RBS Faces Criminal Libor Charges, As Prosecutors Feel Oats: Seven And A Half Things To Know

01/29/2013 08:01 am ET
  • Mark Gongloff Managing Editor, Business and Tech, The Huffington Post

Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, The Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go:

Thing One: Prosecutors Could Get Used To This 'Criminal Charges' Thing: So maybe too-big-to-fail banks aren't too big to jail after all.

At least, it is starting to look as if tiny, digestible chunks of big banks are potentially subject to criminal charges, if the bank's evil deeds are obvious and egregious enough. The Wall Street Journal reports today that U.S. government officials are within days of announcing a $790 million fine and possible criminal charges for Royal Bank of Scotland over manipulation of the key short-term interest rate known as Libor. A deal could come in the next couple of weeks, the WSJ writes, but RBS officials are balking at the idea of pleading guilty to criminal charges.

It is hard to blame RBS officials for balking -- only recently have U.S. prosecutors gotten brave enough to actually file criminal charges of any sort against banks. They started with the Swiss bank UBS, whose Japanese unit pleaded guilty last month to criminal charges to help settle that bank's massive Libor headache. Before that, ginormous banks such as Barclays (Libor) and HSBC (money-laundering) managed to dodge any criminal charges at all because officials were terrified of rattling the global financial system. When the world didn't end after UBS criminal charges, officials got a little bolder, the WSJ writes, meaning RBS might have to ritually sacrifice one of its own Asian subsidiaries.

So that's good news: Actual criminal charges are likely to have more of a deterrent effect than the usual wrist-stinging fines and avoidance of admitting wrongdoing. Also helpful would be actual charges against individuals, of which there have been noticeably few in the Libor scandal. The BBC reported recently that dumb trader emails about Libor in the RBS case are "particularly lurid," which is really saying something, considering the history of dumb trader emails in this wide-ranging scandal. That suggests there could be grounds for some people to be sent to jail.

And who knows? Maybe if prosecutors discover that they can send some people to jail over Libor without the world ending, then they might be emboldened to revisit the possibility of sending people to jail for the even more damaging mortgage-market shenanigans leading up to the financial crisis. Ah, but that's probably too much to ask.

Thing Two: Immigration As Stimulus: President Obama today will announce immigration-reform plans that will be more liberal than the roadmap introduced by a group of Senators yesterday, including a quicker path to citizenship for millions of people in the U.S. illegally, writes the Washington Post. Though this is sure to get many conservatives' blood a-boiling, it could also be a boon to the U.S. economy, writes Edward Krudy of Reuters: "Relaxed immigration rules could encourage entrepreneurship, increase demand for housing, raise tax revenues and help reduce the budget deficit, economists said." See, the world's biggest economies all have demographic headaches, including rapidly aging populations. An influx of new blood could help solve that problem in the U.S., giving it an economic advantage.

Thing Three: Fed Watch! The Federal Reserve starts a two-day policy meeting this morning, where it will discuss just how much money it wants to print to keep the U.S. economy moving along. Economists estimate the Fed will end up buying more than $1.1 trillion worth of bonds under its latest bond-buying program by 2014, Bloomberg writes. But economists aren't exactly sure how much this bond-buying will actually, you know, help the economy. And Fed officials are starting to get nervous about the possible side effects of all of this money flying around, Quartz's Simone Foxman wrote recently.

Thing Four: Here In My Car I Feel Safest Of All: U.S. auto makers start telling us about their 2012 profits today, starting with Ford, which reported a $1.6 billion profit. Taken together, the past two years have been among the most profitable for the U.S. auto industry "in decades," the Wall Street Journal writes. Pretty impressive, considering two of the Big Three went bust just a few years ago. And now they have something to shoot for: Toyota last year regained the title of the world's biggest auto maker, overcoming natural disaster and recalls to sell 9.75 million units, compared with 9.29 for GM, the WSJ writes.

Thing Five: Slow Down, You Move Too Fast: U.S. officials have been looking into whether media companies, including Bloomberg, Dow Jones and Thomson Reuters, have been letting critical economic data slip a few microseconds too early, giving high-speed trading robots an advantage, the Wall Street Journal reports. They decided against filing criminal charges, in part because it's too hard to figure out what stuff got released too early and whether it actually helped any traders.

Thing Six: Runaway Pay: Bailed-out U.S. companies such as GM and AIG have given their executives big raises for the past two years, while the Treasury Department twiddled its thumbs, according to a new report by the special inspector general for the Troubled Asset Relief Program, Christy Romero. She said Treasury essentially outsourced decisions about executive pay to the companies themselves, despite the fact that the U.S. government was still a stakeholder in those companies.

Thing Seven: Mortgage Skimming: Federal prosecutors yesterday charged a former trader at the brokerage firm Jefferies & Co. of skimming a little bit of money here and there from clients in trades of residential mortgage-backed securities, writes the New York Times. Among the victims were funds set up by TARP to help bolster the market for RMBS, according to the government. The probe was led by Romero's busy TARP watchdog office. The total amount allegedly taken was not much, a little more than $2 million, but the case is an example of Romero's aggressive approach to enforcement, writes the NYT's Peter Lattman. Feel free to compare and contrast that to the approach taken by other government agencies (cough, Justice Department, cough).

Thing Seven And One Half: The Yankees Still Suck: On this day in 1900 baseball's American League was founded in Philadelphia. The league originally consisted of eight teams, including the progenitors of today's New York Yankees (then called the Baltimore Orioles; today's Orioles were then called the Milwaukee Brewers) and Boston Red Sox (then called the Boston Americans). Only one of those teams, the Detroit Tigers, still has the same name and location as it did 112 years ago. Detroit also happens to be the most recent AL champion. The AL champion in the league's first year of play, 1901, was the Chicago White Stockings, now White Sox.

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Calendar Du Jour:

Economic Data:

9:00 a.m. ET: S&P/Case-Shiller Home Price Index for November

10:00 a.m. ET: Consumer Confidence for January

Corporate Earnings:

Amazon.com

Ford

Harley-Davidson

Pfizer

U.S. Steel

Heard On The Tweets:

-- Calendar and tweets rounded up by Alexis Kleinman.

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