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Will the Libor Scandal Lead to Prosecutions? Some Hidden History and Current Prospects

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We have a video double header, with both clips addressing the question of what action officials might take as a result of the escalating Libor scandal. First is a segment on Max Keiser with journalist/broadcaster Ian Fraser. His interview starts at 11:45 of this clip and reviews when and why banks started to be treated as above the law in the UK.

Second is a Bloomberg interview with Neil Barofsky, former special inspector general for the TARP, on Geithner’s inaction when he learned of possible Libor gaming and the prospect for indictments in the US (click here if you have trouble getting the segment to load):

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46 comments

  1. wryzee

    Man, if only rapists or child molesters had cable programming objective enough to posit to their side of the story – hosted no less by a redheaded knockout – then the US would truly be diverse, open-minded forum for pluralistic discourse.

    Seriously, though, that Bloomberg clip is one perverse symptom indeed.

    1. OpenThePodBayDoorHAL

      This is pretty simple. Put a wheelbarrow full of money in the town square. Then tell someone they are in charge of guarding the wheelbarrow; but that no one will check if it’s still there, and if they do check and it’s gone, he will not be in trouble for taking the money. Why would anyone expect some kind of different outcome?

    2. Enrico Malatesta

      It just keeps unraveling – Now the Banks are “Too Big to Nail”.

      This has to stop. Banks & shareholders need to take their just punishment, we can’t afford them faking their medicine any longer.

  2. Maju

    Not just lack of regulation is a big problem but impunity is even more. In all these huge scandals of the latest years in Europe, nobody has yet gone to jail (and even trials are scarce): not in Ireland, not in Greece, not in Spain and not in Britain.

    And not in Germany or other states of “core Eurozone” either. While I read some stuff on the LIBOR part of the scandal, the EURIBOR one has gone totally off the radar already.

    Capitalism used to be very much questionable but somewhat consistent, solid and respectable: today it’s nothing but a festival of pickpockets… without any police.

    A whole new class has emerged: the kleptocracy and they own the system. For the rest there is police and jail, even for very minor or not proven crimes… but for the kleptocrats only impunity.

    1. LucyLulu

      If you watched Erin Burnett on CNN last night then you would know why the U.S. can’t prosecute LIBOR. It’s projected the banks might have to pay $14B in fines, per Ms. Burnett, and if they pay the fines, they won’t have the money to lend to borrowers. And you know how hard it is to get a loan these days.

      She didn’t claim tightened credit as the reason LIBOR wouldn’t be prosecuted, but expressed it as something she and her viewers needed to take into consideration.

      1. briansays

        the moral is if you are going to steal then steal big
        she should have been sent to re-education camp after she left CNBC
        still too pretty to give up all hope on

        1. F. Beard

          still too pretty to give up all hope on briansays

          Isn’t that the truth! Poor thing, to be cursed with such good looks.

  3. indio007

    I am so sick of people saying “JP Morgan did this.” and “The government did that.”

    No they didn’t . Those are fictitious entities.
    MEN AND WOMAN did this and that.
    When these people act outside their official capacity and duties they are acting “outside their office”.

    The gov’t didn’t turn a blind eye.
    Tim Geithner did.

    Barcley’s didn’t game LIBOR.
    PEOPLE WORKING THEIR DID.

    The institutions might be too big to fail , but the people working there aren’t.

    1. Tahoe58

      I believe this is exactly the point. Each and each ‘action’ ‘decision’ is made and taken by some concious mind ~ or so we hope ~ each and every one of these minds know the different between what is right and what is wrong. These minds are making concious choices ~ and are choosing wrong. And it is wrong, because I value honesty, integrity, and fairness. It would seem that much of modern society has migrated far from those values.

    2. Shawnna

      Exactly – but what’s your point???

      When a critical mass of financial and government leaders are corrupt, I think it is correct to refer to the industry and/or institutional entities as corrupt.

      And that is what we are witnessing – the complete revealing of a totally corrupt government and financial industry.

      1. indio007

        I beg to differ. The gov’t and corporations are not corrupt. The people running them are not doing their official duties. THEY ARE ROGUE.

        1. aono48

          “The institutions might be too big to fail , but the people working there aren’t.”

          Ok agreed

          “The gov’t and corporations are not corrupt. The people running them are not doing their official duties. THEY ARE ROGUE.”

