Part One. Okay, we all know about the appalling behavior – fraud upon fraud – of the large financial institutions that either caused the global financial crisis or (most charitably) made it much worse. But let’s forget all that. Live and let live. Everybody makes mistakes. That was then and this is now.

Part Two. So what have the big institutions been up to since then, while and subsequent to receiving massive taxpayer bailouts, without which every one of them would now be out of business? The answer, amazingly, is fraud upon fraud.

Here are the results of six minutes worth of Googling terms like “bank fraud:

October 2011: Bank of New York Mellon is sued by the US and the NY Attorney General for allegedly cheating pension funds out of foreign exchange fees for at least a decade. New York alone was seeking $2 billion in damages. Meanwhile State Street has been sued by California and Arkansas and is being investigated by the SEC and several US Attorneys on similar charges, and Barclays and Deutsche Bank are also under intensive investigation.

May 2012: Wachovia paid $160 million after admitting to laundering money for Mexican drug cartels.

June 2012: Barclays Bank was fined $200 million by the CFTC, $160 million by the US and £59.5 million by the UK Financial Services Authority for attempted manipulation of Libor rates.

June 2012: GE Capital executives are convicted of rigging bids on billions of dollars of municipal bond projects across the US. GE Capital conspired with just about every large bank in America – JP Morgan, Bank of America, UBS, and Wells Fargo paid over $600 million to settle charges against them and to cooperate in the case against GE. No one knows how much in total was defrauded from the municipalities.

July 2012: HSBC acknowledged that it had laundered money for drug cartels.

July 2012: (Yes, same month.) HSBC admits laundering money for Saudi Arabian terrorists, North Korea and Cuba.

December 2012: UBS agrees to pay $1.2 billion to the US DOJ and CFTC, £160m to the UK Financial Services Authority and 60 million Swiss francs to the Swiss Financial Market Supervisory Authority for its role in the Libor scandal.

November 2013: JP Morgan pays the largest financial settlement in history as a result of mortgage fraud at the bank and at Bear Stearns and Washington Mutual.

December 2013: The European Commission fines six financial institutions for their participation in the Libor scandal (Royal Bank of Scotland, Deutsche Bank, Citi, and JP Morgan).

Miscellaneous dates: Numerous non-US banks pay huge fines for helping American citizens evade taxes.

June 2014: French bank BNP Paribas agrees to pay almost $9 billion and to plead guilty to criminal charges for processing billions of dollars in financial transactions for rogue nations.

July 2014: Bank of America is ordered to pay penalties of $1.27 billion for the fraud known as the “Hustle” mortgage program.

July 2014: Citigroup paid the Justice Department, five states and the FDIC $7 billion as a result of a variety of frauds.

July 2014: Lloyds Banking Group agreed to pay $226 million for manipulating interest rates – specifically, in order to reduce Lloyd’s cost of gaining access to a (UK) taxpayer bailout.

July 2014: Credit Suisse, Deutsche Bank and UBS are subpoenaed by the SEC, FINRA and the New York Attorney General in connection with a broad-ranging investigation into abuses of high-speed, dark pool, trading, specifically, discriminating against low-frequency traders and trading ahead of low-frequency traders, including clients of the banks.

August 2014: The all-time record for fines and penalties, set less than a year ago by JP Morgan, is about to be broken, as Bank of America agrees to pay almost $17 billion to settle massive allegations of fraud in connection with mortgages.

August 2014: After years of crowing about how it was “open architecture” and reminding clients that its investment specialists (those with discretion over client portfolios) are fiduciaries required to place the clients’ interests first, it now turns out that both the Office of the Comptroller of the Currency and the SEC are investigation whether JP Morgan didn’t, in fact, just stuff clients into JPM’s own proprietary products.

Fraud at the large financial institutions we’ve so kindly bailed out is so common, so frequent, so usual and recurring a phenomenon that we’re benumbed by it, we hardly even raise an eyebrow when it turns out that a large bank has ripped someone off again. On the other hand, even a child knows that anyone who trusts these large financial institutions is at least moderately deranged.

Part Three. Proportion of wealthy American families who entrust large financial institutions with the management of their capital: 79%.(1)

(1) Source: Cerulli Associates; Spectrem Group; Booz & Company.

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Please note that this post is intended to provide interested persons with an insight on the capital markets and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.

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