Massive Furor in UK Over Libor Manipulation; Where’s the Outrage Here?

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In case it isn’t yet apparent to you, the unfolding scandal over manipulation of Libor and its Euro counterpart Euribor is a huge deal. Even though at this point, only Barclays, the UK bank that was first to settle, is in the hot lights, at least 16 other major financial players, which means pretty much everybody, is implicated.

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. This is an overview from the Financial Times of Barclay’s misdeeds:

The bank admitted that it lowballed estimates of its borrowing costs from late 2007 to May 2009 because it wanted to reassure investors of its strength during the financial crisis and it believed other banks were doing the same. It also admitted that its traders improperly influenced the rate submissions from 2005 to 2008 to make money on derivatives.

Note that, according to Barclays, there were two scandals: one is the usual “rogue traders” sort, which took place from 2005 to 2007 (funny how these CEOs take credit for overall performance for bonus purposes and blame inadequately supervised lower level employees whenever real trouble arises?); the second, as we will discuss, is that Barclays submitted lower rates for the daily Libor “fixing” than its actual funding costs to make itself look healthier than it was during the crisis. Readers in comments at the time were reporting that published Libor was 30 to 40 basis points below where they found the market to be. Since lawsuits are being launched against Barclays, we will likely see estimates of the impact of the manipulation.

This is Diamond’s defense explanation of the 2005-2007 Libor manipulation:

Barclays traders attempted to influence the bank’s submissions in order to try to benefit their own desks’ trading position. This is, of course, wholly inappropriate behaviour. Barclays submissions should reflect the cost of interbank borrowing rather than individual traders’ positions. The interventions in question were typically on the short term one and three month rates relevant to the wholesale markets and not the longer term rates used to set, for example, retail mortgages. It is also important to note that these traders had no way of knowing whether or not their actions would ultimately benefit or detriment Barclays overall. They were operating purely for their own benefit.

This inappropriate conduct was limited to a small number of people relative to the size of Barclays trading operations, and the authorities found no evidence that anyone more senior than the immediate desk supervisors was aware of the requests by traders, at the time that they were made.

“Immediate desk supervisors” sounds pretty junior to the layperson, but desk heads are often managing directors. It will be interesting to see if they are as low-level as Diamond implies.

This revelation has led to an explosion of harshly critical media coverage in the UK, as well as stern comments from regulators and Labor party members. Jonathan Weil called it “The Golden Age of Financial Journalism, British Edition” and itemized some of the raft of accounts. The Guardian quotes Mervyn King, Governor of the Bank of England:

It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.

Could you imagine Ben Bernanke saying that? And consider this remark from a Guardian article by Will Hutton:

Investment banking is an organised scam masquerading as a business. It is defined by endemic conflicts of interest, systemic amoral behaviour and extreme avarice. Many of its senior figures should be serving prison sentences or disgraced – and would have been if British regulators had been weaned off the doctrine of “light touch” regulation earlier and if the Serious Fraud Office’s budget had not been emasculated by Mr Osborne. It is a tax on wealth generation and an enemy of honest endeavour – the beast that is devouring British capitalism.

It’s been remarkably difficult to find that sort of blunt assessment in our mainstream media, even though the US was the incubator of the subprime RMBS and CDOs that brought the global economy to its knees.

A first bank executive head has rolled, something we have also not seen in the US except by failure or acquisition. The Barclay’s chairman Marcus Agius is expected to resign on Monday (update: it’s now official).

The content of the official documents have led to further revelations. The FSA remarks had a coded reference to conversations between the Bank of England and Barclays about their Libor submissions and market perceptions. Robert Peston at the BBC broke the story that it was Bob Diamond, then head of Barclays investment bank, now its CEO, who spoke with Paul Tucker, deputy governor of the Bank of England in the fall of 2008. Per Peston:

The heart of the matter is that in 2008, at the height of the credit crunch, the perception of banks’ financial strength was linked to how much they had to pay to borrow. Barclays managers were very worried that the appearance of the bank paying more to borrow than other banks was damaging confidence in its health.

So Barclays so-called “submitters”, the managers who gave borrowing data to the British Bankers Association’s Libor-setting committees, consistently told these committees that Barclays was paying a lower interest rate to borrow than was actually the case.

What is striking is that even the artificially suppressed quotes for Barclays’ borrowing costs provided to the BBA committee were higher than other banks’ quotes.

After the conversation, Barclays management gave an explicit instruction to lower the Libor submissions. The bone of contention is that neither Tucker nor Diamond have records of the conversation. Diamond conveniently recalls that he got the Bank of England’s blessing to lower the bids; Tucker apparently says no. (Note that even if the central bank did consent to the manipulation in October 2008, Barclays had been manipulating Libor actively in 2005 to 2007).

The Libor scandal has escalated into a political row, with Labor demanding a full bore, year-long inquiry into bank pay and culture (!) as well as a criminal investigation of Barclays. The conservative prime minister Cameron instead plans a narrower, independent review of the Libor bid rigging.

The Barclays Libor manipulation looks is on the verge of busting out into a full-bore News Corp. level scandal, the sort of eruption that leads to lasting changes in the political landscape. This Wednesday, Diamond is testifying before Parliament; that is almost certain to escalate the controversy. The British financial media continues to chip away at the story, with further accounts over the weekend. From the Financial Times, which started reporting on this five years ago and persisted despite years of denials by the banks:

Bankers, traders and investors complained to US and UK central banks and regulators that false information was being supplied for the setting of a critical London lending rate as early as 2007.

