Monday, July 09, 2012

The LIBOR Screwing: You've Been Taking It for 15 Years

This LIBOR thing is not just Barclay's and the Swiss.  It's the biggie-US banks, too, whether directly or not.

The FSA has identified price-rigging dating back to 2005, yet some current and former traders say that problems go back much further than that. “Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran closely involved in the LIBOR process. “It was one of those well kept secrets, but the regulator was asleep, the Bank of England didn’t care and…[the banks participating were] happy with the reference prices.” Says another: “Going back to the late 1980s, when I was a trader, you saw some pretty odd fixings…With traders, if you don’t actually nail it down, they’ll steal it.”  --BigPic quoting The Economist

Given that homeowners, students, credit card holders, and other borrowers pay more when rates are higher, the banks appear to have fleeced consumers for 10 years during the entire bull run leading up to the financial crisis....

You'd be a damn fool if you think that Goldman Sachs wasn't aware of this--or an active participant.

Vox also essays on the LIBOR Screw.

...The drastic and deleterious effect of price misinformation is why the news of the latest banking scandal, which concerns systematic fraud in the London Interbank Offered Rate, or LIBOR, is so troubling. It is no longer news that most, if not all, of the giant international banks are little more than government-protected criminal organizations that now survive on a combination of direct and indirect theft from the taxpaying public instead of their historical banking activities....

...thanks to the $435 million fine imposed on Barclays by the U.S. Commodity Futures Trading Commission and other agencies, we know that the LIBOR, upon which the interest rates for a great many other loans are made, has been based on fraudulent reports for at least the last seven years. This means that the risk assessments made by all of those borrowing and lending money during that time were incorrect, and given that Barclays made a habit of consistently under reporting the interest rates it was paying, indicates that the risk of loan default is higher than the record low interest rates would seem to suggest are the case....

Vox is not an optimist:

...When the global economy collapses, there will be many asking, “Who killed capitalism?” And the correct answer will be: the large international banks, with the assistance of their short-sighted accomplices in government...

Well, collapse or no, it would be very pleasant to see several dozen (or several hundred) Too-Big-To-Fail bank conspirators sent to Leavenworth for an education in real-world economics--say 25 years' worth.

(Side bet:  what's the over/under on the date when it's revealed that Goldie knew and/or participated?)

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