What’s wrong with this story, aside from the fact that it’s another infuriating example of a big bank getting slapped on the wrist for cheating consumers on a grand scale?
A federal judge grudgingly approved Morgan Stanley’s $4.8 million settlement of electricity price-fixing charges over activity estimated to have cost New York consumers about $300 million, turning aside claims by a major nonprofit that the accord let the bank off too easily.
The case, which also involved the electricity generator KeySpan Corp, was the first in which the U.S. Department of Justice said it tried to recover improper profit from a financial services company that used derivatives to foster anticompetitive behavior.
Morgan Stanley entered a swap agreement with KeySpan in 2006 that gave it a stake in revenue by Astoria Generating Co, which also operated in New York City. It also entered a related hedge with Astoria.
The government said the arrangement allowed KeySpan to withhold substantial electricity generating capacity from the market, driving prices higher for consumers, and generated $21.6 million of net revenue for Morgan Stanley.
U.S. District Judge William Pauley in Manhattan said he shared the concerns of state officials and the AARP, a nonprofit serving people 50 and older, that any settlement should have reflected the harm to consumers and forced Morgan Stanley to give up the $21.6 million.
“Given the government’s stark allegations of manipulative conduct against Morgan Stanley, disgorgement of $4.8 million is a relatively mild sanction,” Pauley wrote. “There is a risk that a large financial services firm like Morgan Stanley could view such a modest penalty as merely a cost of doing business.
“But despite this court’s misgivings, the government’s decision to settle for less than full damages is entitled to judicial deference, particularly in view of the novelty of the government’s theory…”
“…It’s extremely disappointing,” Michael Gianaris, a New York State senator who opposed the accord, said in a telephone interview. “If banks can commit misdeeds and still generate tens of millions of dollars in profit as a result, not only are we not achieving justice, but we are not deterring future acts by other banks…”
Justice Department spokeswoman Gina Talamona said the accord “should send a message to the financial services community that the antitrust division will vigorously pursue anyone who engages in anticompetitive conduct in the derivatives industry, and that they will be held accountable…”
Vigorously! It takes a lot of of chutzpah to use that word, given the fact that the presiding judge wanted Morgan-Stanley to give up $21.6 million but deferred to the feds, who decided that one-fifth of that amount was sufficient.
I don’t know what the judge meant by “novelty of the government’s theory,” but who would have thought a few years ago that Barack Obama’s Justice Department would turn out to arguably be even less credible than Dubya’s was?
That’s not a “slap on the wrist”.
It’s a gentle touch on the pinky.
Hey, Corporations Rule@
And Corporatists enable them.
Both Obama and Romney are Corporatists, Romney just more openly so.
We are so screwed. Which of the two viable choices will be worse? Romney could act like a Scott Walker on a national scale and will run roughshod over the 99 Percent if he has a full Repub Congress.
Obama will just keep chipping away at the social safety nets, civil liberties, the principles of the Democratic Wing of the Democratic Party, the Democratic Party itself. Obama and his Wall Street backers made a successful hostile takeover and leveraged buyout of the Democratic Party. He’s the political equivalent of Romney’s Bain Capital: He comes in, destroys the party from the inside, lets it fall apart, and runs off with the profits.
The Dem Party will never be the same after Obama.
Worst President Evah? Or just Worst (so called) Democratic President Evah?
Nice, Snarki.
Obama and his DOJ are really, really cheap dates for Wall Street.
Finally removed ALL funds from my long-time bank (I’ve been using credit union for savings for a long time) – they didn’t even ask me why or even pretend that losing a long time individual customer mattered in any way. So I left the following letter, telling the rep “Here is the reason why, if anyone here cares.” At least the letter made ME feel better for a little while!
“The reason I am closing my bank accounts, which I have maintained for years, is the reprehensible practice in which your computer system re-sequences the actual order of debit transactions by re-posting them in highest-to-lowest dollar amount instead of the actual order in which they were initiated. When I check my account one day and see certain transactions in a certain order, I reconcile my account using that information in conjunction with my own records. The very next morning those same transactions appear in a different sequence, causing me to be rendered helpless, unable to reconcile, and therefore maintain an adequate balance in order to avoid excessive overdraft fees. I note that BANK NAME would sometimes hold a transaction for two or three days and then, all of a sudden, lump it together with another transaction in order to intentionally cause my account to be overdrawn.
I also note that, although BANK NAME has previously paid off Plaintiffs to settle litigation stemming from “transaction shuffling,” it continues to gouge its customers, since the profits garnered from victims of this practice apparently outweigh the paltry price of any “punishment” that may be brought to bear by its customers. Finally, I am also very sorry to see that many of your branch representatives do not even pretend to value individual customers, as evidenced by the incompetent, rude and brusque manner with which I have been treated when inquiring about my accounts on more than one occasion.
Disgustedly,
This penalty amounts to less than 2% of what they bilked their customers out of. It’s simply a cost of doing business.
$21.6 million—-$4.8 million—–what’s the difference? This scheme cost consumers $300 million. NOBODY said that MS should give back the $300 million that they defrauded from consumers. But the most enlightening part of this story was how they pulled their fraud off. Good old Capitalist supply and demand. You know that old saw “free markets” that the Republicans keep telling us are so Grand (OP). These thieves ‘withheld’ electricity generation capacity from the market. Demand was high (normal) and supply was made to be artificially low. Enron did the same thing in California which cost Democratic Gov. Grey Davis his political career. The same crap happened in India last week. The Capitalist refuses to build new power generating plants in India until the government gives into its 1% demands. Ain’t Capitalism wonderful. Nope.