The LIBOR Scandal: Decay at the Core of Our Financial and Political Systems.

Interest Rates

Interest Rates (Photo credit: 401(K) 2012)

The LIBOR scandal is more than just the latest financial fraud to come to down the pike. It’s a visceral representation of a fraud, a stench, a putrid and rotting decomposition at the very heart of our financial and our political system. The London Interbank Offered Rate is not just a benchmark for interest rates; it is the actual basis of our monetary system and it is a scam.

The misdeeds that have been perpetrated by men whose greed and avarice have emboldened them to believe they are above the law,  also evidently believe they are beyond the reach of justice. And who can blame them? Otherwise people would be much more visibly outraged that nobody has been jailed during this disgraceful period in our history. If insiders can manipulate the basic measurement of the value of the time cost of money — the interest rate — there is root-rot at the core of not only the financial system, but the political system that enables these modern-day financial overlords to thrive totally absent of discernible consequences no matter how massive a fraud they commit.

Try to Grasp the Brazen Shamelessness of This Rip-Off

The British financial giant Barclays has already confessed to manipulating the  LIBOR rate (in exchange for leniency)  from 2005 to at least 2009. Every time Barclays’ traders made a bet on the direction in which interest rates would turn, Barclays’ own employees would submit false, probably made-up data, for use in determining interest rates to ensure Barclays’  traders would win the bet. Time and time again, for years, Barclays made money by fixing bets for its own traders.  College basketball players have gotten stiffer penalties for point-shaving to collect on fixed game scores for Pete’s sake.

But in today’s Conservative-enabled environment, it’s apparently no big deal to rig billions of dollars for the wealthy; after all, “it’s just business”.

The wealthy, like the CEOs in charge of the banks involved, the venture capitalists like Mitt Romney, etc., don’t just have more money than most of us; they have blatant and overt contempt for us. You can see it in interviews with Mitt Romney or his wife. They expect a level of reverence that average hard-working Americans will never know. Ann Romney asked a reporter, “How much do you people want?” when commenting that the Romneys had already released ONE INCOMPLETE Federal Tax Return and that it should darn well be enough! We are like their dogs that fetch dead ducks in the cold water that they shoot while hiding in the bushes…and we should be THANKFUL for the possibility of a pat on our heads or some scraps for doing the only real work involved in the entire exercise. Or that we should be “happy” to ride in a cage strapped to the top of their car on vacation. After all, we cannot expect to ride in the same car with them for goodness sakes.

We don’t yet know precisely who or how many others have been fixing bets. What we do know is that Barclays could not have done this by themselves. It’s just too big for them to have done so. More of the world’s major banks, including some of the largest in the United States, are under investigation, and it is unambiguous that these fixes were not surreptitious deals by a few rogue traders. These traders were so bold, so sure that there would be no consequences even if caught, that they put requests to manipulate the rates in writing and even joked about delivering expensive gifts to those who aided them in their crimes. It is also clear that it was the 99% , (you know, those of us who don’t have a fixer) like consumers, community banks and credit unions, were the ones who lost money so that those at the top could benefit. Essentially, Barclays and the rest of the banks padded their bottom lines by taking money from literally everyone else. They won when they should have lost and others lost when they should have won.

The amount of money involved is staggering. On any given day, $800 trillion worth of credit-related transactions are linked to LIBOR rates. In most markets, consumers could simply take their business elsewhere once they learned that the scales were rigged. Even in casinos, gamblers go in knowing that the odds favor the casinos. But interest rates are different. Everyone who borrows money on a mortgage, credit card, student loan, car loan or small-business loan is affected in a rigged financial market except the wealthy .

According to the Federal Reserve Bank of Cleveland, in 2008 more than half of all adjustable-rate mortgages were linked to LIBOR . Even those who didn’t borrow but saved for retirement or their children’s future, or a medical emergency, got screwed by interest rates being manipulated. There’s no mystery about why the economic recovery has been so frail. Housing is still depressed in the aftermath of a huge, manufactured bubble, and consumer demand is being held back by the high levels of household debt that are the result of that bubble.

Business investment has actually held up fairly well given the weakness in demand. Why on earth would businesses invest capital when they don’t have enough customers to create the demand to make full use of the capacity they already have? Tax cuts be damned. Without a robust middle class supplying the increased and steady demand, it is not going to happen.

Unrequited Outrage

And yet, it gets worse. During the 2008 financial crisis, Barclays and other banks also appear to have intentionally manipulated LIBOR to show lower-than-real borrowing rates to convince the financial market, and their regulators, that the bank was stronger than it really was. In simple language, they rigged the interest-rate reports so that no one would know exactly how much trouble they were in. They committed criminal, prosecutable, white collar fraud. Yet, once again the big banks are exposed in systematic fraudulent activity, but no one is held accountable, much less sent to jail. When Barclays agreed to a $450 million fine for trying to rig the LIBOR  , its CEO actually offered the classic, childish excuse that used to be a futile attempt at avoiding a trip to the wood pile: But, but, but  Everyone else was doing it!!

