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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61Comments
Jun 29, 2012 12:30PM
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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 12:54PM
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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 3:19PM
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Between these scum bags at Barclays and the fine men and women of Congress who trade on inside info every day, "Joe Bag of Doughnuts" doesn't have a chance anymore. This is wrong on so many levels, it makes me sick.
Jun 29, 2012 3:25PM
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The latest, greatest incarnation of Robber Barons.  I thought I was going to fall out of my chair laughing when I read, "Banking Is Now Lawless".  As opposed to, oh let's say, back in 2006 and 2007 or 2008?  Oh wait...they were lawless then too! 
Jun 29, 2012 12:59PM
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workers screw up they get fired from their low paying job.........ceo's run companies in the ground and

get bonuses on top of their multi million dollar salary..........ahhhh capitalism

Jun 29, 2012 1:57PM
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Finally - someone in the know stating the simple facts. Now, when will someone in power actually do something about it?
Jun 29, 2012 1:22PM
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Another black mark for wall street! when will it end? Are all you people happy with the greedy punks who are stealing and manipulating the market for their personal gains? they seem to get large $$$ bonuses, even when the stocks fall???I agree totally with Cramer on the need for punishment of the wrong-doers.

Please don't anyone again suggest that social security fund be invested in this sick boys club, it is not safe from the greedy ones and the controls are still severly lacking. If it does get suggested, be very wary of 'why' it was suggested.

Jun 29, 2012 12:53PM
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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 2:44PM
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Great article Jim, but beware when you take on being the truthful whistle blower. These cohart bankers ( thieves ) don't take exposure to kindly and have tremendous power to retaliate. They probably own hackers who right at this minute are purging your account, among other masterly deeds. You might be done like the character in the movie, trading places starring Eddie Murphy. Seriously! It's very refreshing to read your articles as you are a rare breed of human being who goes deep for the truth to expose corruption of the highest order. Someone, somewhere, someday will bring these lousy bankers to their knees or they will face the raft of the real three spirits of Christmas in the form of a revolution.
Jun 29, 2012 2:48PM
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As long as "GREED" exists in the world, there will be people that will do their best to take our money with no concern for the rest of us.  Whether they be Wall Street, Politicians and whomever, if they think they can get away with it they will try their best to do so.
Jun 29, 2012 4:45PM
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Finally we're hearing what many have been saying since 2008.  Where are our representatives, especially Congress when they supposedly want to correct all of Obama's wrongs and apparently nobody elses?

Congress should be shouting this day in and day out instead of the garbage they are spending their time on.

Jun 29, 2012 1:45PM
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I have always questioned where Jim falls on issues and whether or not I agree with his philosophy.  At least for now, I agree with this article.  Now if we can just see who, besides the AG of NY, has the stones and the where with all to do something about it... 
Jun 29, 2012 3:57PM
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 What? There is market manipulation by the banks? Well I am shocked.

Jun 29, 2012 4:07PM
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Thanks Mr. Cramer.  Now please tell us about the tactics American banks used to empty 401 K's and other retirement accounts,  how they repessessed homes even if the homes were being paid for, and finally how they got us to bail them out of the worst financial crisis, which was created by the banks themselves?  I don't mean a multipage treatise on the topic, you know, just a few paragraphs...
Jun 29, 2012 2:35PM
Jun 29, 2012 2:30PM
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yes mike, this was indeed a scathing, accurate attack on our system that hurts shareholders and does not hold the perps responsible BUT shouldn't the board of directors be targeted and forced to take action on behalf of the shareholders with employee terminations and bonus clawbacks? 

 

as for cramer - it is difficult to align with him on this as he has publicy admitted to gray-area market manipulation while he was a hedgie.

 

anyway - some directors and employees should be losing their jobs over this, but probaly will not as they are typically in cahoots with the board.  it's a vicious cycle.

Jun 29, 2012 2:17PM
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BANKS = Carpetbagging Thieves / BEWARE !!!
Jun 29, 2012 11:51AM
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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. 
Jun 29, 2012 4:21PM
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Thi**** the nail on the head of whats wrong with todays people in positions of leadership.  We have no leadership with deserved respect.  Wild wild west cowboy style is the rule of the day.

Jun 29, 2012 3:31PM
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What was wrong with making the attempt at controlling banks? Dodd/Frank. At least an effort was applied. They can harp on government red tape muddying the system all they want but it seems to me leaving them at their own disposal, banks and investment firms, leads to gouging, misleading, and manipulation. Let them eat cake!  
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