But only the Commodity Futures Trading Commission, the US regulator, jumped on the issue and started demanding information about the setting of Libor, the London interbank offered rate, which is the benchmark for $360tn in mortgages, credit cards and other contracts worldwide.

The CFTC started investigating in May 2008. It was contacted by a whistleblower, and by spring 2010 it had enlisted the UK Financial Services Authority with strong evidence of attempted manipulation.

The Independent reports that senior Conservative party members may have been involved in the five year coverup of the Libor manipulation:

The Independent on Sunday has learnt that the Conservative deputy chairman, Michael Fallon, is a board member of a leading brokerage firm that dominates the rates market and which has been asked to co-operate with the Financial Services Authority’s investigation into malpractice across the City.

Mr Fallon is a close ally of David Cameron and a senior member of the Treasury select committee that will question the Barclays chief executive, Bob Diamond, this week, prompting demands from Labour that he should declare an interest. The Prime Minister continues to resist calls from Ed Miliband for a Leveson-style inquiry into rate-fixing…

The IoS can also reveal that the Bank of England was aware of concerns over Libor five years ago, and discussed it in at least two meetings with representatives of some of the City’s biggest financial institutions.

And the Telegraph features a bank staffer who was not at Barclays describing how open the price manipulation was during the crisis:

It was during a weekly economic briefing at the bank in early 2008 that I first heard the phrase. A sterling swaps trader told the assembled economists and managers that “Libor was dislocated with itself”. It sounded so nonsensical that, at first, it just confused everyone, and provoked a little laughter.

Before long, though, I was drawing up presentations to explain the “dislocation of Libor from itself” for corporate relationship managers. I was deciphering the subject in emails, internally and externally. And I was using the phrase myself openly with customers of the bank.

What I was explaining was that the bank was manipulating Libor. Only I didn’t see it like that at the time.

What the trader told us was that the bank could not be seen to be borrowing at high rates, so we were putting in low Libor submissions, the same as everyone. How could we do that? Easy. The British Bankers’ Association, which compiled Libor, asked for a rate submission but there were no checks. The trader said there was a general acceptance that you lowered the price a few basis points each day.

According to the trader, “everyone knew” and “everyone was doing it”. There was no implication of illegality. After all, there were 20 to 30 people in the room – from management to economists, structuring teams to salespeople – and more on the teleconference dial-in from across the country…

The main business of the day was to deal with the deepening crisis. And questions were raised about what we, in one of the bank’s sales teams, could be doing to earn our wages….

As part of that, we had to explain the “dislocation of Libor from itself”. As the trader put it, everyone knew that we couldn’t borrow at Libor, you only needed to look at the price of our credit default swaps – effectively survival insurance for the bank – to see that.

What that meant was that even though Libor may have been, for example 2pc, the real Libor rate the bank was paying was more like 5pc or 6pc. So in fact, we needed to be lending money at Libor plus 3pc or 4pc just to break even. That is what we were telling clients.

Now we are seeing some signs in the US of an increased focus on the parasitic nature of big finance in the US media, of recognizing that particular abuses are part of a much larger pattern. This may merely be a coincidence of timing, but look at this section of a Bloomberg op ed by Virginia Postrel (hat tip reader John L):

Lord knows we’ve had more than enough scandals ginned up by Wall Street over the years, and the message that banking executives proclaim after each is: “Don’t worry, we’ve learned that lesson, and it will never happen again.”…

We are told repeatedly that when Wall Street’s deeply flawed incentive system leads to one bad outcome after another, year after year, it will never happen again. Yet it does. And you can add this vital business to the list: The way state and local government officials hire Wall Street firms to raise the billions of dollars their municipalities need to build schools, hospitals, airports and sewers, and provide other essential services.

For some reason, Wall Street never seems to get the message that bribing government officials — and paying each other off — to get access to lucrative municipal-bond underwriting business is illegal. Wall Street has never learned this lesson because the miniscule price it ends up having to pay for misbehaving has absolutely no deterrent value whatsoever.

Indeed, what the cartel of the major banks does over and over again to win underwriting business from local government officials, and the way the cartel then sorts out among itself who gets what fees, is a microcosm of a much wider problem of the increasing power that the Wall Street survivors of the financial crisis have over the rest of us.

But even if US banks have been as deeply involved in Libor manipulation, it’s very unlikely that we’ll see anything remotely like caustic the UK press coverage here. The first reason is many MSM journalists went to the same schools as top bankers, and are reluctant to see members of their class as crooks (this is a long-standing problem, see Kathryn Olmstead’s “Challenging the Secret Government,” which describes how quickly the media retreated from enterprising investigations after Watergate). This has been exacerbated at some institutions by the personal affiliations of top executives. Michael Thomas has argued that the beginning of the end of the New York Times occurred when when Punch Sulzberger joined the board of the Metropolitan Museum: “It meant he would be dining with people he should be dining on.”

By contrast, there seems to be less identification between journalists and leaders in business in government in the UK. Martin Wolf of the Financial Times, speaking at a financial journalism conference at Columbia, remarked that British journalists didn’t see themselves as having a loft role, unlike their American counterparts. But he said that he (and by extension other journalists) assumed top executives and pols were dishonest. That sort of native skepticism seems to have been bred out of the US press.

