The Law LIBOR Scandal Again Points to Systemic Corruption in International Banking System

[DivideandMultiply]

Over the last week for those paying attention we may have been witness to the uncovering of the largest financial scandal since the events that precipitated the 2008 financial crash.

The LIBOR or BBA Libor is an average interest rate estimate based on information provided by 16 leading banks operating in London, that along with the Eurilibor provides a benchmark for interest rates throughout the world (thx wiki).

The scandal at present revolves around how Barclay's and the Royal Bank of Scotland have lied about their inter-bank lending rates, thus manipulating LIBOR to gain a financial advantage estimated to be in the tens to possibly hundreds of billions of dollars (roughly 75 billion at most conservative estimate). This is appears to be only the surface of the issue, with the possibility existing that all 16 banks, along with other financial institutions and traders have colluded in the past to systematically manipulate and rort international financial markets.



In this clip Matt Taibi and former US Attourney General Eliot Speitzer argue that this truly gargantuan corruption scandal, not only foreshadows more ominous revelations to come (if possible), but reveals the true nature of a corrupt international banking system that operates more like a series of criminal cartels than legitimate businesses.

What do posters think about the current scandal, what can we possibly do to end this level of corruption? I know there is a senate enquiry coming up into banking behaviour post GFC in Australia. It address a number of allegations, amongst which that CBA allegedly defrauded HBOS of 900 million dollars worth of clawbacks (not the worst of the allegations that may be levelled).

Is the answer smarter regulation, or perhaps more stringently enforced regulation? Perhaps the banning of financial contributions from private institutions to political parties? Still what we do in Australia may have minimal impact overseas and honestly I am at a loss as to what can be done.

 

[R00StaR]

Dept free money, completely transparent reserve bank type institution and money spent into society infrastructure/ services ect (as per my reserve bank thread). These guys are way to dodgy and the control of money has way to much power for these thieves.

On the political party contributions, i like the idea (from occupy wallstreet i think it was) of $1 per 1 vote. We have the net, theres no need for further contributions. Enough of the corruption!

 

[rayven]

It's quite gut wrenching to learn the level of dirt thrown on anyone who dares stand up to the banking sector.

It's only minor the way Wikileaks was denied paypal,mastercard and visa donations long before any sexual misconduct cum about.

 

[medusala]

What do posters think about the current scandal, what can we possibly do to end this level of corruption?

It is very, very interesting. There are two separate scandals one smaller ie banks attempting to rig the market for profit and the far bigger one ie banks showing lending rates far less than where they should have been in order to appear solvent. The former is hard due to various banks having differnt positions ie some short and some long rates and the bottom and top 4 rates being knocked out of the calculation.

Virtually everyone in the City knew about this ie LIBOR being irrelevant. The banks started to ask for collateral and started pricing swaps differently. The gap between LIBOR and OIS make the issue obvious. It was commented on frequently in a couple of broadsheets. The BOE knew, the FSA knew etc etc. See below re graph

http://www.voxeu.org/article/libor-ois-spread-due-predatory-behaviour

It is a joke that those two are now claiming no part of it. Ditto politicians and Treasury.

Is the answer smarter regulation, or perhaps more stringently enforced regulation?

It is frequently said the problems in the UK arose due to lack of regulation. That is nonsense. There is heaps of regulation. The labour govt introduced reform circa 2000 and gave plenty of power to the FSA.

As above both the BOE and FSA were not only aware but most likely encourage banks to falsely lower their LIBOR rates.

As for rigging rates, who has done it most successfully? BOE, Fed and ECB of course.

The scandal at present revolves around how Barclay's and the Royal Bank of Scotland have lied about their inter-bank lending rates, thus manipulating LIBOR to gain a financial advantage estimated to be in the tens to possibly hundreds of billions of dollars (roughly 75 billion at most conservative estimate).

D&M, where do those figures come from? I havent seen them.

