We’re entering that exciting phase of any financial crisis when the lawsuits come fast and furious, criminal charges are lodged, and Wall Street firms agree to pay hundreds of millions of dollars for having snookered their customers once again.
In recent weeks, Merrill Lynch, Goldman Sachs, Deutsche Bank, Citigroup, JPMorgan Chase, Morgan Stanley, UBS and Wachovia have reached settlements with state regulators under which they agreed to pay more than $500 million in fines and penalties. They have also agreed to buy back more than $50 billion in auction rate securities from retail investors who had been misled into believing that those securities were as safe as shares in money market funds.
In addition, a federal grand jury in Brooklyn on Sept. 3 indicted two former brokers at Credit Suisse on charges of lying to corporate clients about how $1 billion of their money had been invested. The investors thought it was in securities backed by federally guaranteed student loans. In fact, it was put in riskier mortgage-backed auction rate securities that earned higher fees for the brokers and their firms, prosecutors said.
The alleged fraud may have caused losses to the clients of as much as $500 million.
Now comes word from Bloomberg News Service that the Justice Department has launched a criminal investigation of JPMorgan Chase and other banks following civil allegations that they conspired to overcharge local governments for hedging on the interest rate risks in their bonds.