Bloomberg reports that indictments are coming in the Libor rate-rigging case, at least from the US.
The U.S. Justice Department is preparing to file charges this fall against traders from several banks in the global probe of interest rate-rigging. Meanwhile, U.K. prosecutors haven’t even decided whether they have a case.
The U.K. Serious Fraud Office opened a criminal investigation this month after Barclays Plc (BARC) was fined a record 290 million pounds ($450 million) by U.K. and U.S. authorities. Politicians including U.K. Chancellor of the Exchequer George Osborne and Ed Miliband, leader of the opposition Labour Party, called for a criminal probe, and the agency was told it would be given a budget to take on the case.
There’s a pretty jarring quote later in the article where a British law professor explains that financial crimes are taken far more seriously in America than in the UK. So we’re the aggressive ones, then.
This falls in line with the expected October surprise for banker accountability, where a few traders, not executives, get arrested over Libor, and the Justice Department conveniently drops the other fraud investigations they were pursuing. But even these arrests of traders won’t encompass the entire magnitude of just that element of the Libor fraud. Because we’re learning that this fraud went on for close to 20 years.
In 1991, I had live trading screens that showed the Libor rates. In September of that year, on the third Wednesday, at 11 o’clock, I watched those screens to see where the futures contract [on three month Libor] should settle. Shortly afterwards, Liffe announced the contract settlement rate. Its rate was different from what had been shown on my screens, by a few hundredths of a per cent.
As a result, I lost money. The amount was insignificant for me, but I believed that I had been defrauded and I complained to Liffe [ London International Financial Futures Exchange, which is where the contract traded]. Liffe explained that the settlement rate was not determined by what rates were actually in the market. Instead, the British Banker’s Association polled banks, asking them what the rates were. The highest and lowest quoted rates were discarded and the rest were averaged, giving the settlement rate. Liffe explained that, in doing this, they were adhering to the terms of the contract.
I talked with some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits. I had been unaware of that, as I was relatively new to financial trading. My naivety seemed to be humorous to my colleagues.
Consider that the conventional wisdom among traders at that time was that banks would manipulate Libor for their own personal gain. This is far different than the story about “rogue traders” you’re going to hear when arrests are made.
We knew that the banking industry was corrupt. We didn’t know how corrupt, and for how long. But we’re beginning to get the picture. And the solution cannot be to arrest a couple marginal traders and let it end. A dismantling of this corrupt financial system is the only recourse unless you want to tolerate an economy based on fraud.




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“A dismantling of this corrupt financial system is the only recourse unless you want to tolerate an economy based on fraud.”
David, unless we dismantle the corrupt POLITICAL system, as well, a POLITICAL ECONOMY of fraud and DECEPTION, of manipulation and deceit, will have to be “tolerated” and, frankly, such “toleration” spells the vicious ending of civil society and, very likely, the demise of the human species.
It IS the POLITICAL ECONOMY which we are talking about, if we are fully honest, is it not?
How might you imagine, for even an instant, that these two, obviously related and intertwined aspects, which TOGETHER, comprise the “problem”, are separate?
If you can explain to me how unfettered greed and unlimited power are not BOTH equally “responsible” for our common “plight”, each buttressing and “supporting” the other, then I am all ears.
To imply, or suggest, that either can be brought to meaningful heel without equal and serious “attention” to the other is simply to allow both to go on, unchecked and unrecognized, in total, unassailable collusion.
What do you think DDay?
DW
Saw a segment on RT or presstv that every other suggested alternative is manipulated more than LIBOR.
LOVE the photo Dave.
You’ve done a really outstanding job this week. IMO, best week you’ve ever had.
THANKS!!!!
DW, you’ve had a prolific week as well both in the intellectual department and your occassional incursions into my area of specialization.
Of course, living in our country at this point in time, being a political observer and satirist is kinda like shooting fish in a barrel.
Washington, Jefferson and that Adams guy that makes the beer, would be so proud of us. /s
Amazing. Never heard of LIFFE before. Is it still in business? If not, what exchange(s) is (are) used for trading the futures contracts on LIBOR? It’s time to force full disclosure of, and tax, every trade on the LIBOR futures exchange(s), so we can begin collecting the enforcement fund to jail the traders who use the exchange(s) to defraud their counterparties.
Doesn’t that contradict Turbotax Timmy’s Congressionally testimony?
In that other dimension, they are raising a glass while toasting to you’ll’s efforts.
This segment of the Bloomberg story is not explained:
Bloomberg says criminal charges are being pushed back a month. Then it says the public is outraged. Then it says the public outrage “captured the attention of other regulators” but drops the ball entirely by failing to explain how “capturing attention” of “other” regulators resulted in an extra month delay in bringing criminal charges.
Seems to me, we would have waited six more weeks to see criminal charges (Labor Day), now we’re gonna wait ten more weeks (October). What magic does anyone expect in those four extra weeks?
You make me want to be a better man.
Boy, you’re really a glass half empty kinda guy. :-)
PTB don’t give a sh*t about all this. DOW up 100 pts in the last 15 minutes. Benron will print all the money Wall Street wants, no matter what.
From above:
Man…..we need one of those to seperate the regular fraud from the serious fraud.
I’m glad we don’t worship the queen, b ut the Brits have some good ideas we should adopt.
You’re right as usual.
But newspapers need headlines and guys like you and me need shit to talk about on a slow Friday afternoon. Lindsay Lohan hasn’t run over anything/anybody in over a week. Jackson kids have a new guardian. Now we all know that hot vampire chick Kristin Stewart is a slut.
Awww. Come on Dad, all the cool kids are doing it! You want me to be the only dork out there not raping and pillaging the global financial system?!
I’m going to MY Room! *stomps up stairs slams door* *heavy metal music starts blaring*
Quit talking about Jon’s daughter that way! But given the opportunity you wouldn’t have to ask me twice!
OT again. Don’t mean to interrupt this with something promising, but Judge Baltazar Garzon has been hired to lead Julian Assange’s legal team.
The Administration will get magically closer to the November election, when the charges are announced in October instead of September.
“We will be ready to levy charges in September, and…what? How far from the election? Wait…uh…OCTOBER. We will be ready to levy charges in OCTOBER!”
If they could re-kill Osama bin Laden in October, they would do that, too.