Second is corporations and government officials play the access journalism game adeptly and journalists are afraid of being cut out of the favors that are doled out to friendly reporters, namely, exclusive interviews and leaks.

But I think the biggest culprit is our political duopoly. The Labor party in England really does represent different interests than the Tories, and is willing to go after the Tories and their allies in a much more persistent manner than our Dems, who ultimately depend on the same funding sources as Republicans. In England, as the News International scandal showed, there is the possibility of real amplification: of media discoveries being fed into political investigations, which in turn lead to more media ferreting. The fact that someone who seemed to have such a lock on power as Rupert Murdoch could be cut down is no doubt a bracing message to the British press, that they have infuence that for the most part they have failed to exercise effectively. So, ironically, a country where banking is a much larger percentage of GDP than the US may be the one where banking misconduct is finally unearthed and at least some of the perps suffer. And that would show our own officials’ failure to act to be the disgrace that it is.

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  1. Guy Fawkes

    SIXTEEN BANKS INVOLVED IN PRICE-FIXING THE LIBOR and our media and Facebook still up-in-arms over Obamacare.

    This is criminal racketeering. Barclay’s CEO shouldn’t be able to resign, he should be shackled off to prison along with the rest of these sixteen CEOs.

    OMFG, will the criminality ever stop???

    1. C

      Well it won’t stop as long as the DOJ thinks that “cooperating with a compliance order” for 2 years counts as punishment.

    2. Maju

      “will the criminality ever stop?”

      No. It might stop because of two reasons only:

      1. Guillotine, lots of guillotine (or equivalent, like putting banksters to do forced labor for decades as penalty).

      2. Effective suppression of private property, as in a communist revolution.

      Otherwise the criminality will, of course, continue and grow. Paying fines and being sued is just part of “business”: that does not dissuade anyone with deep pockets, but guillotine would do.

      1. pws

        There’s no need for any of that when we have one of the worst Gulags in the world already.

    3. Susan the other

      The weird thing is that it wasn’t Diamond who resigned. It was the Chairman of the Board. Because the rest of the board decided they wanted to keep Diamond!

    4. LeonovaBalletRusse

      GF, and why isn’t Merkel up in arms over this manipulation of Libor and Euribor? Right now is the time to raise the CARDINAL ISSUE of the “meaning” of a full-fledged “European Union”–which MUST entail conversion of the “home currency” to the “Union currency”–as in the U.S. Why should the “British Imperial” City-biased “Referee” be permitted to manipulate Euro exchange, effectively fixing the game according to his hidden bets?

      NOW is the time for Merkel and Hollande to ADDRESS this Euro-skewing INEQUITY due to the City’s “hedging” of EUROZONE rules and regs, for fun and profit to insiders within the hallowed gates. The European Union States must be obliged to use the Euro, the “Unifying Currency,” in any PLAN for REFORM. “Half measures avail us nothing” should be the mantra. AFTER this SOLID BLOC of Political/Economic/Currency European Union is ESTABLISHED, then JUST “currency exchange” rules/regs/ratios may be put into place by those within the EuroStateCurrency System. NO country/person OUTSIDE of the ConsolidatedEuro System should have any power to SET Euribor rates of interest.

      Really, why did the Euro and European Union “geniuses” even permit this “double standard” – this “losing hedge” to its “glorious” system?

      1. Frances Coppola

        Because if you look at the list of LIBOR panel banks you will see listed Deutsche Bank, which is undoubtedly up to its eyeballs in this. If there is one thing Merkel is good at, it is defending the interests of German banks. She isn’t going to rock this particular boat.

        1. LeonovaBalletRusse

          FC, DB MUST join in, because the “UK” refused to accept the Euro currency, and moreover the guardians of City interests refuse to accept any World standards that impinge on their “profitability” by hook or crook via “Finance” imports and exports of universal grifting.

          NOW is the time to question the MEANS of this “off-sides” manipulative “profitability” in “European” finance, American finance, etc. Up to now, this has been “the only game in town” but now the City has impugned itself as the “worthy outside referee” of “finance” and “currency exchange” FreeTradeNOT.

          All bankers heretofore forced to yield to the City’s machinations will “strike while the iron is hot” if they have the nerve. This “unique opportunity” never will come to them again. They should PRESS Control-Alt-Delete immediately.

        2. Generalfeldmarschall Von Hindenburg

          Re: Merkel defending German banks… I doubt Deutsche Bank is anymore German than “Bank of America” is patriotically American. They’re all post national elite power centers. You don’t have to be a nationalist to appreciate the dangers of an incipient feudalism as a new type of “enclosure” of the commons by Big Capital crowds out the 99.99% in the name of efficiency, economy of scale, six sigma or wtf ever.

  2. C

    Letters to the editor anyone?

    I agree this will likely not be covered much here. I heard a rather disappointing blurb the other day on NPR which made it sound as if this was just a little thing being investigated and vastly understated the importance.

    Nevertheless I have also found that many news outlets haven’t just retreated from investigative journalism, they don’t investigate. Rather they, unofficially, rely on other news sources and their own readers/listeners/viewers to tell them the news which they then report.