 

[DivideandMultiply]

It is very, very interesting. There are two separate scandals one smaller ie banks attempting to rig the market for profit and the far bigger one ie banks showing lending rates far less than where they should have been in order to appear solvent. The former is hard due to various banks having differnt positions ie some short and some long rates and the bottom and top 4 rates being knocked out of the calculation.

As above both the BOE and FSA were not only aware but most likely encourage banks to falsely lower their LIBOR rates.

As for rigging rates, who has done it most successfully? BOE, Fed and ECB of course.



D&M, where do those figures come from? I havent seen them.

Interesting re the BOE etc. and it makes sense. It also does not surprise me that this become a widely known fact in the industry. Interesting how polar certain opinions on the issue are and the apologetics by a few has been almost instantaneous.

The exact figure comes from a dodgy source. I have only read articles/seen reports emphasising in loose terms the massive potential gain this manipulation could entail, the exact figure was based on a quote from someone and after checking the source it appears to be WSWS, so disregard :S.

An interesting suggestion I read that simply addresses the reliability of interest rate benchmarks is this:

http://www.forbes.com/sites/halahto...ated-rates-could-be-hurting-or-helping-you/3/

Yes, you make the system transaction-based and transparent. The best thing you can have is a centralized market. Something that can’t be manipulated has to be transaction-based rather than based on estimates, and the prices should be available to everyone to see.
Think about the stock market, everyone pays the same price regardless of whether you are a small investor, a behemoth sovereign wealth fund or a mutual fund. Everyone sees the histories of the stock prices. In these markets though ,where banks borrow from each other, you don’t have that.

http://www.forbes.com/sites/halahto...ated-rates-could-be-hurting-or-helping-you/3/

 

[OldBlueFan]

Is the answer smarter regulation, or perhaps more stringently enforced regulation? Perhaps the banning of financial contributions from private institutions to political parties? Still what we do in Australia may have minimal impact overseas and honestly I am at a loss as to what can be done.

How can the answer be more/different regulation when these arseholes can hold governments to ransom?

Just look at the joke that is the EU at the moment; social policy decisions being made by technocrats and bankers! And how did this sordid mess come to pass? Because the governments were stupid enough to empty their treasuries in order to bail these thieves out in the first place.

The only solution is complete collapse of the system.

It looks as though the collapse of corporatism will coincide with the collapse of the ecosystem. If the masses have any brains at all (which is highly questionable), they'll recognise who were the architects of their doom and deal with these peddlers of greed and corruption accordingly.

The only hope is that out of the ashes will rise a system that can perpetuate itself and the end of one that can only consume itself.

 

[R00StaR]

Yep the whole system is corrupt

 

[medusala]

The exact figure comes from a dodgy source.

Was just wondering because as you can imagine has been getting a huge amount of press over here. Prior to GFC manipulation was unlikely to have caused much in the way of losses ie banks have offsetting positions and thus market hard to rig.

Post GFC rates were lower than they should have been thus many people would have been paying far lower interest payments than they should have (yet Tory pollie stupidly claiming peoples homes would have been repossessed as a result - and this despite mortgages typically being set off BOE base rate)

As above LIBOR should be in line with OIS. When it is that is an indication posted rates are based on reality. They could scrap LIBOR and go to OIS or similar but in the past there was no reason.

I couldnt open your link as it says it wont allow UK based addresses to open. However I have read Griftopia by Taibbi and he makes some very good points. As does the book Confidence Men re Geithner.

It is no surprise that Treasury in the UK were against a wide ranging enquiry. Just as it is hardly surprisingly that the authorities tried very hard to suppress Bloombergs FOI requests re TARP, AIG etc. Some very, very dodgy stuff has gone on in the last few years.

 

[Fatty rules]

Doctors, nurses, teachers, childcare workers, and just about anyone else you care to mention - if they showed such little regard for professional standards, duty of care and fair conduct as is common in the the finance sector internationally, they would lose their jobs, without huge payouts, and many would face the real possibility of criminal prosecution. But they don't have 100million quid to spend each year on 'political lobbying' as the UK finance sector spent last year. The LIBOR scandal and many similar practices in international finance are nothing new and not much is being done to end these kinds of practices.

