The Supreme Court business has really distracted me from this huge scandal over Barclays and other banks manipulating the LIBOR, the key interbank lending rate, to goose their profits. Therefore I thank Yves Smith for bringing me up to speed on it.
First, Libor is the basis for pricing over $10 trillion of loans. As the CTFC noted:
“US dollar Libor is the basis for the settlement of the three-month Eurodollar futures contract traded on the Chicago Mercantile Exchange, which had a traded volume in 2011 with a notional value exceeding $564 trillion.”
The Wall Street Journal puts total in contracts affected at $800 trillion.
Second is that price fixing is a criminal violation under the Sherman antitrust act. The Department of Justice stressed that Barclays had been the first bank to cooperate with the investigation and had been extremely forthcoming, and for that reason it would not be prosecuted if it complied with the settlement terms for two years. The implication is that the DoJ will not be as generous with other banks involved in the price-fixing scheme.
Sixteen other major financial institutions are implicated in the scandal, which covers just about everyone. In the simplest terms, Barclays admitted to manipulate the interest rates to cash in on derivatives and also mask weaknesses in its balance sheet. But the LIBOR (which stands for London Inter Bank Offered Rate) is used as a benchmark lending rate all over the world. Adjustable-rate mortgages were calculated using the LIBOR. The exposure on this could be enormous.
Already, the chairman of Barclays Bank, Marcus Agius, has resigned, in an attempt to take shrapnel for Bob Diamond, the CEO of the company. But that has not stopped the furor in Britain. Prime Minister David Cameron announced a parliamentary inquiry today, not just of Barclays, but the entire British banking sector.
Prime Minister David Cameron has announced a wide-ranging parliamentary review of the banking sector following the Barclays rate-rigging furore.
He told the House of Commons that the manipulation of the Libor interest rates had been a “scandal”.
The review will run alongside an inquiry specifically into the Libor market, also announced on Monday.
The comments follow news that the Serious Fraud Office is considering whether to bring criminal charges.
You just don’t see the words “criminal charges” thrown around in banking inquiries these days. But the UK is leading the way on this one, in sharp contrast to how these sorts of things get handled in the US. Cameron was forced into this investigation, and the Labour Party continues to claim it doesn’t go far enough, seeking an additional independent investigation on executive pay and culture in the financial industry. There’s enough of a separation between the parties on these issues that creates the space for accountability. That’s especially true as the British press has exploded over the scandal, feeding the outrage and bolstering the Labour Party’s resolve. Labour sees the opportunity because the Conservatives may be up to their necks in the scandal themselves.
This dynamic doesn’t exist in the United States. The parties tamp down rather than raise up anger over banking scandals. Years after the foreclosure crisis and documented fraud, we see a new term rise: “foreclosure fatigue.” It’s just all so boring. Who wants to hear about mass fraud in the banking system anymore? Keep in mind that the British financial system is arguably bigger per capita than the US. It’s as much about culture as it is money.
Hopefully Britain will lead the way to shaming the powers that be in this country to act. Because you just know that US banks weren’t standing idly by as foreign counterparts sought to game the LIBOR for their benefit.





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As Attaturk pointed out this morning, Mitt will ask Bob Diamond and other U.S. City-zens for job creation advice at a fundraiser next month. If his handlers don’t cancel it first.
No chance anything will be done over here by anybody.
One of the most ridiculous things I keep hearing from US banksters is that any attempt to regulate (like going back to Glass Steagall) will make US banks uncompetetive compared to British banks. This is hogwash if you look at the British response.
The Brits are actually going after people at or near the top. They are stiffening their own regulation and their regulators are putting the fear of doG into the City.
If you peruse the job listings for Compliance and Anti Money Laundering professionals, the difference between the way the US vs Uk jobs is worded is profound.
The US banks and hedge funds want lots of software and elaborate systems, but nothing that will interfere with the business side. The UK adverts are for people who want to come in to muck out the stables.
I’m half tempted to cross the pond.
Very true. The Labor party historically was not bought in any manner by Business, and their core constituency were “us” not “them”.
The very short election cycle in the UK means that campaigns are much less expensive.
Let me know if you want a referral.
The Brits LOVE a good scandal. They feast on it. Regrettably, there appears no sexual undertones. Ahhh. But there’s enough to make this juicy and whereas trillions of dollars and pounds may be involved, it’ll be fun watching.
But, of course, nothing will happen here. After all, Obama said it, the bansksters “id nothing wrong”.
The biggest part of Barclay’s fine for libor fixing comes from the US government, so I’m not sure what your talking about.
So far Barclay is fined
200 million by US govt. CFTC
160 million by US govt. DOJ
93 million by Brititsh Financial Services Authority
The UK wasn’t even going to look into criminal, until public outrage boiled over, so I’m not sure following the Brits would be ideal.
Yes, the “legacy” parties do “tamp down” anger over banking scandals as have the media (which are also part of the political class, in the US …).
Beyond the comparison to the parties in Great Britain, what does “this” suggest?
Anything?
Anything, at all?
Perhaps NOTHING can be done about the continuing criminal behavior of the American Banking “community” until and unless something is done about the legacy parties?
Otherwise, what is to bring about change … despair fatigue, desperation fatigue, starvation fatigue?
What clever little twisted-tongue “wisdom” is going to bring about needed change, necessary change? Or even awaken “the people”?
Ah, wishful-thinking fatigue … it is just so … “so”!
Thank you, DDay, for trying to twist some tails.
DW
Waaaay cool. A new Law & Order? Law & Order SFO
Has Cameron rushed to support and laud the brilliance of Diamond, as Obama did for Dimon? If you remove an “a” and a “d” from Diamond you’re left with Dimon. (great, now I’m descending into gibberish)
Will Bob Diamond show up to the hearing sporting Prime Minister Cufflinks?
Good one.
“foreclosure fatigue”? goddam the Corporate Media is so focking lazy
when will they get Kardashian fatigue?
“gibberish” ?????
May be. But one helluva coincidence.
When they boob.
It has been assumed for several years by people paying attention to markets that LIBOR was being gamed and manipulated but that wasn’t really a big deal because the price of every financial instrument and index is gamed and manipulated by the denizens of The Street and The City. Our markets are free only to the extent that powerful interests are free to manipulate prices. Of course nobody takes second place to the Fed and other central banks whose machinations have brought interest rates to zero or below.
When interest rates, real rates ie. rates minus inflation are zero or below, then capitalism and markets have failed. I know few will accept or understand it and there is no reason to believe some invisible schmuck on the internet but please don’t forget it even if it makes no sense to you now. Someday it will.
Anyway back to manipulated markets. It’s no biggie about LIBOR because they all are.
The reason the Labour Party feels free to push this issue is because the UK elections aren’t anywhere near as soaked in money as the US elections. Campaigning periods are shorter, thus providing less of a window for advertising, and there are a whole host of rules, both with legal and cultural force, against US-style campaigning.
“Foreclosure Fatigue” Not so much. I want to see those responsible in the big banks for the forclosure crisis investigated prosecuted and jailed for their crimes. I want to see the supposed representation who are openly rooting for america to fail removed from office. I want to see a free press who actually informs the citizens, not spew lies so much and so often that more than a third of the country has the IQ of a knat.
Then USA, Inc. isn’t the country you’re looking for.