In the US, in important consumer areas like banking and automobiles, we pass legislation that protects consumers and keeps them safe.  In theory.  We have often discussed the problem of banking regulation on this site.  The ongoing Volkswagen emissions scandal is part and parcel with our failure to jail culpable bankers.

In this case, we regulate fuel emissions to improve the environment.  Often car manufacturers conduct the emissions tests.  If they don’t, the test are conducted in controlled venues.  Cr manufacturers have figured out how to make cars look like they are complying with emissions standards  under these tests.  When the car goes out on the road, the car no longer meets the standards.

In Europe and in the US, diesel cars are desirable because they burn less fuel.  However, with emissions standards, it is apparently difficult to make a profit with a fuel efficient, environmentally-sound vehicle.

What happened with VW was Libor on wheels.  There is no doubt that other car manufacturers will be outed.  Ford already made a deal with the government.

If we take the time to make rules and laws, shouldn’t we try hard to enforce them?   Slowly people like Senators Warren and Sherrod Brown are calling the public’s attention to banking irregularities that tear down economies.  Cars will be next.

Yves Smith writes:  The Department of Justice may face an early test of its long-overdue policy change, that the government will seek to prosecute individuals, including executives, along with those of corporations. As Sally Yates, Deputy Attorney and author of the memo setting forth the new policy, put it, “We mean it when we say, ‘You have got to cough up the individuals.’”

Is it in the interest of senior bankers to violate the law?  William K. Black writes:  The parent organizations of five of the world’s biggest banks will plead guilty to rigging global currency markets rattled the financial markets. But it also raised concerns about whether fines and settlements are effective deterrents to fraudulent behavior.

The five banks will pay the U.S. Justice Department and the Federal Reserve fines totaling $5.6 billion as they agreed to plead guilty to colluding to manipulate currency and interest rate markets. Yet, they could continue to do business as usual, thanks to settlement terms and waivers against stiffer actions from the Justice Department and the Securities and Exchange Commission (SEC).

At  UBS, the latest case is the third act of rigging it has confessed to in the last five years. “The only thing that could save UBS is to have a crackdown by somebody external that gets rid of this assorted group of managers.”

Here is a snapshot of what the four banks detailed in their plea agreements, according to a U.S. Justice Department press release: “Members of ‘The Cartel’ manipulated the euro-dollar exchange rate by agreeing to withhold bids or offers for euros or dollars to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators. By agreeing not to buy or sell at certain times, the traders protected each other’s trading positions by withholding supply of or demand for currency and suppressing competition in the FX market.”

The foreign exchange and Libor bid-rigging cases individually are the largest cartels by three orders of magnitude in world financial history.

Here is how the fines add up to $5.6 billion: The banks will pay $2.5 billion in criminal penalties for manipulating currency rates, plus another $1.6 billion in fines payable to the Federal Reserve. The remainder will come from penalties of $1.3 billion that Barclays will pay U.S. and British regulators and $203 million that UBS will pay for manipulating interest rates.

The whiff of big money is a factor to think about for regulators.  said Nichols.  The amount of money that moves through the foreign exchange market in one day is almost twice the value of the economic output of the U.K. in one year.

U.S. regulators protect bankers from winding up in jail.  Banks negotiate in advance that a guilty plea will not be what a guilty plea would normally be.

Was stronger action was warranted in the case of UBS?  Should banks secure waivers against stern action. “The rule with large banks is that the SEC always waives – it doesn’t matter how bad [the violations are],” he said. “This is a serial recidivism.” He noted that one SEC commissioner is working to prevent routine waivers that the SEC grants.

Possible remedies:  Put a fraudulently controlled bank in receivership.  Receivership should probably be an option only for banks that seem irredeemable, and it might make more sense for most banks to just create a better internal culture.

Unlike with bribers, bankers do not face the risk of imprisonment. The material rewards for violating the rules and the trust of clients are huge, while the risk is almost nonexistent.

• Pam Martens and Russ Martens write:  The Insurance Industry Pays Incentives Like a Mercedes-Benz Lease to Push Annuity Sales

Increasingly it feels to Americans that the bulk of the news about scams to separate them from their life savings is coming from one Senator from Massachusetts — Elizabeth Warren.

Ripoffs in financial services, insurance, and real estate – known as F.I.R.E. on Wall Street – are being exposed by Warren, typically in bold pronouncements in Senate Banking hearings where Warren has a chair and a respected voice, and are rapidly amplified in the media.

In 2013, it was only because of Senator Warren that we learned that the so-called Independent Foreclosure Reviews to settle the claims of 4 million homeowners who had been illegally foreclosed on by the bailed out Wall Street banks were a sham. The “independent” consultants were hired by the banks, paid by the banks, and the banks themselves were allowed to determine the number of victims.

It was Senator Warren who put the high frequency trading scam described in the Michael Lewis book, “Flash Boys,” into layman’s language.

“High frequency trading reminds me a little of the scam in Office Space. You know, you take just a little bit of money from every trade in the hope that no one will complain. But taking a little bit of money from zillions of trades adds up to billions of dollars in profits for these high frequency traders and billions of dollars in losses for our retirement funds and our mutual funds and everybody else in the market place. It also means a tilt in the playing field for those who don’t have the information or have the access to the speed or big enough to play in this game.”

In 2013, Warren, together with Senators John McCain, Maria Cantwell and Angus King, introduced the “21st Century Glass-Steagall Act.” Warren explained why the legislation is critically needed:

“By separating traditional depository banks from riskier financial institutions,” said Warren, “the 1933 version of Glass-Steagall laid the groundwork for half a century of financial stability. During that time, we built a robust and thriving middle class. But throughout the 1980’s and 1990’s, Congress and regulators chipped away at Glass-Steagall’s protections, encouraging growth of the megabanks and a sharp increase in systemic risk. They finally finished the task in 1999 with the passage of the Gramm-Leach-Bliley Act, which eliminated Glass-Steagall’s protections altogether.”

Nine years later, the financial system crashed, leaving the economy in the worst condition since the Great Depression.  Warren and Wall Street