The authorities accused the bank of assuring clients that they would receive the best possible rate when executing a currency trade. In reality, the authorities said, the bank did just the opposite: It provided clients “prices that were at or near the worst interbank rates,” enabling the bank to make extra cash during the 2008 financial crisis.
.. The victims included New York City pension funds and prominent private investors, the authorities said. City investors included teachers and police officers, while the private investment funds belonged to the likes of Duke University and the Walt Disney Company.
.. Still, the $714 million settlement amounts to a fraction of the roughly $2 billion in suspected ill-gotten gains that Mr. Schneiderman’s office initially sought as a penalty.
.. Under the terms of the Bank of New York Mellon settlement, the bank must “end the employment of certain executives involved in the fraud,” including David Nichols, a managing director at the bank whom Mr. Bharara’s office sued in 2012.
.. The settlement requires the bank to “effectuate the separation” of Mr. Nichols, but it does not say when he must leave the bank nor does it require him to pay any financial penalty to the government.
Citigroup’s Roaring Revival on Wall Street
The bank’s resurgence on Wall Street is all the more remarkable because it is taking place as many of its rivals pull back in the face of new regulations intended to make the financial system safer. The Wall Street operations of JPMorgan Chase and Goldman Sachs, for instance, have remained steady or shrunk during the last four years.
Citigroup’s advance has involved acquiring vast amounts of derivatives, the financial instruments that gained notoriety during the 2008 financial crisis. It has at times snapped up derivatives from other banks that have been selling them to comply with new rules.
.. In 2009, Citibank, Citigroup’s main banking subsidiary, had $32 trillion in derivatives, according to regulatory filings. That figure more than doubled, to $70 trillion, in the third quarter of 2014.
.. Citigroup, for instance, bought credit derivatives last year with a notional value of $250 billion from Deutsche Bank, Germany’s largest bank and a big Wall Street player, in a deal reported by Risk magazine. European banks are shedding certain derivatives because they are ahead of their United States counterparts in applying provisions of a capital regulation known as the Basel III leverage ratio.
Fed Stress Tests Find Biggest Banks Meet Capital Thresholds
Under the tests, Goldman Sachs fell very close to a minimum requirement for one measure of capital.
.. Next Wednesday, the banks will find out if the Fed has approved their plans to distribute capital to shareholders through dividends and stock buybacks. Banks that fell close to minimum capital levels on Thursday may have to scale back their requests to pay out capital to avoid going below the minimum thresholds.
.. The stress tests also underscore an important shift in power within the Fed that took place after the financial crisis.
The reorganization reduced the sway of the Fed’s regional banks, including the Federal Reserve Bank of New York, which traditionally had outsize influence because it oversees the nation’s largest institutions, including JPMorgan and Citigroup. The post-crisis changes effectively put more regulatory power in the hands of the central body of the Fed, known as the Federal Reserve Board.
.. The board, not the New York Fed, decided that Citigroup had failed last year.
A Warning from Buffet about Banks
So how to explain Mr. Buffett’s stance on the industry?
An investment banker and blogger who has long offered incisive and witty insights about the industry under the name Epicurian Dealmaker offered this take over the weekend: “He despises investment bankers and employs his considerable folksy charm to scare potential business sellers away from using us for the plain and simple reason that we make his job harder and more expensive. For sellers of companies, investment banks level the playing field.”
.. Jeffrey Matthews, a longtime Buffett watcher and author of “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett,” has a very simple explanation of Mr. Buffett’s views on bankers. “The short answer is, he means it,” he told me. “I see no non sequitur regarding his investment banker critiques: He’s pals with Obama, but he critiques politicians as a class too. The few good ones (Dimon, Blankfein, Byron Trott) just make the rest look worse, I suppose.”