 

[The Passenger]

free markets my arse....

i really hope these people get their just dues.

the amount of bullshit that is coming out of the finance sector is just astounding. the whole building the "dream" - kids, family, steady income and all that. is really just a complete sham, imo designed to keep money streaming out of ordinary people and into the pockets of fat cats.

not that those things aren't worth of aiming for, but the way they are marketed, and people fall for that s**t. they know we'll fall for it... it's ******* horrendous.

 

[medusala]

Doctors, nurses, teachers, childcare workers, and just about anyone else you care to mention - if they showed such little regard for professional standards, duty of care and fair conduct as is common in the the finance sector internationally, they would lose their jobs, without huge payouts, and many would face the real possibility of criminal prosecution.

That is incorrect. Very few teachers or doctors get debarred. Extraordinarily hard to sack public servants no matter how useless they are. On the other hand people regularly get fined and banned from the City. And when they do they dont get paid out. They can also face prosecution (see UBS trader re ETFs, see insider trading cases etc).

http://www.bbc.co.uk/news/10464617

Only 18 UK teachers have been struck off for incompetence in the past 40 years, the BBC's Panorama has learned.

the amount of bullshit that is coming out of the finance sector is just astounding. the whole building the "dream" - kids, family, steady income and all that. is really just a complete sham, imo designed to keep money streaming out of ordinary people and into the pockets of fat cats.

And one of the worst scams of all is superannuation. Yet amazingly so many think not only is it good but the rate should be increased

 

[medusala]

the amount of bullshit that is coming out of the finance sector is just astounding. the whole building the "dream" - kids, family, steady income and all that. is really just a complete sham, imo designed to keep money streaming out of ordinary people and into the pockets of fat cats.

Amazing how many people think that super is such a wonderful thing. Brilliant scam by the finance industry.

Doctors, nurses, teachers, childcare workers, and just about anyone else you care to mention - if they showed such little regard for professional standards, duty of care and fair conduct as is common in the the finance sector internationally, they would lose their jobs, without huge payouts, and many would face the real possibility of criminal prosecution.

That is incorrect. Its almost impossible to get rid of teachers, doctors etc for incompetence. Bankers on the other hand do get fined and banned on a regular basis. They also dont get paid out when they face such charges and they can and do face criminal charges (see recent UBS trader in London, insider trading etc)

http://www.bbc.co.uk/news/10464617

Only 18 UK teachers have been struck off for incompetence in the past 40 years, the BBC's Panorama has learned

http://www.bloomberg.com/news/2012-...ans-as-fsa-wields-weapon-of-last-resort-.html

The number of Financial Services Authority bans peaked in the year ended in April 2011, with 71 people excluded from the banking and mortgage industries

 

[Monniehawk]

Amazing how many people think that super is such a wonderful thing. Brilliant scam by the finance industry.

Yep. Complete dud.
I just got back from 6 weeks in Europe and booked another for next year - all on my super. Just like I have done each year since retiring.
Stupid idea, super!
(Where do you get this stuff, Meds?)

That is incorrect. Its almost impossible to get rid of teachers, doctors etc for incompetence. Bankers on the other hand do get fined and banned on a regular basis. They also dont get paid out when they face such charges and they can and do face criminal charges (see recent UBS trader in London, insider trading etc)

http://www.bbc.co.uk/news/10464617

Only 18 UK teachers have been struck off for incompetence in the past 40 years, the BBC's Panorama has learned

http://www.bloomberg.com/news/2012-...ans-as-fsa-wields-weapon-of-last-resort-.html

The number of Financial Services Authority bans peaked in the year ended in April 2011, with 71 people excluded from the banking and mortgage industries

Just counting all the teachers, nurses and doctors who brought the world economy to its knees; crippling millions of jobs, destroying businesses.....

I can can count 'em easily, 'cos I is a stats guru....

