Barclays cheats, and shareholders pay

Unless the wrongdoers are forced to pay personally, nothing will change.

By Jim Cramer Jun 29, 2012 10:47AM

Lawlessness. Utter lawlessness. That's what I came away thinking about after Barclays (BCS) admitted that its traders tried to manipulate interest rates to make themselves look better and seem more solvent.


This rate they manipulated, the London Interbank Offered Rate, or LIBOR, is immensely important, controlling trillions of dollars in contracts, everything from what corporations borrow at to what you and I might have gotten our mortgage priced off of. It was sacrosanct, or so I thought, and along come these trading pirates taking it where they can, perhaps in a total conspiracy with other bank traders, to get bigger bonuses and inflate their banks' share prices.

To which I say of course they did. Why not? If they got caught, who paid? The shareholders, that's who. "Barclays agreed to pay $453 million in fines," the lead story of The Wall Street Journal opens with. But it wasn't Barclays, it was the hapless owners of Barclays. "The unusually steep punishment," to quote further, reflected the serious and widespread nature of the manipulation.


Huh? What's steep about this punishment? Isn't punishment meant to punish wrongdoers? What did the shareholders do? There were people involved in the price-fixing. The fact that they aren't paying the fine says to me that this is anything but steep. It just encourages more lawlessness. We have put Mafia chieftains in prison for years for fixing the prices of the trucking of goods. We have indicted, prosecuted, convicted and sentenced organized-crime lords for cheating casinos and running numbers and sports books. We've put people behind bars for ages for fixing the price of electrical equipment and cardboard boxes!


But these guys, involved in far more nefarious rigging, easily documented from emails, get to laugh all the way to the bank, because I am not even hearing about clawbacks of bonuses that might have been enlarged by the manipulation of the most important financial contract in the world.


How about the boys at the top? Sure enough Barclays chief executive Robert Diamond and three other top executives agreed to forgo 2012 bonuses of $23.5 million. I feel their pain. But that's go-forward money. How much did they make during and after the scams? It's bad enough the stock prices have been horrendous, but they got rich at the same time, perhaps off of these actions.


Nobody ever seems to have to give up anything, and nobody ever seems to lose a job, and nobody ever seems to even get prosecuted, provided they are bankers. It's like the job gives them immunity for all but insider trading, and they would probably have immunity from that, too, if we didn't have a tough and fair U.S. attorney for the Southern District of New York.


This immunity is just one more injustice, not unlike the immunity that all of the bankers at Lehman or Bear Stearns or AIG or Countrywide received. It's not unlike the immunity the bankers received from the robo-signings. These bankers were the proximate cause of so many of our ills, yet somehow they evaded the law.


That's because banking is a lawless profession. To me these people are embezzlers, fraudsters and perhaps even gangsters in pinstripes. Their immunity makes a mockery of justice, and it explains why so many simply calculate that it's worth it, because even if they get caught, all that happens is shareholders pay. What a sweet deal they have on the rest of us.



Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and which has no positions in stocks mentions.



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Jun 29, 2012 12:54PM
We really need to make some big changes: why penalize a corporation for willful criminal behavior? Corporations are incapable of forming criminal intent, only people do that, and that's who should hang for this. Ordinary folks are living and dying on the rollercoaster ride of the cost of money, losing their homes, jobs, health care, and these big-bonus parasites are given a free pass by the system. This country has a fat lot of nerve pointing the finger at Mexico and Iraq and Pakistan and India and sobbing "corruption." We just do it bigger and quieter here, and we build it right in to the government.
Jun 29, 2012 12:53PM
Great essay.  But it begs the question: What do we do about it???  So far, no regulation with any teeth at all has gotten through the Repub stonewall in Congress.  If they don't change the laws, and augment the powers of the regulatory agencies (not to mention removing the members who have already been bought and paid for by the financial industry) this situation will never change.  In fact, it will just get worse.  Let's hear some ideas for fixing the problem, Jim!
Jun 29, 2012 12:52PM
madoff's brother convicted......cramer should be next
Jun 29, 2012 12:51PM

If I did it, I would be going to jail, no doubt of it.


Who are these men of lust greed and glory?
Rip off the mask and let’s see.
But that’s not right.
Oh no, what’s the story?
Well, there’s you and there’s me.


Crime Of The Century,  Supertramp  


Bow down all you terrorists; you’ve got nothing compared to this bunch.


Jun 29, 2012 12:30PM
This is yet another reason we have the 99% protesting. I totaly agree that the individuals must be brought to trial. The have the Email detailing out who was involved in this case. It is rediculous to not bust those people. While it is true the stock holders are the defacto owners of a publically traded company we also are fully aware that the company officials do everything they can to insure those same stock holders are not involved in the day to day running of the company and are not informed of any activity of a questionable or illegal nature unless it becomes public knowledge or they get busted by the government. The top executives and directors are totally accountable for the operation of a company and also legally liable for any misconduct. Letting these mobsters in suits walk free is a complete mockery of the U.S justice system and enflames the already deep resentment from the general public.
Jun 29, 2012 11:51AM
I agree the individuals should be prosecuted to the fullest extent of the law.  However, the article seems to imply that shareholders are being unfairly targeted.  The shareholders are the de facto owners of the company.  So, not only should they pay, they should pay more.  How about a fine that equals the company's gross profit for the year in which the crime occurred?  How about a clawback of all salary paid to those in charge as well as the Board of Directors for that year?  That would get people's attention. 
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