Justice Department set to act against banks

About a dozen large banks are under investigation by the U.S. Justice Department over allegations they colluded to manipulate the price of foreign currencies, The New York Times has reported.

Charges could be filed against at least one bank by year's end, with others expected to plead guilty when charges are leveled against them. The article cited interviews with more than a dozen lawyers who had been briefed on the investigation. All of them spoke to the paper on the condition of remaining anonymous, the Times said.

The newspaper named Deutsche Bank ( DB), Citigroup ( C), JPMorgan Chase ( JPM), Barclays (BCS) and UBS (UBS) as being among the banks under investigation.

In addition, prosecutors are investigating possible manipulation of Libor, the London interbank offered rate, the Times said. That interest rate, along with various currency exchange rates, can affect credit transactions of all kinds that total in the trillions of dollars globally.

The scope of this and other investigations into big banks and Wall Street firms has created discomfort in the financial exchanges.

"The flurry of activity strikes at the heart of Wall Street's role in setting benchmarks across the globe," the Times said. "The investigations suggest that banks, seeking to benefit their own trades, have compromised the sanctity of rates like Libor and the '4 p.m. London fix' for currencies, which investors use to value their positions."

Outgoing U.S. Attorney General Eric Holder and his Justice Department have taken a lot of heat so far for not prosecuting top bank executives in the wake of the financial meltdown. It remains to be seen if this becomes a case that silences his critics, or just gives them more fuel.

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    Mitch Lipka is an award-winning consumer columnist. He was in charge of consumer news for AOL's personal finance site and was a senior editor at Consumer Reports. He was also a reporter for The Philadelphia Inquirer and the South Florida Sun-Sentinel, among other publications.