Subject: [SocialistWorker.org] Libor: the banking crime of the century
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View original article here:
http://socialistworker.org/blog/critical-reading/2012/07/06/banking-crime-century
Critical reading [1]: A SocialistWorker.org blog
======== LIBOR: THE BANKING CRIME OF THE CENTURY =============================
July 6, 2012 11:37 am CDT
More here [2]. --PG
UPDATE: Former Labor Secretary Robert Reich calls Libor "The Wall Street
Scandal of All Scandals [3]."
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.... Crime of the Century [6]
Source: Truthdig
Posted on Jul 6, 2012
By Robert Scheer [7]
Forget Bernie Madoff and Enron’s Ken Lay—they were mere amateurs in
financial crime. The current Libor interest rate scandal, involving hundreds
of trillions in international derivatives trade, shows how the really big
boys play. And these guys will most likely not do the time because their kind
rewrites the law before committing the crime.
Modern international bankers form a class of thieves the likes of which the
world has never before seen. Or, indeed, imagined. The scandal over
Libor—short for London interbank offered rate—has resulted in a huge fine
for Barclays Bank and threatens to ensnare some of the world’s top
financers. It reveals that behind the world’s financial edifice lies a
reeking cesspool of unprecedented corruption. The modern-day robber barons
pillage with a destructive abandon totally unfettered by law or conscience
and on a scale that is almost impossible to comprehend.
How to explain a $450 million settlement for one bank whose defense, in a
plea bargain worked out with regulators in London and Washington, is that
every institution in their elite financial circle was doing it? Not just
Barclays but JPMorgan Chase, Citigroup and others are now being investigated
on suspicion of manipulating the Libor rate, so critical to a $700 trillion
derivatives market.
Caught as the proverbial deer in the headlights, Barclays Chairman Robert E.
Diamond Jr. resigned this week and offered a plaintive defense to the British
Parliament that he learned only recently that his bank was manipulating the
index on which so large a part of international trade is based. That is
plausible only if we assume he was paid $10 million a year to be deliberately
ignorant. The Wall Street Journal had exposed this scandal fully four years
ago but his bank continued to participate in it nonetheless.
“Study Casts Doubt on Key Rate” was the headline on the May 29, 2008,
investigative report, which concluded: “Major banks are contributing to the
erratic behavior of a crucial global lending benchmark, a Wall Street Journal
analysis shows.” Even then, according to the report, it was known that the
Libor rate was being manipulated “to act as if the banking system was doing
better than it was at critical junctures in the financial crisis.”
Fast-forward four years to Diamond’s testimony before Parliament this week
in which the CEO claimed his recent discovery of a pattern of interest
manipulation by Barclays had made him “physically sick.” Who was to
blame? According to the executive, subordinates acting behind his back.
The American-born banker, who has dual citizenship in the United States and
Britain, is well versed in financial chicanery, having started by putting
together derivatives packages at Credit Suisse First Boston back in 1996. He
was compelled under parliamentary questioning Wednesday to admit that “I
can’t sit here and say no one in the industry [knew] about the problems
with Libor. There was an issue out there and it should have been dealt with
more broadly.”
He couldn’t deny widespread chicanery within his bank because, as in the
collapse of Enron a decade ago, investigators had uncovered an email record
of market manipulation so glaring that if the top executives were unaware, it
was because they didn’t want to know.
As The New York Times editorialized: “The evidence, cited by the Justice
Department—which Barclays agreed is ‘true and accurate’—is damning.
‘Always happy to help,’ one employee wrote in an email after being asked
to submit false information. ‘If you know how to keep a secret, I’ll
bring you in on it,’ wrote a Barclays trader to a trader at another bank,
referring to their strategies for mutual gain. If that’s not conspiracy and
price-fixing, what is?”
The U.S. Justice Department made a deal with Barclays, and although it may
prosecute some individuals in the scam, it agreed not to go after the bank
itself. “Such an agreement makes sense only if that cooperation will allow
prosecutors to nail other banks that have been involved in setting the rates,
including potential cases against Citigroup, JPMorgan Chase and HSBC ... ,”
the Times editorial said.
Both Citigroup and JPMorgan Chase were reported by The Wall Street Journal
years ago to be suspected of rigging the Libor interest rate. The leaders of
those banks, despite such media exposure, clearly remained confident enough
to continue on their merry way.
The sad reality is that they will probably get away with it. The world of
high finance is by design as obscure and opaque as the bankers and their
political surrogates can make it, and even this most recent crack in their
defense of deception will soon be made to go away.
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[1] http://socialistworker.org/blog/critical-reading
[2] http://www.rollingstone.com/politics/blogs/taibblog/why-is-nobody-freaking-out-about-the-libor-banking-scandal-20120703
[3] http://www.alternet.org/economy/156201/libor:_the_wall_street_scandal_of_all_scandals_
[4] https://twitter.com/#!/CriticalReading
[5] https://www.facebook.com/criticalreading
[6] http://www.truthdig.com/report/item/crime_of_the_century_20120706/
[7] http://www.truthdig.com/robert_scheer/
