|Dow||-9.82 to 16,937.26|
|S&P 500||-.26 to 1,962.61|
|Nasdaq||+.64 to 4,368.68|
|10-YR Yield||-.001 to 2.623%
|Gold||+$1.40 to $1,318
|Crude Oil||-$.66 to $106.17|
The late, great Illinois Senator Everett Dirksen is credited with saying: “A billion here, a billion there, pretty soon, you’re talking real money.”
He was talking about government spending and deficits. But he might as well have been referring to the mega-penalties the world’s mega-banks keep being forced to pay out!
Take French giant BNP Paribas SA (Weiss Ratings: BNPQY, unrated)! According to today’s Wall Street Journal, BNP will cough up $8 billion to $9 billion for facilitating transactions that violated U.S. sanctions. The bank will reportedly plead guilty to conspiring to violate the International Emergency Economic Powers Act, and more than 30 bankers will leave, as part of the deal with U.S. authorities.
These charges stem from tens of billions of dollars in money transfers by companies and government agencies in Sudan, Iran and other nations we’re not exactly friendly with. And according to the Journal, BNP was far from alone. RBS of Scotland paid a $100 million fine in 2013 … Standard Chartered of the U.K. paid $667 million in 2012 … and Dutch bank ABN Amro paid $500 million in 2010.
It’s not like these are the only charges leveled against mega banks in Europe or the U.S., either. Barclays (Weiss Ratings: BCS, C-) of the U.K. paid $454 million in 2012 as part of an investigation into the rigging of the benchmark LIBOR interest rate. LIBOR is used to determine everything from derivatives pricing to corporate loan rates and payments.
The European Union also fined six banks, including JPMorgan Chase (Weiss Ratings: JPM, A-), Citigroup (Weiss Ratings: C, A-), and Germany’s Deutsche Bank (Weiss Ratings: DB, C-), another $2.3 billion for their roles in manipulating benchmark rates.
Meanwhile, banking regulators are investigating a dozen U.S. and European banks for rigging still another market — this time, foreign exchange. The allegations center around the values the banks assigned to various currency pairs at crucial fixing times during the day.
|Fines against the world’s mega banks for rigging foreign exchange trades could total $35 billion.|
One research firm recently estimated fines related to that investigation could total a whopping $35 billion! Potentially vulnerable banks include Deutsche Bank, Citigroup, and UBS of Switzerland (Weiss Ratings: UBS, B).
“Is there any market these guys didn’t manipulate for their own gain?”
Still not enough for ya? Well, how about the up to $10 billion that Citigroup is reportedly facing for practices related to the bundling and sale of mortgage securities? Or the up to $12 billion that Bank of America (Weiss Ratings: BAC, A-) might have to pony up?
Where does it all end? Is there any market these guys didn’t manipulate for their own gain? Or any standards and practices they didn’t violate? Those are fair questions all around, given the ongoing flood of investigations, charges, fines, and penalties.
So what do you think? Are today’s mega-banks corrupt through and through? Or are these just isolated cases of wrongdoing by a few bad apples?
Furthermore, what impact do you think more government investigations and multi-billion dollar fines will have on bank stocks? Are they reasons to sell and not look back? Or are they just the cost of doing business for large financial institutions, and therefore, no reason to avoid the big bank stocks?
You can share your opinions in the comment section!
|OUR READERS SPEAK|
With the inflation trade reappearing in the markets after a long absence, many of you shared your opinions and asked questions about how investors can capitalize.
Reader Lea said: “As I am holding silver and gold bars, how long will it be for it to really take a hike up? I am 75 years old, I don’t want to miss out.”
I personally believe the initial move in a new, gold bull market is getting underway now. That’s a big shift from the past few years, when gold steadily fell from around $1,900 an ounce down to $1,200. So I’d hold on tight!
But Reader Tom was less enthusiastic about the potential for rising gold prices and rising interest rates. He said: “I don’t have the same exuberance for gold as Mr. Larson. I think interest rates will remain at historically low levels for a long, long time. Which means stocks are the place to be, at least for the foreseeable future. I’m allocating 5 percent to gold and precious metals, the rest in a diversified portfolio of equities.”
Those kinds of diverse opinions are what make markets, so thanks for sharing! If you would like to add your two cents, please do weigh in here.
|OTHER DEVELOPMENTS OF THE DAY|
Existing home sales rose 4.9 percent in the month of May to 4.89 million units at a seasonally adjusted annual rate. That topped expectations, and was the biggest one-month rise in almost three years. Prices rose by the smallest year-over-year margin since March 2012.
Worries are growing about bond mutual funds and ETFs that have hovered up hundreds of billions of dollars worth of debt securities, many of which are esoteric, illiquid and hard to value. A JPMorgan Chase report warns of the potential for a “free fall in prices” if average investors yank money from those funds when rates rise, forcing managers to dump illiquid securities into a panicked market.
Another Monday, another batch of merger announcements! At the top of the list: Wisconsin Energy (Weiss Ratings: WEC, A-) said it would buy Integrys Energy Group (Weiss Ratings: TEG, B) for $9.1 billion. The move will expand the gas and electric utility’s reach in the Midwest.
It was an absolutely THRILLING World Cup game yesterday between the U.S. and Portugal, one that had me yelling at the television with both joy and aggravation. Here’s hoping both of my teams — Germany and the U.S. — can punch their ticket to the next round on Thursday!
Reminder: You can let me know what you think by putting your comments here.
Until next time,