Why aren't US citizens freaking out about? - LIBOR

The LIBOR manipulation story has exploded into a major scandal overseas. The CEO of Barclays, Bob Diamond, has resigned in disgrace; his was the first of what will undoubtedly be many major banks to walk the regulatory plank for fixing the interbank exchange rate. The Labor party is demanding a sweeping criminal investigation. Mervyn King, Governor of the Bank of England, responded the way a real public official should (i.e. not like Ben Bernanke), blasting the banks:

It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.

The furor is over revelations that Barclays, the Royal Bank of Scotland, and other banks were monkeying with at least $10 trillion in loans (The Wall Street Journal is calculating that that LIBOR affects $800 trillion worth of contracts).

The banks gamed LIBOR for two semi-overlapping reasons. As noted here last week, there were instances of Barclays traders badgering the LIBOR submitters to "push down" rates in order to fatten their immediate bottom lines, depending on what they were trading or holding that day. They also apparently rigged LIBOR downward in order to produce a general appearance of better health, essentially tweaking their credit scores a few ticks upward.

Most intriguingly, or perhaps disturbingly, there were revelations last week that Bank of England deputy Governor Paul Tucker had a conversation with Diamond at the peak of the crisis in 2008. The conversation reportedly left Diamond, and subsequently his traders, with the impression that the bank had carte blanche to rig LIBOR downward in order to help allay spiraling public fears about the banks’ poor financial health.

British officials, and Tucker individually, deny that Tucker gave Diamond permission to rig rates. But a report by British regulators did conclude that the two were talking about Barclays LIBOR submissions on October 29, 2008, and that as a result of that conversation, Diamond came away with a “misunderstanding.” The Daily Mail quotes the Financial Services Authority report:

However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred.

This meant that Barclays’ submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays’ Libor submissions.

That is explosive stuff. Members of Parliament will be grilling Tucker tomorrow about those events in what is sure to be a far more combative and entertaining legislative inquiry than the Jamie Dimon dog-and-pony show we just went through here in the states in recent weeks.

The implications of that part of the story should be particularly chilling to Americans, who in recent years have been party to a number of revelations about strange and seemingly inappropriate contacts between senior regulatory officials and big bankers during the heat of the crisis.

We know that American officials in 2008-2009 were extremely concerned about the appearance of weakness in the financial markets, so much so that they may have resisted pursuing criminal prosecutions against big banks, and we also know that they spent a lot of time commiserating with Wall Street figures before and during the crisis.

If Bob Diamond and Paul Tucker were having these talks about LIBOR, is it fair to wonder what else Hank Paulson and Lloyd Blankfein were talking about in the 24 discussions they had in the six days following the AIG disaster? When Paulson had a secret meeting with the entire board of Goldman Sachs in, of all places, his hotel suite in Moscow, in June of 2008? Or what other material nonpublic information was exchanged when Paulson met with a gang of hedge fund chiefs at the offices of Eton Park management in July 2008, and laid out for them a possible scenario for putting Fannie and Freddie into receivership?

Anyway, the LIBOR story is leading the front pages of most of Britain’s dailies, it’s on TV, and it’s producing blistering editorials and howls of outrage amongst politicians and activists. But as compadre Yves Smith at Naked Capitalism put it, where’s the outrage here in America?

The big story on our shores in the last few weeks has been the health care ruling, which makes sense, but then after that… what? The heat? Tom and Katie? (There’s actually a story about how Katie can wear heels again, now that she’s not married to a short person). Joe Sandusky? Nightline’s big story tonight, which is already being hyped on the net, is about how fat Chris Christie is and why the hell he hasn’t done the bypass surgery yet:

New Jersey Gov. Chris Christie opened up about his weight problem in an interview with ABC News and stressed he is "trying" to lose weight, a battle he's waged for 30 years, but said he's never considered gastric bypass surgery because it's "too risky."

"I mean, see, listen, I think there's a fundamental misunderstanding among people regarding weight and regarding all those things that go into, to people being overweight," Christie said in an interview that will air Tuesday on "Nightline."

Glad to be informed! The New York Times, meanwhile, did chime in with a house editorial yesterday, and it was appropriately somber. And there has been some coverage in the financial press.

But to me what’s missing from all of this is the “Holy Xxxxxxxx XXXX!” factor. This story is so outrageous that it shocks even the most cynical Wall Street observers. I have a friend who works on Wall Street who for years has been trolling through the stream of financial corruption stories with bemusement, darkly enjoying the spectacle as though the whole post-crisis news arc has been like one long, beautifully-acted, intensely believable sequel to Goodfellas. But even he is just stunned to the point of near-speechlessness by the LIBOR thing. “It’s like finding out that the whole world is on quicksand,” he says.

So as far as the stateside press goes, I’ve got to assume the cavalry is coming soon. But when?

Read more: http://www.rollingstone.com/politics/bl ... z201JxsmRa

Replies to Matt's article

And we have Taibbi to thank for that! As the Master of the People's Broadcasting once said:

There is no liberal media today.

- - - Studs Terkel, 2004

Thank the gods for Taibbi and a handful of others (everyone always cites Seymour Hersh, who comes out with a semi-palatable story every 15 years or so, but in between is a fount of confusion and misinformation; his recent observation, "I don't think that Stuxnet did any damage, it really wasn't anything much." --- WTF????)

Back in 2000, when the banks formed the Wolfsberg Group (ABN AMRO, Banco Santander, Citibank, Credit Suisse, Deutsche Bank, JP Morgan Chase, Goldman Sachs, Societe General, and UBS, etc.) to create their "anti-money laundering" process --- it just sounded far too hokey for words?

After all, many, if not all, of those banks had been involved in money laundering.

Then later, the IMF, working through the private company, the Edgemont Group, worked to create and coordinate Financial Intelligence Units at Offshore Finance Centers around the planet (numbering around 95, but the have only established, or there are now established, FIUs in the 80s number total) in order to circumvent money laundering under the auspices of the Wolfsberg Groups' AML process --- which is really bizarre, as those Offshore Finance Centers, also known as tax havens, have always been about hiding wealth and ownership, tax avoidance and tax evasion, and money laundering!!!

So, logically, the banks were using their AML (anti-money laundering) process not to circumvent it, but to control it.

This LIBOR manipulation is really about the almost predictable next step in the progressive or absolute financial manipulation and markets rigging.

Since, as mentioned and reported, this directly affects $10 trillion in contracts, and indirectly a possible $800 trillion in contracts, futures, derivatives, etc., it affects ARMs (adjustable rate mortgages) as well as structured loans.

While there are far too many directed areas of corruption and financial fraud to mention here as being affected by this LIBOR scam, it is interesting to note it began around 2005, and that between 2005 to 2007, the top banks lent out at least over $680 billion to private equity firms for leveraged buyouts --- which dramatically increased unemployment and healthcare costs --- as many of those leveraged buyouts where across the healthcare sector.

"You see how this stuff is so brazenly interconnected?

Mind-boggling, ain't it????

The real question today is:

What hasn't been financially manipulated to their profit?

What hasn't been rigged?

Their company softdrink vending machines?????"