from uh, 93 00:05:25,600 --> 00:05:28,200 Speaker 1: you know, from prosecution over the evidence that they've turned 94 00:05:28,200 --> 00:05:31,839 Speaker 1: over to prosecutors regarding new conduct in in the in 95 00:05:31,880 --> 00:05:35,760 Speaker 1: the currency investigation. However, there's about there was, you know, 96 00:05:35,880 --> 00:05:39,800 Speaker 1: sixteen banks uh that were sued in a in private 97 00:05:39,839 --> 00:05:43,840 Speaker 1: litigation by investors over this conduct. And some of those 98 00:05:43,839 --> 00:05:49,039 Speaker 1: banks have already disclosed that disclosed and regulatory filings that 99 00:05:49,080 --> 00:05:53,960 Speaker 1: they're being investigated. Uh. Those include Deutsche Bank, Goldman, Sachs, Morgan, 100 00:05:54,040 --> 00:05:56,120 Speaker 1: Stanley and HSBC. So there are a lot of other 101 00:05:56,160 --> 00:05:58,279 Speaker 1: big banks out there. And then and then the individuals 102 00:05:58,279 --> 00:06:01,880 Speaker 1: that we're talking about are potentially uh susceptible to to 103 00:06:02,240 --> 00:06:05,279 Speaker 1: uh criminal charges. Is that right? Yeah, you would. And 104 00:06:05,320 --> 00:06:08,240 Speaker 1: obviously at this point, um, you know, the government's been 105 00:06:09,279 --> 00:06:12,279 Speaker 1: talking about a lot about going after individuals, so you 106 00:06:12,279 --> 00:06:16,320 Speaker 1: would uh expect individuals to be a focus. Uh. Yet 107 00:06:16,400 --> 00:06:19,400 Speaker 1: as we see thus far, they have yet to bring 108 00:06:19,480 --> 00:06:23,520 Speaker 1: charge against any of the really small number of individuals 109 00:06:23,600 --> 00:06:26,839 Speaker 1: um that have been you know, named by US and 110 00:06:27,000 --> 00:06:31,039 Speaker 1: others um as being uh, you know, perpetrators of the 111 00:06:31,520 --> 00:06:35,440 Speaker 1: misconduct in the guilty place. We're talking with Bloomberg's Tom 112 00:06:35,440 --> 00:06:39,560 Speaker 1: Schoenberg and Cornell's Bob Hockett about the latest developments in 113 00:06:39,600 --> 00:06:44,120 Speaker 1: the Justice Department's currency manipulation investigation. Last year, Attorney General 114 00:06:44,160 --> 00:06:47,479 Speaker 1: Loretta Lynch announced the settlement with six banks, and she 115 00:06:47,560 --> 00:06:52,040 Speaker 1: described how traders rigged foreign exchange rates. Traders in this 116 00:06:52,120 --> 00:06:56,599 Speaker 1: cartel used a private electronic chet room to manipulate the 117 00:06:56,640 --> 00:07:01,320 Speaker 1: spot markets exchange rate between euros and dollars, using coded 118 00:07:01,400 --> 00:07:06,040 Speaker 1: language to conceal their collusion. They acted as partners rather 119 00:07:06,120 --> 00:07:09,680 Speaker 1: than competitors in an effort to push the exchange rate 120 00:07:09,720 --> 00:07:16,080 Speaker 1: indirections favorable to their banks but detrimental to many others. Bob. 121 00:07:17,320 --> 00:07:20,640 Speaker 1: When that settlement came out, some of the banks suggested 122 00:07:20,720 --> 00:07:23,120 Speaker 1: that what was really going on here was basically that 123 00:07:23,160 --> 00:07:26,120 Speaker 1: they had a few bad apples. Given what we know, 124 00:07:26,840 --> 00:07:30,520 Speaker 1: is that is that kind of a fair description or 125 00:07:30,560 --> 00:07:33,600 Speaker 1: is this something that at least the investigation is it 126 00:07:33,720 --> 00:07:36,720 Speaker 1: something that is much broader than that. I think it's 127 00:07:36,760 --> 00:07:38,280 Speaker 1: it's likely to turn out that there are more than 128 00:07:38,320 --> 00:07:40,400 Speaker 1: a few bad apples. Now that's not to say that 129 00:07:40,400 --> 00:07:43,680 Speaker 1: they're sort of sort of pervasive corruption across the institutions, 130 00:07:43,680 --> 00:07:45,160 Speaker 1: but I think it's going to turn out that there's 131 00:07:45,160 --> 00:07:47,400 Speaker 1: a sizeable number of bad apples under a couple of reasons. 