    That being the case and with them being desperate for content a barrage of LTEs to them and their journalists saying “here is a vast story you are ignoring and the content is free” may motivate them.

    It may be a waste of time I admit but in my experience a small body of people can sometimes force a news organization to do what they least like doing, report news.

    1. Carla

      @C: “Rather they, unofficially, rely on other news sources and their own readers/listeners/viewers to tell them the news which they then report.”

      Actually, I’m pretty sure they depend on their OWNERS to tell them which stories to report. Bite the hand that feeds them? Highly unlikely.

  3. psychohistorian

    Such a wonderful posting. Really nailed why the US does not “see” this issue.

    I think we have entered the duck and cover period. What should be considered criminal behavior by all elements of the FIRE sectors is being overlooked while prisons keep being built to hold the pot smokers and those who can’t pay their bills and do something stupid.

    The duck and cover period is when major dislocations in products and services start to occur as the world economies wind themselves down. By the end of 2012, right after the US election, if not sooner for other geopolitical reasons, I think the can kicking will end.

    Wait until the casserole cacophony starts worldwide….go long on ear plugs.

    Let the concert begin!

    1. NY212

      I have a more cynical take, really, this is only possible in the first place because Euro banksters are lower on the pecking order than Homeland banksters. The latter stand to gain if the former get the axe. It’s just more the same pattern of bankster prosecutions we’ve seen for the past two years.

      1. Fïrëan

        Bob Diamond is an American, from Massachusetts. As the head of BarCap (Barclays Capitol)he initially walked away from the negotiations to save Lehman Bros., then after the resulting bankruptcy he negotiated a take of over by BarCap of the better asssets Of Lehman. Hardly a banker “lower on the pecking order”, I’d say.

  4. bob

    I have a hard time hearing “regulation” “investigation” and “London” in the same sentance.

    It’s a giant casino. Giving them any credit for policing is madness.

    1. jake chase

      Agreed. The real joke is that the post gives credit to the Brits for expressing outrage, while the major financial problem in today’s world is the cowboy atmosphere in the City of London. The UK regulators can’t wire their way into a pay toilet and don’t even want to since the entire British economy depends on facilitating financial scams. All you will see is tabloid bullshit and Parliamentary platitudes.

      Meanwhile the US class action bar will be dining on Barclays for years and years and years. This makes asbestos look like something good to eat by comparison.

  5. john c. halasz

    Umm…Virginia Postrel is a libertarian hack of long standing. Her comments are nothing more than a Claude Rains moment.

    1. Yves Smith Post author

      I’m well aware of that. The fact that even she is scolding banks suggests there is a shift underway in willingness to challenge them.

      1. LeonovaBalletRusse

        Like Brad Delong et al. trying to re-position themselves away from the sinking ship, AS IF…

    2. F. Beard

      Anyone with the slightest pretense of being a “libertarian” MUST be against the government backed banking cartel.

      1. john c. halasz

        That’s the “no true Scotsman” fallacy. Greenspan after all was famously a disciple of Ayn Rand.

        1. F. Beard

          A government backed/enforced private money monopoly is on its face NON-LIBERTARIAN. As for Rand, she was a hypocritical fascist since she claimed to be for liberty but was in favor of a government enforced gold standard.

  6. Bill

    Yves, for an alternative take on the British media, check out Medialens. It’s run by two very astute British media critics.

    Despite the superficial openness, the British media is in many ways not too far off from the US media.

    1. Yves Smith Post author

      The British media took down Murdoch. I don’t see the US media as willing to take down someone less powerful, say Roger Ailes. And they are out full throated against the banks now. So why are the outcomes different?

      1. Neo-Realist

        I don’t consider Murdoch down until his right wing propaganda media empire is broken up and the pieces picked up by interests that utilize them for serious independent journalism. He’s suffered some public embarrassment, and some underlings have gone under the bus, but FOX News and the Wall Street Journal among other outlets continue braying their poisonous reactionary swill.

        1. Warren Celli

          Agree about Murdoch.

          The US media and UK media are the same beasts with different fur.

          Deception is the strongest political force on the planet.

  7. AncientBrit

    Congratulations Yves on publising this in the U.S.
    British public opinion is outraged, it is the subject of street talk, the U.K press is on a roll (a sight to behold) whilst Cameron and banking spokesmen are way behind the curve.
    When some press article appeared a couple of days suggesting that there should be no knee jerk reaction to unfolding events and no witch hunt, it was followed by an outpouring of derision.
    The anger had been growing in this country for years and, now the fuse has been lit, the fire will be no more “conatined” than Bernanke’s subprime debacle.
    You are right “bob” to have a hard time hearing of regulation, investigation and London in the same sentence. That is why the population now wants revenge. It never agreed with the lack of regulation in the first place.
    It is just possible that this is the straw to break the camel’s back of the worldwide maniplation.
    My gut reaction has, for quite some time, been as “psychohistorian” suggests which is that the can kicking will end at or after the U.S. Presidential election in Novemeber.

    1. Dan Kervick

      Michael Thomas has argued that the beginning of the end of the New York Times occurred when when Punch Sulzberger joined the board of the Metropolitan Museum: “It meant he would be dining with people he should be dining on.”