          Sometimes an organization is set up purposely to rip people off. Think boiler rooms. In these instances, the people involved are not rogue put following SOP. Why, even the SEC sometimes refers to these entities as corrupt organizations.

          Further, why was the RICO act named the way it was?

  4. Conscience of a Conservative

    The manipulation of rates by banks is trivial compared to what central banks do daily. Controlling the price of money is what government’s do. And they’re not just content to stick do just that. The telegraph reports that back in 1999 when Gordon Brown dumped gold on the market it was done so to rescue a large bank who was exposed to high gold prices. And today we have the story of Bernanke and quanitative easing who admits that a goal of his policy is to prop up the stock market and create a wealth effect.

    1. Yalt

      Yes, because what’s truly wrong in the banks’ actions here is not the fraud, not the illegality or venality, but the interference with the great and holy unregulated and unfettered free market. From that perspective, all the petty crimes committed by private entities in the pursuit of profits pale indeed next to the nefarious price-fixing activities of central banks specifically created for the purpose of controlling the price of money.

      It’s a curious ethical standard but I suppose it has the virtue of simplicity.

      1. briansays

        i am really looking forward to ron paul speaking at the republican convention and making people squirm

        get your popcorn

    2. Walter Wit Man

      The private sector colludes to set prices as well. I fear the private sector setting prices more than I do the government . . . in theory.

      Although in practice the government is now the partner of the capitalists that own the private sector so they simply collude with the private sector.

      Any large venture by a large number of humans is “planned.” There is no free market magic. It’s a false religion.

      1. Walter Wit Man

        adding . . . the examples you refer to show private action by private central bankers . . . not government action.

        Even the part where they pretend like the government regulates the central banks is BS because the politicians are bought off by the private sector too.

    3. Susan the other

      Accusing the banksters of fraud is starting to make no sense. Their fraud is doing them in, they aren’t making a living at it; basically they’re frantically trying to stabilize the dollar. We need a broader explanation of what is happening. Try this: It’s Not Peak Oil – It’s Peak Dollar. Back in the 90s there was talk about the damage being a reserve currency (petrodollar) was doing to our national balance sheet. We were locked into a situation we couldn’t escape from because the world was pegged to the dollar. The “Market” was dependent on a strong dollar. Ergo the situation with China whereby we could only export dollars (treasuries) because the dollar was too high for fair trade. And the devastation of many of our industries. All we could do was go deeper into debt. It sounds a lot like Spain. In that we really couldn’t invoke a sovereign currency authority and print our way back to a healthy economy. Everything we printed went around the world faster than we could get our hands on it.

      I went to Max this morning and listened to Ron Kirby, then went to a link to lars Schall who translated a report (into German) by Pablo Escobar on the NATO war in the middle east the gist of which was we would reap the whirlwind in that oil patch because eventually we would lose reserve currency status. And I thought, well that really doesn’t make sense. So I’ve concluded it’s more propaganda and what the US is really doing is saying “Please don’t throw us in that briarpatch!” We stand to gain enormously by getting rid of the petrodollar. Maybe.

      1. F. Beard

        Credit creation defrauds everyone, borrowers, savers and ultimately the banks themselves. And remember that a murder-suicide is no less a murder.

        The banks have put themselves in desperate situation. In the boom they defraud to be rich and in the bust they defraud to survive.

        1. Susan the other

          But this explanation does kinda fit together. We seem to be forcing China to buy directly from the Saudis. Not Iran.

      2. F. Beard

        In that we really couldn’t invoke a sovereign currency authority and print our way back to a healthy economy. Everything we printed went around the world faster than we could get our hands on it. Susan the other

        That’s because we pay foreigners to park their US dollar export earnings in US Treasuries. However, a monetary sovereign like the US should NEVER borrow money.

      3. rob

        I don’t agree that the frauds are hurting the bankers. They make much of their money from fees up front.Inflated numbers all mean big returns… they keep the money… their shareolders are the ones left facing the devaluation of currency.The specific indviduals making decisions,have the perverse incentives to inflate numbers. They securitze risk,products and come up with whatever “innovation”their counterpart on the other end of some specific transaction needs ,to both get their bonuses.despite the lack of sustainability in this financial services swindle,these people make out like gangbusters.When they go belly up.. we bail them out.. and they file the right paperwork and start all over again.WE the people need this to all work out. but the short sighted ,over compensated among us can ride out the storm till the next wave /bubble comes by.

