U.S. Is Building Criminal Cases in Rate-Fixing | N.Y. Times

Source: New York Times

As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.

The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission. Collectively, the civil and criminal actions could cost the banking industry tens of billions of dollars.

Authorities around the globe are examining whether financial firms manipulated interest rates before and after the financial crisis to improve their profits and deflect scrutiny about their health. Investigators in Washington and London sent a warning shot to the industry last month, striking a $450 million settlement with Barclays in a rate-rigging case. The deal does not shield Barclays employees from criminal prosecution.

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“Audit the Fed” bill advances…

Washington Times

By Stephen Dinan

The House oversight committee voted Wednesday to demand a broad audit of the Federal Reserve System by congressional investigators — a major move that lawmakers said is designed to bring accountability to the murky workings of the independent central bank.

The bill was sponsored by Rep. Ron Paul, the Texas Republican who turned the push for an audit into a powerful presidential campaign slogan and whose criticism of the Fed’s monetary policy drew hundreds of thousands of voters into the political process.

It passed by voice vote, signaling the growing sense among lawmakers that the time has come for a full review.

“Clearly the Fed must be made too big to fail, and too big to fail requires a considerable amount of oversight,” said Rep. Darrell E. Issa, California Republican, who is chairman of the committee.

Federal law right now specifically prohibits such a broad audit, and opponents fear undermining the independence of the Fed.

The bill would direct the Government Accountability Office to complete a broad audit that presumably would include a peek at the Fed’s decision-making and many of its lending policies.

The committee defeated an amendment sponsored by Rep. Elijah E. Cummings, Maryland Democrat, that would have prevented auditors from getting a look at the minutes of internal board discussions.

“This whole idea about ‘Well, we can’t touch the Fed‘ is baloney,” said Rep. Dennis J. Kucinich, Ohio Democrat. “We have to be able to have control over the Fed because it’s controlling every aspect of our economy.”

The Federal Reserve consists of a board of governors and 12 regional banks, which act as lenders of last resort to the country’s banking system.

Last year, a more limited audit by GAO found that the Fed repeatedly invoked emergency authority to expand its lending during the Wall Street crisis in 2008 and 2009, including major loans to prop up the housing market.

The audit also found that the Federal Reserve Bank of New York, which had a major role in the lending, did not have sufficient controls to prevent conflicts of interest for its employees.