 

[medusala]

Yep. Complete dud.
I just got back from 6 weeks in Europe and booked another for next year - all on my super. Just like I have done each year since retiring.
Stupid idea, super!
(Where do you get this stuff, Meds?)

Such a powerful argument. Super is a payroll tax. It does not increase savings it merely shifts it around (and at a cost to tax revenue). Naturally fund managers make a fortune for doing something very simple.

Just counting all the teachers, nurses and doctors who brought the world economy to its knees; crippling millions of jobs, destroying businesses.....

You are quite correct. It is excessive government spending that is the problem NOT banks. Were the banks responsible for the enormous debt build up in Italy, Greece, USA, etc etc?

No they were not. Ireland and possiby Spain can make that claim.

I can can count 'em easily, 'cos I is a stats guru....

Misology redux.

 

[The Passenger]

Amazing how many people think that super is such a wonderful thing. Brilliant scam by the finance industry.

super is a good idea, but like so many good idea is taken for a ride by cunning dickheads.

it wasn't super but it was still a typical bullshit banker that might as well have just robbed 10k off my grandma a few years back, and it would've been the lot of her money if it if my parents didn't catch to what was going on and put a stop to it. convinced her to put all her money into a managed account, which was losing money hand over fist, and then for the pleasure of losing her money they were charging her. good blokes those bankers

 

[medusala]

it wasn't super but it was still a typical bullshit banker that might as well have just robbed 10k off my grandma a few years back, and it would've been the lot of her money if it if my parents didn't catch to what was going on and put a stop to it.

A financial planner switched my mother (then retired) in to Asian equities (with a 5% upfront charge). Low dog. I used to come across a lot of small firm financial planning cowboys. I think they have cleaned it up a bit with respect to fees and trail but it used to be a rort.

Nonetheless re bankers, the real rorts come when they collude with governments.

The UK hasnt been too bad compared to other places (French banks have always been seen as an arm of the state), probably because other than Barclays the UK banks dont have much of an IB footprint. The goings on at Citi probably take the cake (Geithners efforts re AIG not far behind)

Matt Taibbi was very good on this in Griftopia (notwithstanding a few errors due to him not being a financial journo)

Zero Hedge also good at covering the corporatist theft of taxpayers $ as well.

 

[R00StaR]

The problem imo is the entire system, the entire world is choking from too much debt yet every dollar ever created is debt, so it cant be any other way. Everything is fine while expanding but once money contraction takes place it gets ugly. The Reserve banks are in place to stop these boom/ bust cycles and keep a steady economic environment weren't they? Hows that turning out?

Its a freaken disaster always has been, yet we never wonder if theres a better way or system, we just happened to get it perfect all those years ago. In the hands of god know whom, out to profit for themselves and shareholders. Ive been looking about for arguments why its the best system or superior to dept free money..... im struggling to find it so far.

Yet we continue to see Europe drowning in debt, the answer? More debt, wow really. Italy borrows at 6% and lends to Spain at 3%. Boom more Euros are created out of thin air, diluting whats in the system and creating further debt. Admittley im no economic scholar, but this seems a freaken stupid arse about system to me. if the money were instead created debt free it would still dilute the value of what money is in the system only there'd be less debt not more. Hello, isnt this whats needed?

Meh yeah yeah but who makes money from that idea? Well nobody makes money but its doesnt cost the people as much. Dilution/ inflation plus debt.

 

[skilts]

Gee this thread makes me feel old. I remember a time when bankers were honored members of the community. Sigh.

 

[medusala]

Meh yeah yeah but who makes money from that idea?

Banks get to borrow off central banks at close to nothing lend to governments at much higher, earn huge carry and pay themselves bonuses on the back of it. Hardly rocket science but very, very profitable.

