Wall Street Banks Still As Greedy As Ever

by: Elaine in Roanoke

Wed Aug 17, 2011 at 10:43:12 AM EDT

The Roanoke Times in its editorial today praises Cuccinelli for finally filing a lawsuit that means something to Virginia taxpayers. The Bank of New York Mellon holds billions of VRS assets and, as custodian, executes all foreign currency trading necessary for VRS to buy and sell on foreign stock exchanges. Well, it seems that Mellon has been squeezing extra money out of the pension funds it holds for Virginia, Florida, Arlington, Fairfax, and God knows who else, with a scheme to get more profit by cheating on currency trades.

The Wall Street Journal explains how the scheme worked. VRS needed $12.5 million to make a trade on the Canadian exchange. Mellon sold $12.5 million in pension fund holdings and bought Canadian dollars at a conversion rate of 1.0795, getting $13.5 million. However, Mellon waited until the exchange rate dropped to 1.068 before moving money back into the VRS account and pocketed a profit of $141,250 instead of the fee it should have gotten, $6,250.

The cheating was uncovered by a whistleblower, and with our corporate-friendly courts, who knows what the outcome of the Virginia and Florida lawsuits will be. Watch very carefully, however, and see what Eric Cantor does. If he slips an amendment into a piece of legislation that lets custodial banks off the hook for their shady dealings, we will know that Mellon bought itself a friend. At the very least, I agree with the Roanoke Times. Cantor should immediately return all Mellon money received since his wife was appointed to the VRS board. The contributions smack of an sleazy "asset" purchase.