132 00:07:47,680 --> 00:07:50,040 Speaker 1: One is the Justice Department itself sort of intimated that 133 00:07:50,080 --> 00:07:51,880 Speaker 1: there's a lot more going on than as thus far 134 00:07:52,000 --> 00:07:54,960 Speaker 1: been revealed. Too, Is it just so easy, given the 135 00:07:55,000 --> 00:07:58,440 Speaker 1: outsize role that these institutions play in the fin animal markets, 136 00:07:58,480 --> 00:08:01,320 Speaker 1: for certain insiders within the institutions to do this kind 137 00:08:01,360 --> 00:08:03,480 Speaker 1: of thing, and there are enormous profits to be made. 138 00:08:03,800 --> 00:08:07,080 Speaker 1: And finally, third, um, this is kind of a related thing, 139 00:08:07,120 --> 00:08:09,400 Speaker 1: not exactly directly on point but very closely that. I 140 00:08:09,440 --> 00:08:11,960 Speaker 1: think if you look at things like the Live where 141 00:08:11,960 --> 00:08:13,960 Speaker 1: scandals right the whale scandal, and you look at the 142 00:08:14,000 --> 00:08:17,640 Speaker 1: precious metal market cornering scandals in recent years, those are 143 00:08:17,680 --> 00:08:20,720 Speaker 1: all in the same mature as this particular scandal. They're 144 00:08:20,720 --> 00:08:23,160 Speaker 1: all about outsized institutions that have a lot of market 145 00:08:23,200 --> 00:08:25,680 Speaker 1: power and thus can move prices, and that are also 146 00:08:25,800 --> 00:08:28,000 Speaker 1: very large to sort of govern because they're so complex 147 00:08:28,000 --> 00:08:31,600 Speaker 1: and park lung with certain insiders within them who helpfully 148 00:08:31,640 --> 00:08:35,880 Speaker 1: call themselves cartels acting like cartels. So my guesses this 149 00:08:35,960 --> 00:08:37,280 Speaker 1: is going to turn out to be a rather bigger 150 00:08:37,320 --> 00:08:39,400 Speaker 1: problem than as thus Parking revealed, even if it's not 151 00:08:39,400 --> 00:08:41,920 Speaker 1: going to be get a case of just pervasive corruption 152 00:08:41,920 --> 00:08:46,920 Speaker 1: across the institutions tom. The private electronic chat room that 153 00:08:46,960 --> 00:08:50,360 Speaker 1: elect that Lauretta Lynch was talking about was called the 154 00:08:50,440 --> 00:08:55,560 Speaker 1: cartel and involved euro dollar. There is some evidence in 155 00:08:55,679 --> 00:09:00,400 Speaker 1: some lawsuits that there are more than a dozen online 156 00:09:00,480 --> 00:09:06,720 Speaker 1: chat rooms involving upwards of fifteen currencies. Can you explain that, yes, Uh, 157 00:09:07,000 --> 00:09:12,160 Speaker 1: in sort of private cases brought by investors um they 158 00:09:12,240 --> 00:09:16,520 Speaker 1: were able to through discovery get additional sort of chat 159 00:09:16,600 --> 00:09:20,920 Speaker 1: rooms and chats UH, in which you know, bankers from 160 00:09:21,080 --> 00:09:25,280 Speaker 1: different institutions were in these chat rooms discussing various currencies. 