It does not come at no cost. Those on fixed incomes (typically pensioners) are utterly getting screwed as they are earning very little due to such low interest rates (such interest rates come about by a rigged market thanks to QE)

Thus it is hardly surprising in the US that the top 1% earned 93% of all income gains recently in the US

http://articles.businessinsider.com..._1_income-gains-capital-gains-uneven-recovery

 

[R00StaR]

Banks get to borrow off central banks at close to nothing lend to governments at much higher, earn huge carry and pay themselves bonuses on the back of it. Hardly rocket science but very, very profitable.

It does not come at no cost. Those on fixed incomes (typically pensioners) are utterly getting screwed as they are earning very little due to such low interest rates (such interest rates come about by a rigged market thanks to QE)

Thus it is hardly surprising in the US that the top 1% earned 93% of all income gains recently in the US

http://articles.businessinsider.com..._1_income-gains-capital-gains-uneven-recovery

I agree with you, that quoted line I meant who makes money if we printed money without the debt. Its a struggle to see any reason for debt money other than to allow the banks/ers to rip us off and control the entire system - and we've seen numerous times they dont play fair, while totally failing in providing smooth economic conditions. Theyve created most of the problems with their greed. Then what happens, we print more debt money and give it them so the entire system doesnt collapse.

At the very least we need a in depth look/ open debate on the system and other options imo. But we wont get it, which is a shame, its something that effects us much more than just about anything else in the world.

 

[OldBlueFan]

You are quite correct. It is excessive government spending that is the problem NOT banks. Were the banks responsible for the enormous debt build up in Italy, Greece, USA, etc etc?

Perhaps not all of it, but were they responsible for crippling the world's financial/credit system - through their untrammelled deceit and rapacious greed - to such an extent that the govt debt of those nations became an excuse for the monied classes to inflict even more suffering on those who had nothing to do with either the govt debt, or the financial crisis?

No they were not. Ireland and possiby Spain can make that claim.

Oh, that's alright then, only two entire nations owe their parlous financial state to the banks. Hey, maybe they're not so bad after all.


So, it's excessive government spending that's the problem, NOT the banks? But you then manage to contradict that statement with your very next statement ... huh?

Anyway, for folks who'd like to cling to the possibility that there might be some sanity to be found amongst so much lunacy, you might like to take a look at this:

Finance is Lost. Are Banksters Redeemable? Interview With Former JPMorgan Director John Fullerton (VIDEO)

John Fullerton is a former managing director at JPMorgan. Finance drives economics, he says, and economics largely determines the fate of the planet, yet the resources of the planet are finite. “The notion that exponential growth can go on indefinitely in a finite planet is in violation with arithmetic and basic physics.” As long as growth is the sine qua non of market economic ideology: “We are lost.”

 

[medusala]

Oh, that's alright then, only two entire nations owe their parlous financial state to the banks. Hey, maybe they're not so bad after all.

Only because idiot politicians bailed them out.

So, it's excessive government spending that's the problem, NOT the banks? But you then manage to contradict that statement with your very next statement ... huh?

WTF? It is very simple. The sovereign debt crisis in nearly all countries is due to excessive spending. The two I mentioned are more due to their banks (particularly Ireland)

 

[Geelong_Sicko]

So what are the possible solutions here? More regulation? Economic watchdogs with bigger teeth? To me it's obvious we cannot let the markets and the corporate sector look after themselves as there are more than a few fantastically immoral people in this game who see no further than their own wallets.

So how do we learn from this?

 

[medusala]

So what are the possible solutions here? More regulation?

There is already a huge amount of regulation. That isnt the problem (though the FSA should never have been given the job from the BOE to oversee the banks in the way they did) In the UK the regulators ie BOE and FSA were aware of what was going on. Barclays had regular chats with both of them, they even complained to the FSA that other banking were fixing too low.

 

[Geelong_Sicko]

There is already a huge amount of regulation. That isnt the problem (though the FSA should never have been given the job from the BOE to oversee the banks in the way they did) In the UK the regulators ie BOE and FSA were aware of what was going on. Barclays had regular chats with both of them, they even complained to the FSA that other banking were fixing too low.

`
So this kind of thing is pretty much unpreventable?