  5. polistra

    As usual, everyone is trying to “save LIBOR” from the “few bad apples”. As usual, wrong. LIBOR was invented in 1984 by the financial Mafia, as a tool to make world conquest easier. We got along just fine (in fact a WHOLE LOT BETTER) before it was invented.

    Solution: eliminate the entire structure. Eliminate everything that ties banks together into a rigid global structure. Eliminate all abstract derivatives.

    We had it right in 1936. Go directly to 1936. Do not pass Go, do not collect $600,000,000,000,000.

    1. Walter Wit Man

      I agree we need to get to the root of the problem.

      But maybe the problem is private central banks? Who controls the BIS and the world’s central banks?

      Why do we let them do this?

      1. rob

        The “BIS” Bank of international settlements. I think of this bank as a tool for evasion of international laws(i.e.nationstate sovereignty).This bank was created as the world prepared for world war II.Yes it was 1930…but there were people who knew that a second great war was inevitable,before some of the main actors were even set upon the stage(hitler,mussolini,roosevelt…the bankers knew they should be protected just in case…..Now these bankers… were people from powerful family dynasties,and insiders connected to major industrial concerns…. This tool was perfected later in the thirties…. with the international agreements that monies deposited here could flow to any side ,despite a countries legal prohibition of trading with an enemy in the time of war…..WWII was a grand example….the story is too deep and grand to detail here… a great book……
        by Charles Hingham 1983,”Trading with the Enemy,the nazi-american money plot 1933-1949″after files are declassified,this book details how ford built trucks for the germans, how GM supplied aviation fuel chemicals, how standard oil of new jerey sold more gas to the axis(thru spain at the new port of lading in venezuela)nthan the allies,while americans were being rationed,how ITT supplied most of the nazi’s communication systems,as well as ball bearing,chemicals,and money… before during and after the war…..I’m rattling on … but the story of this bank….WHAT THE HELL?… never mind the iran contra days,the cold war days…. these are people… and their family names are all around… and when people mention who they are they get called conspiracy nuts.Despite the fact that conspiracies still exist to this very day, and those connected seem to suffer so little.. and eveyone elsepays the bills… no matterwhat.

        1. Susan the other

          Well, we tried to give the Russians Kerensky in 1917 but they weren’t interested. It was a zeitgeist thing. So then we decided to give them Hitler. And to smooth things over, we played both sides and gave the Russians war supplies, lots of them. And in the end it had to have been the BIS’s biggest fiasco. 50 million deaths, no victory. No wonder everyone has tried not to repeat it.

          1. rob

            Yeah,the bush family is an amazing thing…. How a family can be so connected with so many enemies of america… while simultaneously being praised for their loyalty;is just mindboggling…
            While prescott bush was a director of the Union banking corp at the time in 1942 when the bank had iis assets siezed b the alien property custodian,for trading with the enemy…he of course denied it and no one seemed to press the issue.the union banking corp was created in 1924.. while george herbert walker was at the helm(walkers married bushes,prescots father in law.namesake of “W”.)They were also part of the brown bros/harriman banking house/s..and owned steamship lines,steelworks and all sorts of industry that supported a decent percentage of the nazi war machine.
            Geore herbert walker part of the American international corporation in 1915 supported the bolshevic revolution in petrograd,then walker and bush support the nazi’s,then george hw bush;whose part in,bay of pigs, iran contra,savings and loan scandal,iraqgate,etc(and his brother johnathan), is involved in advancing china since he/george was the first us ambassador there in 72,to when johnathan created the us-china chamber of commerce in 1988.Now with the bush boys niel,marvin,beingmajor owners of real estate and assets in china,behind the veil of holding companies and lawyers,(and others with names like bush,ellis,walker).
            Another great book.by Peter Brewton,”The mafia,the CIA, and george bush”1991 or 1992.A detailed account of the savings and loan scandal.from the reporter who broke the story in houston….aside from a complete scam on the taxpayers who picked up the 500 billion pricetag…there is a beginning as to the bush family connection to the bin laden family.. and a young george W, and his buisness partner salem bin laden.Kids whose dads did buisness for years.Salem was one of osama’s older brothers..Then we have9/11,with a certain level of an inside job,that began under the clinton administration… which like the crossing of the rubicon, set this country on its current day fascist direction.where mussolini said fascism should be called corporateism…we have free trade and corporateism… laws of men.strict laws for the masses,immunity for those inside the circles.We had bush/cheney starting wars under false pretenses, the highest form of treason.We have occupations in countries where there is supposedly a sovereign elected gov’t… and the people don’t say boo… we just bicker… we are sliding down this slippery slope..to the core…and are we supposed to get a little exited about a little fudging of a little number…. so what of 350 trillion of associated stuff?

