LIBOR: Just When You Thought It Was Safe to Go Back To Your Bank…

Barclays Bank, 2 Victoria Street, Westminster,...

Barclays Bank, 2 Victoria Street, Westminster, London (Photo credit: Wikipedia)

Just when you thought it was safe to go back to your banks, this newest banking scandal, involving LIBOR, explodes. LIBOR (short for London Interbank Offered Rate) Abuse is essentially a fancy term for massive inside trading; quite possibly more harmful, more insidious, and more unfair than 10 housing bubbles.

Scary? You bet. Does anybody know or care? Probably not many Americans.

Teaching people to care about rip-off, after rip-off, after rip-off, being perpetrated by the rich and powerful is tantamount to getting people to stop blaming teachers for the punk-ass kids coming to schools with weapons. How can teachers teach when they are afraid for their very lives? It ain’t happening. But I will keep trying nonetheless.

Just When You Think Banksters (Bankers+Gangsters*) Have Hit Rock Bottom

So you think banksters* couldn’t be any more despicable? Wrong.

Here we go again with another rip-off of even more massive proportions. Thank you Ronald Reagan and Phil Gramm, for your legacy of “De-Regulation” which has become the Republican dog whistle every time they need something vague and unprovable to blame the financial crisis on.

To name but a few:

  1. Enron
  2. WorldCom
  3. Savings & Loan Collapse
  4. Lehman Brothers Collapse
  5. Housing Bubble Collapse

Each one preceded by a Republican-led “de-regulatory, job-producing event”.

Every single time I think that the multitude of abuses by Wall Street have peaked they find a way to top themselves–with no consequences whatsoever. Banksters* have already spread a multitude of cynicism over the entire economic system, giving birth to Occupy Wall St., the original Tea Partiers, and  innumerable conspiracy theories. Its excesses have already wreaked havoc with the lives of literally millions of Americans, causing taxpayers to shell out billions (of which only a portion has been repaid) even as its top executives are back to making more money than ever.

With its vast political power (via campaign contributions) Wall St. has already eviscerated much of the Dodd-Frank law that was supposed to rein it in, including the so-called “Volker” Rule that was sold as a milder version of the old Glass-Steagall Act. Glass-Steagall, if you don’t know,  was enacted after the Great Depression to separate investment banks from commercial banks. Basically, to keep gamblers (investors who are willing to risk their money for high-return rewards) from gambling with small business owners’ (depositors who want small-risk, small reward, but SAFE) money.

Gramm–Bliley-Leach , (one of at least two HORRIBLE financial bills that former President Clinton signed) repealed Glass-Steagall and now an even deeper level of public-be-damned greed and corruption has been uncovered.

The Public Trust Has Been Destroyed by De-Regulation and Republicans Just Want More

Henry B. Steagall

Henry B. Steagall (Photo credit: Wikipedia)

 

The most basic of services that banks provide is to borrow money from larger banks or the Fed and lend it to businesses or individuals. You put your savings in a bank to hold in trust, and the bank agrees to pay you interest on it. On the other hand, you borrow money from the bank and you agree to pay the bank interest.

Generally, Americans trust the banking system to set the going rate based on a reasonable estimate about the future worth of the money plus enough to make a reasonable profit because of the risk involved.  We also assume that estimate is based on the cumulative market predictions of innumerable lenders and borrowers all over the world, and that there is a good faith effort to be fair.

What has happened, however,  is that the banksters* are manipulating the interest rate so they can place bets with your money which is guaranteed to pay off big for them because :

  1. They have inside information on what the market is really predicting, which they’re neither sharing with you nor folding into their calculations for your interest rate.
  2. They’re using YOUR money and not their own earnings they’re already making off of YOUR money.

This amounts to fraud of immense proportions. Trillions of dollars that ordinary Americans would have received or saved on YOUR lending and borrowing has instead been going to the banksters*. It would make the other abuses of trust we’ve witnessed look infinitesimal.

This is what the emerging scandal over “LIBOR” is all about.

Scope: Two Lies For the Price of One

There are actually two separate LIBOR scandals.

Lie #1: One has to do with a period just before the housing and finance crisis, when Barclays and other banks tendered fake LIBOR rates lower than the banks’ actual borrowing costs in order to disguise the size and scope of the actual problem. Had the world known then, action could have been taken earlier to diminish the impact of the catastrophic financial meltdown of 2008 whose effects are still being felt.

LIBOR is the benchmark for trillions of dollars of loans worldwide. Mortgage loans, small-business loans, personal loans, etc., are accumulated by averaging the rates at which the major banks say they borrow the funds that they in turn loan to consumers or businesses.

So far, the scandal has been limited to Barclay’s, a big London-based bank that just paid $453 million to U.S. and British bank regulators, whose top executives have been forced to resign, and whose traders’ emails give a stark picture of how easily they got their colleagues to lie about the interest rates so that they could reap the rewards. (Robert Diamond, Jr., the former Barclay CEO who was fired, said the emails made him “physically ill”). Well hell, getting caught cheating and lying ought to make one feel “physically ill”! Otherwise you’re just another sociopath who lacks a sense of moral responsibility or social conscience….kinda like Willard Mitt Romney, who “likes being able to fire people“!

But Wall Street has been involved in the same practice, including the same banks involved in the housing bubble–JPMorgan Chase, Citigroup, and Bank of America. Every major bank participates in setting the Libor rate, and Barclay’s simply did not have the ability nor mass to have rigged it without their willing participation.

Barclay’s actual defense has been that every major bank was fixing LIBOR in the same way, and for the same reason. Barclays is “cooperating” (i.e., giving damning evidence about other big banks) with the Justice Department as this article is published, in order to avoid steeper penalties or criminal prosecutions, and international regulators are getting involved. Trust me,  the fireworks have just begun.