      This nails it, Yves. Both the people who guide the major media in the United States and the influential figures they report on belong to the same incestuous world of big money, capitalist philanthropy, elite educational institutions, corporate boards of directors and plutocratic governance. They are guided by a genteel social Darwinism and firm conviction of the moral and genetic justice of their rule. They think they are doing God’s work in defending the governing social system they have built, and the prerogatives of the mighty and the superior individuals who run it, against possible encroachments and oversight from the ignorant hordes in the hinterlands out beyond Manhattan, Westchester and Fairfield. When they are not using their media organizations to cover up the misdeeds of the their fellow plutocrats, they are using them to treat the masses to “reality” shows that instruct us on what miserable and deserving losers we are, and on the proper standard for obedient and competitive groveling in the new neo-feudalist order.

      1. Dan Kervick

        Take a look at yesterday’s NYT editorial instructing Democrats on why they must not be mean to corporations.

      2. Up the Ante

        Very good, Dan.

        ‘reality’ shows, and the recent ‘dance moves’ of, say, John Travolta ?!


    2. LeonovaBalletRusse

      Why does Cameron’s stonewalling remind me of the waning days of Versailles?

  8. Conscience of a Conservative

    Perhaps no outrage here because most folks understand Libor as that thing that their adjustable rate mortgages and unsecured debt is based on. That the BBA understated the Libor rate resulted in “some” savings on their debt. Lost is that banks effectively stole money from counter-parties and pensions on the other side of derivatives trades. Lost on them is that wht the Libor scandal represents is fraud and collusion.

    1. john c. halasz

      As far as I understand the matter, the relevant libor rates being manipulated were the shorter dated ones, whereas the relevant ones for adjustable mortgages and loans and the like were the longer dated ones.

  9. K Ackermann

    The outcry here might appear once US banks are charged.

    The language is changing. I watched Yves and Taibbi talk about the banks, repeatedly using terms such as fraud, criminal organization, etc.

    A dozen articles in the Guardian today used similar language. Blogs are becoming important sources of news for many people.

    1. LeonovaBalletRusse

      K, at the “tipping point,” the pols will side with the masses, unless they are “blood brothers” with the .01%.

    2. smellslikechapter11

      Agree with that no one here is going say much until the other shoe drops on the American banks.

      But this might be good one for Schneiderman under the Martin Act. Think about the insurance bid rigging with Marsh.

      Also, don’t think that the US public will get its bowels in an uproar until you show this cost them money. They just don’t care about hedge funds stealing from banks and banks stealing fromn each other.

  10. Austin Fletcher

    As a UK wage slave I’ll have to disagree with your assertion that the Labour Party ‘really does represent different interests than the Tories.’ At the executive level the Labour Party are completely committed to same neo-liberal agenda as the Conservative party: criminal wars; privatisation; de-regulation; endless corporate welfare; rigged cartel capitalism, etc. Blair was an extremist in pushing forward this agenda, even by Tory standards. Of course, in opposition Labour fulfill the standard role of political showmen, and make a pretence of critiquing their own agenda, but it’s pure fraud.

    There’s even a term for this in official discourse. The Labour Party are Her Majesty’s loyal opposition.

    1. rotter

      “Blair was an extremist in pushing forward this agenda, even by Tory standards”

      yes, tony “labor party” blair..just as we have our very own barrak “liberal democrat” obama.

      1. proximity1


        Neither of them “coming up from, or out of” the “grass-roots” but instead, media-&-management creations which then had to recuperate the popular vote–by lying shamelessly about what they were really all about.

      2. Up the Ante

        “yes, tony “labor party” blair..just as we have our very own barrak “liberal democrat” obama. ”

        A ‘liberal’ ‘democrat’ treated as an irrelevancy by top military brass whenever in their presence.

  11. annie

    the past several days i have written letters to the nyt asking where their coverage of the scandal is. most days they have absolutely nothing on it.

  12. vlade

    I’d slightly challenge the Labour vs Tory difference. There’s definitely much more difference than Rep/Dem, but that’s a relatively new thing. Thatcher dropped a lot of regulation, but Blair/Gordon saw City as their main constituency.

    That said, even for Tories these days open support of banks is a no-no (unless you’re a maverick like Boris Johnson), so on that front UK is still further than US.

    Most importantly though, BoE (who’s shortly going to be the main bank regulator) is much more agresive these days than Fed (not that it’s hard, mind you). I haven’t seen much action yet though, even if the talk is there (Haldane for one, King and few others).

      1. Synopticist

        Ian Blair was head of the Metroplitian (London) police in the noughties. He was appointed by the Blair government, but thats about it.
        In fact, the Murdoch press really targeted him, thats come out during the leveson inquiry. He didn’t want to get too close to them, so Murdochs papers went out of their way to screw him over.
        He was basically sacked by the incoming London tory mayor, who thought he was too closelly associated with the labour government.

  13. R.S.S.


    A British bank – or more than one British bank – was caught cheating at its branch in the US in its communications with the Bank of England which accepted whatever it was told and only an investigation in the US by Commodity Futures Trading Commission uncovered the Libor manipulation and your evidence-free assertion is it *must* be worse at US banks in the US? How can it not be? What a bunch of BS! Try to cut down on the sycophancy. There is no natural law which says British are less corrupt than Americans.

    1. Yves Smith Post author

      Please read the post. There is no such statement there.