        2. Walter Wit Man

          Thanks for the book recommendation. I like Mae Brussel’s preface to the book.

          I still wonder if certain people became dedicated fall guys for American capitalist involvement in Germany, for e.g. Ford. While discussing WWII here the other day I listed many other American business interests in Germany in the 1920s. Of course, like F. Beard reminds us, those that controlled the money supply and the central bank probably profited the most. So maybe the bankers and even oil men should be listed before Ford (but I’m just speculating here).

          I feel like we only have 1/10th of the story.

          1. rob

            what henry ford and edsel did;did pale in comparison to the bankers who kept the enemy from going under… and then capitalizing on the spoils of war.After all… USMC gen.Smedley Butler’s book”War is a racket” 1935…. outlined exactly what is happening today….. the faces have changed(though many are grandsons and great grandsons/daughters)…but the house of morgan and dupont..among others..and the attempted coup of 1934… where the bankers were going to oust roosevelt and get a fascist in office…supported by the american legion….who were going to style the new america after mussolini’s muscle in the street.after all.. the greatest generation took all kinds….the liberty league and the american legion boasted a million strike breakers for the cause….My point is really that we the people are continually fed lines that are not tue….. today we have wkileaks… and the campaign to both defame while attempting to ignore….These people always have excuses they tell themselves and us.

          2. rob

            YES,
            I agree, the preface says so much.For me, I just can’t help but wonder what the people who lived through those years and hardships feel/would feel if they knew they were sold out and lied to by so many that they trusted?

  6. EVmarc

    NO regulators proscuters are the other half in the theift
    From BAR It is almost as if a bank has just been robbed, and the customers are all worried about the way that the robbers are calculating the value of the loot. The fact of the matter is, the robbery was an inside job. In this case, it appears that virtually all the big bankers and the people who were supposed to be regulating them were in on the crime
    http://www.blackagendareport.com/content/libor-ain%E2%80%99t-nothing-acronym-we-must-abolish-finance-capitalist-class

    1. LeonovaBalletRusse

      EVm, Glen Ford is a Patriot of great courage. His blog at The Black Agenda Report is brief, but densely complete, telling the stark truth about LIBOR manipulation as but a blip on the record of what surely is the Global Finance Criminal Syndicate of the .01%and their .99% Agency du jour.

  7. Cheyenne

    Ian Fraser cuts loose with this double-stunner at 15:06…

    “And on the day [in July 1992] of the quashing of [certain bankers'] sentences, a friend of mine was phoned by a contact of his in the SFO, Serious Fraud Office, and the contact in the Serious Fraud Office basically said, ‘the message has come down from on high: there will never again be a prosecution of a high-level banker or a mainstream City institution.’ So it would appear from that moment on, there was a kind of new agenda had been set, whereby people in the City and bankers in particular were given carte blanche to do as they chose. This could include, you know, false accounting, this could include defrauding their clients. It could include money laundering. And it seems a dangerous precedent was set at that moment.

    “But the situation, if anything, got worse under Tony Blair and Gordon Brown when, in 2000, they passed an act, called the Financial Services Markets Act of 2000, which basically included a clause which said that the competitiveness of the City was more important than the rule of law. It said that regulators must consider the international mobility of financial businesses before taking enforcement action, and they must avoid damaging the UK’s competitiveness.”

    To review: the UK’s 1992-forward policy of not prosecuting any financial crimes, however outrageous or damaging, was codified by statute in 2000.

    And with that, we have the absolute guarantee of total collapse.

      1. LeonovaBalletRusse

        Lambert, thanks for reminding us of the crucial significance of the diktat that the Code is the law. Surely the INTENT to deceive/defraud is embodied in the Code.

      2. MRW

        @Lambert Strether,

        That was an important article you wrote, IMO. The ramifications are significant.

      3. Susan the other

        That was a good write-up Lambert, albeit paralyzing. But we should figure out how to deal with it.

    1. MRW

      @Cheyenne,

      Thanks for typing that out. I was taking notes but couldn’t write fast enough.

  8. Enraged

    HA HA HA! “There would appear to be “criminal misconduct here”.

    Where the hell has he been for the past 7 years (and probably much, much longer…)?

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