Once again the banks were rigging the rules; once again their customers were the marks, the suckers, the stooges. The collusion was systematic and routine and frankly nobody involved cared who got hurt.

Investigations are underway and those named in the probes are all the usual suspects: JPMorgan Chase, Citibank, UBS, Deutsche Bank, HSBC, UBS and others. As stated above, this wasn’t simple rogue trading. As the respected publication,  the Economist concludes; this was more like a cartel…a money cartel. And like most cartels, this one deals in addictive products, an unquenchable, illegal market, and involves huge sums of money and the officials willing to look the other way for ill-gotten gains. Most of them Ivy-League graduates, or elites in business or finance who already had everything they could possibly  desire. But the wealthy, no matter how much they have, never has enough money in the same way a heroin addict never has enough heroin.

With a financial system this blatantly corrupt, the only question remaining is whether Wall Street has so many friends (i.e., BRIBED CONGRESSPEOPLE) in Washington that the guilty parties will once again walk away scott free and laughing at the rest us of us and our impotence and our outrage.

What Fair and Honest Justice Should Demand

Honest, American accountability would mean:

  1. Prosecuting the traders and bank officials who violated federal laws
  2. Prosecuting the executives who knew and sending them to jail.
  3. It would mean forcing executives to pay back all inflated compensation they received based on fraudulent profits.
  4. It would mean instead of using the current method of guessing what borrowing costs should be or what banks claim they will be, the rules should be changed so that it is calculated on actual borrowing costs.
  5. Enforcement agencies would have the resources they need to launch investigations, to fight the armies of private lawyers the banks hire and to prosecute the law-breakers. The United States of America is being out-bought in terms of criminal prosecution by rich, elites who really are above the law.

Real accountability, the kind that Mitt Romney and the Republican Party fight so hard to block or alleviate altogether, rests on acknowledging that we simply cannot depend upon Wall Street to regulate itself. They can’t and they won’t any more than a heroin addict can regulate his need for more heroin until it’s too late.

This is organized criminality that makes Al Capone, Bonnie and Clyde, “Baby Face” Nelson, Ma Barker, and “Pretty Boy” Floyd, look like amateurs.  And now, thanks to the Supreme Court, supposedly a body of legal scholars sworn to protect the word and intent of the basis of for all Americans, this same class of wealthy, entitled money has become a major factor in America’s politics.

  • When Mitt Romney says he will move quickly to repeal ALL of the new financial regulations, he is openly endorsing a criminally corrupt system.
  • When members of Congress feign indignation and accuse what few regulators the government can still afford, for being too tough on Wall Street
  • When Republicans slash the budgets of the regulators charged with overseeing Wall Street…

they are encouraging more cheating for their own political and possibly financial gain.

Not surprisingly, Romney and Republicans are raking in donations from the wealthy, the elite, and from Wall Street. And they are catering to banksters that know no shame.

For example, one of the most powerful Wall Street lobbying groups is the Securities Industry and Financial Markets Association, which has been leading the drive to weaken Dodd-Frank and exempt derivatives from all transparency. Its chair was Jerry del Missier, the COO of Barclays, who lost his job and apparently his chairmanship due to LIBOR-gate. Why am I not shocked?

Don’t misunderstand me, financial services are the lifeblood to the economy.  But every family and every small business, every entrepreneur, every kid in a poor or middle-class family that has a dream that if they just work hard enough they can succeed, has a vested interest in an honest system that treats everyone the same. The flight of the imagination that claims reducing oversight of the biggest banks will make us recover faster is nothing but a dangerous fantasy that has been propagandized by the Republican Party for decades.

But know this: that fantasy has never been closer to coming true for them. Step back and look at the big picture.

  • Voter Suppression
  • Republicans refusing to compromise on ANYTHING because of an oath the Grover Norquist that supersedes their oath to their country
  • A Supreme Court that is willing to apply partisan ideology over defending the Constitution that they are sworn before God and Country to uphold
  • Republicans total disregard and disrespect for Women and the rights they have fought decades to procure
  • Republicans total disregard for the rights of people of color
  • Republican total disregard for the rights of LGBT Americans
  • A Republican Party willing to lie, cheat, steal, bribe, and allow millions of families starve to death or die prematurely due to the lack of healthcare insurance for the sole reason of taking down a President
  • A Republican Party whose single largest voting block is white, Christian, males that are willing to ignore the Ten Commandments and all the teachings in their own Holy book for the sake of political ideology and to take down a sitting President

 

Undoubtedly, there are some very rich Americans who have a sense of perspective, who take pride in their accomplishments and came by the honestly. I’m sure those same wealthy individuals do not  believe that their success entitles them to live by different rules.

I just don’t see any evidence whatsoever that any of them exist in the Republican Party any more.

Harvey Gold

Enhanced by Zemanta