Big banks caught playing their customers for suckers to boost profits -- again
No wonder no one trusts the world’s largest banks.
This week we’re being treated to two more examples of how they’ve been abusing their own customers.
The first is the $450 million fine that Barclays paid for rigging benchmark interest rates to boost its profits.
Barclays, a big British bank that’s aggressively expanding into the United States, has admitted to manipulating the London Interbank Offered Rate, or LIBOR.
It’s used to determine the adjustable interest rates consumer and corporate borrowers pay on $10 trillion in mortgages, student loans and credit cards.
The LIBOR is updated daily based on information from a dozen big banks, including Barclays. It has now acknowledged that managers and traders prevailed on colleagues to falsify that data.
News reports say the bank was reporting higher interest rates than its competitors back in 2008 -- a sign that Barclays might be in financial trouble. So employees were instructed to reduce the rates they contributed to LIBOR.
Now British and American regulators are examining other banks to see if they have sought competitive advantages by manipulating the rates they reported to LIBOR.
Then there’s a story in this morning’s New York Times in which former brokers at JPMorgan Chase say they were told to push the bank’s own mutual funds on clients, even when there were better, cheaper options.
“The benefit to JPMorgan is clear,” the Times says. “The more money investors plow into the bank’s funds, the more fees it collects for managing them.”
As a result, the Times reports, JPMorgan Chase has seen its stock funds grow during a time investors have been pulling money out of stock funds.
The conflict of interest couldn’t be more clear.
“I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm,” Geoffrey Tomes, who left JPMorgan last year and is now an adviser at Urso Investment Management, told the Times. “I couldn’t call myself objective.”
JPMorgan certainly isn’t alone in offering self-serving advice that benefits the bank more than its customers.
Remember earlier this year when a departing executive director decried the “toxic” culture at Goldman Sachs that referred to clients as “muppets”?
I just don’t understand why anyone would deal with banks that have no qualms about playing their customers for suckers.
All of this also shows why the millions of investors like you and me need these giant banks to be closely regulated and ardently prosecuted when they break the law.
Saving is hard enough, building financial security for our families is hard enough, without the banks tilting the playing field against us time and time again.