      My comment was that, quoting Martin Wolf, the UK media was more skeptical of authority than the US media and 2. That there were more meaningful differences between the Conservatives and Labor than between the Republicans and Dems, which allowed for amplification of politically “hot” stories.

  14. David Habakkuk

    Certainly, it is not clear how far, in relation to the financial sector, there was any more of a ‘duopoly’ in the United States than in Britain. After all, in January 2008, Blair went to work for JP Morgan as a £2m. a year advisor!

    However, although the question of who parties do and do not represent is an important one, ideas are quite as important as interests. When in 2002 the Labour Government arranged for Alan Greenspan to be awarded an honorary knighthood for his ‘contribution to global economic stability’, this was not because they were corrupt. They had simply swallowed the neo-liberal hogwash peddled by most ‘mainstream’ economists, which Yves Smith has spent so much time and energy dissecting.

    And Blair, who is essentially a rhetorician, swallowed his own propaganda. The fact that doing so allowed him to feather his own nest is significant – but venality was the product of his ideological conversion, rather than the cause.

    The delusional beliefs which led to the current shambles – including the ‘masters of the universe’ view of figures like Bob Diamond and Jamie Dimon – were one which by the late Eighties had come to be quite genuinely held by a large number of perfectly well-intentioned people across the political spectrum in Britain.

    And likewise, both disillusion with such figures – and also resentment at the economic effects of the crisis – now cross traditional political divisions: as is very evident from the comments on stories in the Daily Telegraph. And this is useful: it means that in stalling demands for investigation and action Cameron and Osborne run the risk of allowing Ed Miliband to divert attention from his own party’s responsibility for the crisis. So fear of being politically wrong-footed provides some kind of counter-weight to concern not to alienate financial backers.

    Obviously, a full investigation into the issues raised by the fixing of Libor would open up many cans of worms, on both sides of the Atlantic. And Robert Peston’s story suggests that the complicity of officialdom, as much as the vested interests of the financial sector, is likely to create major obstacles to such investigation.

    What the story also suggests is that at least sometimes this complicity is the result of events running out control: that the collapsing of the house of cards of which Greenspan has to be one of the principal architects has left too many skeletons in too many cupboards.

    Even for hardened skeptics about the ‘masters of the universe’ kitsch, there are limits to the ineptitude which it seems plausible to attribute to figures like Diamond. It appears common ground that after October 2008 – although not before – Barclays submitters were reducing their Libor figures on explicit instructions from top management – and were under the impression these instructions came from the Bank of England.

    However, the FSA appears prepared to accept, both that no such instructions were given by the BoE, and that nothing was done by Diamond and his senior colleagues to suggest that they had been. Instead, the FSA appears to have accepted that the chain of command at Barclays was so dysfunctional that some relatively low-level functionary ended up creating the impression that Libor-fixing was a BoE policy – and that those at the top never became aware that those doing the fixing believed this. If this is so, then Diamond should be sacked for incompetence.

    Obviously, as evidence, claims by Barclays and the BoE that no instruction to manipulate Libor was given in the conversation between Tucker and Diamond are quite worthless. If it had been, neither would want to acknowledge it. Moreover, even if no such instruction had been given, that might not mean much. The conversation could have been on the lines of Diamond saying that if Barclays had to submit realistic submissions, the consequences would be catastrophic not simply but for his bank but for the whole financial system, and obtaining the kind of acquiescence which does not involve an overt instruction, but makes clear the BoE agrees.

    And indeed, given the way that the collapse of banking system was threatening to run out of control, the BoE might quite legitimately have felt that it had no other option. Not been an expert on financial markets, I cannot take an informed guess at what might have happened had Barclays, and the ‘at least 16 other major financial players’ implicated, given accurate estimates of rates at which they could borrow. But is it implausible to suggest that it would in fact have caused panic to spin out of control?

    1. Yves Smith Post author

      Blair is a pretty appalling spectacle, but my impression is he is now held in extremely low regard in England. I’ll admit I’m not current on British politics, but I find it hard to imagine you’d ever see the MSM media unified here against going after a big bank and the Dems also out for blood. Look at how quickly the chairman resigned. And this isn’t over.

      I’m reacting to a fact pattern that says something very different is operating here than in the UK. If the answer does not lie in British politics or its press, where does it lie?

      1. vlade

        In my experience the british public is less tolerant of greed “bad taste wealth” and overblown egos. See the take on russian oligarchs, middle east sheiks, premier league footballers (and their wives) – and of course, recently bankers.

      2. proximity1

        “I’m reacting to a fact pattern that says something very different is operating here than in the UK. If the answer does not lie in British politics or its press, where does it lie?”

        The difference may be due to a confluence of factors which include (not exhaustively, of course), the facts that the British public is simply a far fewer number of people–thus, a smaller ‘critical number’ of ‘attentive people’ are required before any crucial fact, “X”, is effectively perceived, and, cultural differences in reading and thinking habits may produce important differences in the abilities of British people to “grasp both the essential facts as well as their significance” while, in the U.S., far fewer people either can do this or, simply, do do this than is perhaps the case in Britain.

        Thus, with no particularly important difference in the inherent qualities of their different national press cohorts(i.e. mass-media reaching the attentions of enough people of enough influence), one might nonetheless arrive at significantly different practical outcomes in what are seen as reasonably comparable circumstances.

