This just in: Texas pensions will, in fact, mess withfelons.

Last May the US$26.2 billion Employee Retirement System of Texasresponded to Credit Suisse Group AG's guilty plea for tax fraud bysaying that it had “a policy against hiring firms convicted offelonies.”

Last week, five more global banks joined the list of those admitting tocriminal behavior, narrowing the choices.

Texas, in a statement, confirmed that it will continue doingbusiness with four of the five, including Citigroup Inc., JPMorganChase & Co., Barclays Plc, and UBS Group AG. It has alsoresumed doing business with Credit Suisse.

Together, they account for five of the nine banks the state fundsays it uses for foreign exchange. As more and more banks enterguilty pleas, it makes it increasingly tough for clients to cutthem out on principle.

The Texas pension fund resumed business with Credit Suisse“after due diligence was performed and concluded to satisfaction,”Mary Jane Wardlow, a fund spokesman, said in an email.

The fund has procedures to “mitigate exposure to those types ofimproper dealings in the market” among the firms it uses fortrading currencies, Wardlow said. Those practices include keepingdealers from knowing whether they're buying or selling a securityuntil they execute the trade, she said.

Waivers Granted

Six of the world's largest banks agreed to pay $5.8 billion May20, and five pleaded guilty to charges tied to market-riggingprobes. They include Citigroup, JPMorgan, Barclays, Royal Bank ofScotland for colluding in currency markets, and UBS's main bankingunit in interest-rate manipulation.

The U.S. Securities and Exchange Commission granted waivers last week that allow the five banks to continuedoing business unimpeded, according to a person with directknowledge of the decision.

“We're taking the sting out of what it means for a firm to beconvicted of a crime,” said Bartlett Naylor, financial policyadvocate with Public Citizen, a Washington nonprofit. “The choiceof banks is limited on Wall Street because crime has become sopervasive.”

–With assistance from Dave Michaels in Washington.

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