161 00:09:26,160 --> 00:09:30,400 Speaker 1: I think the real issue for investigators is whether or not, 162 00:09:31,440 --> 00:09:34,839 Speaker 1: you know, bankers at competing institutions in the chat room 163 00:09:34,880 --> 00:09:38,520 Speaker 1: talking about a currency was collusion or uh, you know, 164 00:09:38,679 --> 00:09:41,320 Speaker 1: or something that they're allowed to do sort of under 165 00:09:41,360 --> 00:09:46,199 Speaker 1: their current regulatory scheme. Bob, It's it's becoming clear that 166 00:09:46,600 --> 00:09:48,480 Speaker 1: this administration is going to have to turn this whole 167 00:09:48,480 --> 00:09:51,720 Speaker 1: investigation over to the Trump administration. What's your sense of 168 00:09:51,720 --> 00:09:55,959 Speaker 1: where that the uh, potentially new Attorney General Jeff Sessions 169 00:09:55,960 --> 00:09:58,440 Speaker 1: and and his folks might want to go with us. 170 00:09:58,440 --> 00:10:00,440 Speaker 1: Are they going to be as tough on this sort 171 00:10:00,440 --> 00:10:04,320 Speaker 1: of activity as the Obama administration? Yeah? This, you know this, 172 00:10:04,320 --> 00:10:06,680 Speaker 1: this might be something of a silver lining um of 173 00:10:06,800 --> 00:10:08,840 Speaker 1: in the in the Sessions suppoyment, right. I mean, so 174 00:10:09,000 --> 00:10:11,160 Speaker 1: Sessions is well known for being kind of a stickler 175 00:10:11,200 --> 00:10:15,040 Speaker 1: on sentencing guidelines and the sort of upholding very strictly 176 00:10:15,600 --> 00:10:17,600 Speaker 1: laws that are already in the books. The bad news, 177 00:10:17,600 --> 00:10:19,440 Speaker 1: and that, of course, is that he's probably less likely 178 00:10:19,440 --> 00:10:22,360 Speaker 1: to be liberalizing drug laws, which I think we've sensibly 179 00:10:22,360 --> 00:10:24,760 Speaker 1: about liberalizing of play. But the good news might be 180 00:10:24,800 --> 00:10:26,880 Speaker 1: that he's Actually he might be end up he might 181 00:10:26,920 --> 00:10:30,040 Speaker 1: end up being more serious about enforcement of laws that 182 00:10:30,120 --> 00:10:34,040 Speaker 1: that that governed Wall Street, partly because again he's a stickler, 183 00:10:34,320 --> 00:10:36,240 Speaker 1: and maybe partly also the effic since he's down from 184 00:10:36,240 --> 00:10:39,080 Speaker 1: the South, he's not a kind of Wall Street type himself, 185 00:10:39,120 --> 00:10:40,720 Speaker 1: and so he might be a little bit more willing 186 00:10:40,800 --> 00:10:43,280 Speaker 1: to um, you know, see these bad actors as bad 187 00:10:43,320 --> 00:10:45,160 Speaker 1: actors rather than as you know, people who are sort 188 00:10:45,160 --> 00:10:47,360 Speaker 1: of in the same circle as he is. UM. So 189 00:10:47,520 --> 00:10:50,120 Speaker 1: we might end up getting a bit more serious enforcement 190 00:10:50,200 --> 00:10:54,080 Speaker 1: of the finance riggs up here in the Northeast. We 191 00:10:54,120 --> 00:10:55,640 Speaker 1: are going to have to leave it there. I want 192 00:10:55,640 --> 00:10:59,080 Speaker 1: to thank our guests, Robert Hockett, a law professor at Cornell, 193 00:10:59,240 --> 00:11:02,760 Speaker 1: and Tom Show Bomberg Crack, reporter for Bloomberg News here 194 00:11:02,800 --> 00:11:06,200 Speaker 1: in Washington. Thank you both for being with us. Coming 195 00:11:06,280 --> 00:11:10,400 Speaker 1: up uh an open letter from constitutional law scholars to 196 00:11:10,520 --> 00:11:13,240 Speaker 1: Donald Trump. We will have the first interview with one 197 00:11:13,280 --> 00:11:17,559 Speaker 1: of the professors behind that letter. They have some significant concerns, 198 00:11:17,800 --> 00:11:19,880 Speaker 1: and we're going to talk about what happens when police 199 00:11:19,920 --> 00:11:23,520 Speaker 1: find marijuana in a house's trash can? Can they search 200 00:11:23,640 --> 00:11:26,400 Speaker 1: the house? A new court ruling on that you're listening 201 00:11:26,400 --> 00:11:28,960 Speaker 1: to Bloomberg Law. This is Bloomberg