        Though British and U.S. cultures “map” each other to a remarkable extent, they do not, all the same, “map” perfectly or completely. Despite a common language (which separates them) and common notions about economics and politics, British and U.S. people live in very different physical circumstances which can produce important differences in their manner of interpreting similar fact-sets, it seems to me.


        Maybe some practical examples of what I have in mind would help:

        Britain has no “Hollywood”, while the U.S. does. Though both nations have mass-media magnates or conglomerates, there remain some residual British habits (though, yes, now ever more vanishing) from the 1950s, 1960s and 1970s, habits of reading, radio-listening, and newspaper use, which are simply quite different than what in those same decades was common in the U.S.

        School: the aculturization of children in and through school experiences is similar but not quite the same. I think that in the 19th and early through mid-20th centuries both the U.S. and the British societies did rather better jobs of homogenizing their populaces into some semblance of a national identity–the British “Englished” their people (resistances admitted as never quite overcome), whether Scots, or Welsh–though this never took at all so well in Ireland outside the Ulster loyalists–and, similarly, the U.S. did, in this same time period, a fairly decent job of “making Americans” out of people from Portland, Maine to Pasedena, California and from Fairbanks to Fort Meyers, from Honolulu to Cape Hatteras. Niether the British nor the U.S. do these socializing tasks so well as they once did, but the British may be doing it comparatively better, all the same. Again, the U.K. is far, far more compact and less populous. In the same vein, (school, and intellectual socialization), Shakespeare was English, not American, and will always remain “English” in ways that are socially, culturally significant. There is an element to this that is nearly or completely impossible to appreciate unless one recognizes that “Shakespeare” was in and of the nobility, and that this means, necessarily, that his language, much of which he literally invented, sprang from a class which the U.S. society and culture, has never had. This is true both “for better and for worse,”–there being both advantages and disadvantages to the fact that Shakespeare was English, not American.

        21st century London apart, Britain hasn’t the same high-rise urban mass comparable to the combined effects of (as metropolitan areaq) New York , Chicago, Philadelphia/New Jersey, Houston and Atlanta even taking into account a very high density population distribution in Britain outside the major centers of Birmingham, Manchester, & London.

        These are only some of the possible factors in the resulting differences between the two nations.

        1. LeonovaBalletRusse

          “Shakespeare was English” – not “British” per Victorian Reich, the “modern” glue holding .01% White Imperial Master Class together, with their .99% Agents in tow, v. the 99% English kept at bay, FAR, far away from the “Pendragon” City.

        2. Neo-Realist

          I really enjoyed the Lindsay Anderson film IF…… Never seen a similar film to it made in America–too threatening to the Patriarchy? the TPTB?

      3. SubjectivObject

        I interpret that for the person in the US street, that the wolf and rable is not yet as close to the door as it is for the UK person in the street. The relative larger distances and reduced social-encounter-interaction for the US person removes a lot of the immediacy of local sentiment the UK persons have typically.

        1. proximity1

          There may be some culturally-based differences in how British people and American people “see”–define–who are included in “the wolves and the rable,” as well as their relative distances from the door.

      4. David Habakkuk

        As to Blair, he is certainly held in ‘extremely low regard’ here – by most people, apart from, curiously, the present Tory leadership, who appear to have modeled their approach to central aspects of governing to his. There clearly are differences between the US and the UK, both in the politics and in the press – but they can be quite difficult to pin down.

        Certainly, as you say, this is not over.

        As the Daily Mail suggested, a number of Peston’s ‘scoops’ have looked like diversionary leaks – and this one looks as though it was sourced from senior figures in Barclays, very likely ultimately from Diamond himself, with the intention of shifting the focus from the bank to government.

        The fact that while the story suggests the submitters came to believe wrongly that there had been an instruction to fix Libor, it also reports that Tucker and Diamond have ‘different recollections’ of the conversation between them, raises the possibility that the latter either intends to drop the BoE in it, or is threatening to do so. We will see on Wednesday.

        Crucial, however, is the fact that what all those involved say now is going to be constrained by the knowledge that the fixing of Libor is leading to civil suits on a massive scale. This makes it much more difficult for them to be dishonest or evasive without risking serious consequences.

        The Guardian report on the lawsuits last Saturday opens up new questions. It says that the independent experts brought in by Charles Schwab in support of their lawsuit concluded that each bank they studied ‘dramatically increased the its collusive suppression of Libor’ in the critical two weeks following the Lehman bankruptcy. This was, I think, on 15 September 2008 – more than six weeks before the conversation between Diamond and Tucker.

        If this applies to Barclays, then either the expansion of the fixing occurred prior to that conversation without the endorsement of the BoE, or the BoE was already involved in collusion prior to that conversation.

        The report, meanwhile, quotes a DoJ document as suggesting that collusion between traders across a wide range of banks, including Barclays, took place from at least August 2005 through to May 2008. According to the document, the interbank communications involved ‘included ones in which Barclays swaps traders communicated with former Barclays swaps traders who had left Barclays and joined other financial institutions.’

        One possible construction is that, as it were, Barclays was the poisoned apple which rotted the whole banking barrel. However, given that at least 16 banks are said to have been involved, this does not look so very plausible. Equally, it does not look entirely plausible that these corrupt networks could have been generated by the spontaneous interaction of ‘rogue traders’ in most of the key Western banks. And if in fact they were, and the senior management in all or most of these banks were oblivious, then the whole Western banking system must clearly be run by incompetents.

