Accusations claiming that top Wall Street bank executives rigged U.S. Treasury auctions at the expense of public workers have just surfaced.
According to a lawsuit filed in Manhattan federal court on Wednesday, top Wall Street Banks used an online chat feature to discuss and trade top-secret client information with the goal of rigging Treasury auctions so they could boost their own profits.
The suit also claims this took place during the recessions the country faced between 2007 and 2015.
Bankers involved are associated with Goldman Sachs, the Royal Bank of Scotland, Morgan Stanley, UBS, BNP Paribas, and others.
This is the second time this lawsuit is being filed. The first time, lack of concrete evidence led to the suit losing momentum. Now, one of the banks previously sued decided to turn on its former conspirators, and attorneys representing the plaintiffs now have more evidence to work with.
The suit argues that bankers used a chat feature to share details on the prices their clients were willing to pay to get into the market. With this information at hand, banks were able to force prices up or down since they had a preview of what the market would look like. As a result, they were able to manipulate bond prices and set them higher on days when demand was high.
Another allegation brought up by plaintiffs involves the electronic platforms that are closely controlled by bankers, making competitive trading more difficult for retirees and public workers.
While it’s still unclear what the government would be able to do to avoid this type of manipulation again, the Justice Department and the Securities and Exchange Commission opened their own investigations into the allegations brought up by the lawsuit.
As Uproxx argues, President Donald Trump's administration has been dismantling previously-enacted finance regulations that were put in place after the housing bubble burst, prompting the recession. Without safeguards in place, bankers have more opportunities to come up with different schemes, hurting others in the process. Are we ready for another crash?
Banner / Thumbnail : Reuters/Shannon Stapleton