Lie #2: The second part of this rip-off is even worse. It involves a more general practice that started around 2005 and continues as far as we know.

This part of the scheme to defraud Americans is to rig the Libor in whatever way necessary to assure the banks’ bets on derivatives would be profitable.

This is the insider trading aspect and it’s also on a global and gargantuan scale. It makes the bankers no-risk winners and the rest of us, whose money they’ve used for to make their bets, losers and chumps.

JPMorgan’s estimated $3 to $5 billion loss on its ‘London Whale’ trades really is a tempest in a teapot — as Jamie Dimon initially declared — compared to allegations of LIBOR manipulation. Imagine finding out the Dow is rigged or the S&P 500 doesn’t really measure the stocks of the 500 largest U.S. firms and you have a hint at how big a deal this really is.

The real shame is that other than hope the Justice Department or other regulators impose stiff fines or better yet, criminal penalties, and hold executives responsible, there’s not much any of us can do about it.

Fury Fatigue, Scandal Sensitivity Disorder, Whatever You want to Call It, Americans are Suffering From it!

When it comes to Wall Street and the financial sector in general, the vast majority of Americans suffer fury fatigue. We have come to expect such garbage from bankers as if they were the old cliche regarding used car salesmen; but I’m sure used car salesmen ARE MUCH MORE TRUSTWORTHY! This fatigue is multiplied by an overpowering pessimism that nothing will ever be done to stop these abuses. Too many Americans are either too busy trying to survive the last fiasco, that Wall Street never had to answer for, or that Wall Street bankers are just too powerful. But that fatigue and cynicism are self-fulfilling; nothing will EVER be done if we give in to them.

As with the 10-year Treasury note and fed funds rate, literally trillions of dollars of other financial instruments — including corporate loans and mortgage rates — are pegged to LIBOR, making it one of most important financial indicators in the world, if not the most important.

One thing you can all be sure of is that Willard Mitt Romney knows this game and plays it to his advantage. It is no coincidence that Wall Street has ponied up more money for Willard han any other candidate in history. They know that he has THEIR backs. So does Karl Rove, FOX “so-called” News, and to a lesser extent, NBC in particular out of all other networks. GE still owns 49% of NBC-Universal. GE and its former banking arm are certainly involved to some extent. With CNBC as a corporate shill, and Republicans like David Gregory, Joe Scarborough, and Mrs. Alan Greenspan (Andrea Mitchell) deeply rooted in this once honorable and respected news division, you can bet they are pushing Willard Mitt Romney’s agenda.

Last week, Barclays paid roughly $450 million to settle charges by U.S. and U.K. regulators that its traders had manipulated LIBOR. A day after he resigned as Barclays CEO, Robert Diamond appeared before U.K. Parliament last week and testified that regulators on both sides of the Atlantic were aware of irregularities in the LIBOR market as far back in 2007 and did nothing about it. In addition, Diamond testified that Paul Tucker, now a deputy governor at the Bank of England, expressed concern that Barclays was reporting higher LIBOR rates than some competitors; at least one Barclays executive took Tucker’s concern as a signal Barclays too should report lower LIBOR rates.

There is really only one way to keep this problem from going wildly out of control. If the American electorate cedes control of the Banking sector to the ruthless and corrupt Republican Party, the future of fairness, jobs, and equality will be forever in our rear-view mirror.

This LIBOR scandal is yet another sign of how the financial system — which until the 2008 housing bubble crash was built on trust — is rotten at its core. This truism is apparently something that’s seemingly lost on all except those at the very top of the banksters* club. The fact there isn’t more public outrage about this scandal is partially due to its London roots and wonky nature. But it’s also a reflection of the public’s fatigue with revelations of lawlessness in the financial industry that, to date, hasn’t resulted in people going to jail or more serious efforts to re-regulate the industry.

As Americans, if we aren’t untiring and resolute in our demand that Glass-Steagall be re-instituted and the biggest banks be broken up, we will be one step closer to an upper class that will run roughshod over the rest of Americans for generations to come.

[One other note: If you think that Darryl Issa’s relentless persecution of Eric Holder isn’t to throw him off from investigating voter suppression in GOP-held states, or prosecuting Wall Street Banksters* who are donating BILLIONS to Republican campaigns via Citizen’s United idiotic Supreme Court ruling, I have some bridges-to-nowhere I’d like to sell you.]

The question is whether the American electorate will wake up to the truth, and stop getting their “news” from pundits saying what they want to hear (read FOX and NBC’s David Gregory/Joe Scarborough one-two punch).

Wise up and shake off that Fury Fatigue (and yet another de-regulation rip-off) .

  • If you are black, poor, old, or Hispanic, your right to vote is being suppressed.
  • If you are Hispanic, you are being cheated out of citizenship.
  • If you are a woman, your rights to control your own choices are being stolen from you and placed in the hands of old white men.
  • If you are in a union your rights to collective bargaining are being stolen.
  • If you are poor, likely you will always be poor, as will your children.
  • Republicans want to control you and everything you have.
  • The haters and liars have taken control of the Republican Brand.

Democrats are far from perfect. But if you are in any of the groups above, Republicans simply do not care about you. In fact, they wish you would just give in to their propaganda and lies and let them run everything the way THEY want.

Let this Libor scandal provide enough impetus and force to finally get the job done, and throw these bums out of office.

If we don’t stop them now, we will be forced to be satisfied with their leftovers for generations to come.

Harvey Gold

Enhanced by Zemanta

  2 comments for “LIBOR: Just When You Thought It Was Safe to Go Back To Your Bank…

  1. Mechasr
    July 9, 2012 at 11:49 pm

    Banks — Heads they win, tails you lose

Comments are closed.