        Of course, it would be possible that a massive criminal conspiracy developed from August 2005 onwards, purely because it became apparent that money could be made by manipulating derivatives, if Libor was fixed. Is it however also conceivable that the possibility that if Libor was accurately reported, various derivatives contracts might blow up explosively was already apparent two years before, on 4 September 2007, Libor hit the highest level since December 1998?

        The Guardian report is at

        1. Up the Ante

          “The Guardian report on the lawsuits last Saturday opens up new questions. It says that the independent experts brought in by Charles Schwab in support of their lawsuit concluded that each bank they studied ‘dramatically increased the its collusive suppression of Libor’ in the critical two weeks following the Lehman bankruptcy. This was, I think, on 15 September 2008 – more than six weeks before the conversation between Diamond and Tucker.

          If this applies to Barclays, then either the expansion of the fixing occurred prior to that conversation without the endorsement of the BoE, or the BoE was already involved in collusion prior to that conversation. ”

          I would like to suggest the ‘funding crisis’ is evidence the ‘moneyed investors’, probably Saudi, was brought about by their refusing to continue the frauds that felt free to murder so many Islamics. That in fact the ‘muzzies’ as given in common parlayance is in fact a euphemism for those who have been ‘muzzled’ in the ‘free world’.

          That ‘common parlayance’ may even be dished to you by the ‘political police’.

      5. charles sereno

        The Labour Party may indeed “represent different interests than the Tories,” and they may have more to gain politically from airing this affair. But how can that possibly turn out well when the alleged offenses occurred in the twilight and dawn, respectively, of Tony Blair and Gordon Brown?

      6. LeonovaBalletRusse

        Blair “outplaced” – Bush’s poodle, Pope’s poodle, Middle East “peacemaker.”

      7. Synopticist

        The biggest difference I can see between the US and Britian is in attitudes to government and the wealthy.

        We Brits tend to resent them both, whereas vast numbers of americans despise the gubmint, but love their rich “wealth creators”.

        You just don’t find that level of admiration for the super-wealthy in the UK. We know most of them inherited their posotions, and maintained them by cheating and lying. Even New Labours embrace of banking and the City was reluctant and hesitant, and only continued because, after all, it seemed to be working.
        There’s zero chance the present labour leadership, which will probably win a majority next time around, will be as banker freindly as the present or last governments, because so many people frankly despise the city in all its forms.

        1. F. Beard

          Good for England!

          And there really are ways to implement money ethically without losing real performance.

      8. Warren Celli

        Yves said; “I’m reacting to a fact pattern that says something very different is operating here than in the UK. If the answer does not lie in British politics or its press, where does it lie?”

        The answer lies in the fact that this a global take down of populations by the aberrant sociopath Xtrevilist few. It is simply another very intentional incremental escalation by Xtrevilism as they the move populations to perpetual conflict and a two tier ruler and ruled world. The passion and veracity of the British press is being played like a well known instrument as Xtrevilist forces are systematically destroying British institutions just as they are destroying them in other nation states. British surveillance and security, like in the US and other nation states, have been recently ramped up to handle any fall out.

        Trust in various co-opted institutions falls at different rates depending on past veracity and the degree of co-option. There is a lag in deprogramming from past perceptions. Many will see the political system as presently captured but believe in the press, or the rule of law, or the civil systems of government even as still relatively fair. The admixtures in individuals minds adds to the confusion and intentionally created chaos.

        Another more important fact pattern is that this Xtrevilist move was begun post W.W.II when gaining control of all media was an attainable goal for the aberrant sociopath few and all media was predominantly one way conversation. The Xtrevilists — the newer Pernicious Greed for Destruction forces — were able to create and control the content and then control the response to that content by editing response letters. Few in opposition had their own publishing resources. Having Reagan and Thatcher promote the private sector vs government sector meme globally and in lock step was relatively easy to pull off. Rinse and repeat.

        Along comes the internet. The most important fact pattern is that in the last fifteen years the internet has blossomed giving the masses a gift to effect remedy and reprieve and we now are able to mount serious two way communication rebuttal to the dark forces. The problem is that the internet is rapidly being put in lock down by the Xtrevilist forces as we speak, and we the people are not using it wisely. We are not deprogramming fast enough, and we are still relying on past system remedial avenues. Captured system remedial avenues that are being intentionally destroyed by Xtrevilism. In so doing we fail to use the savior internet for the organization outside the system that could possibly save us. We in effect are bitching but not pitching.

        Complicating this, and adding to the problem, is that the technology — which each day embodies within it ever more of the current aberrant sociopath Xtrevilist morality — is now replicating itself at the speed of light.

        Deception is the strongest political force on the planet.

    2. vlade

      I can believe that BoE (not to mention Fed) would give a quiet nod to all relevant banks if they came in and said “we can’t borrow in the unsecured market at all. LIBOR is a fantasy”. That going out on any given day (especially shortly after Lehman) would have caused havoc in the markets (and that’s desceribing it optimistically. In the worst case, you’d have nothing at all to value most of the contracts, set the loans or deposits etc.).

      So the story is plausible, especially if BoE believed it to be just a temporary problem.

      Of course, plausible does not mean true.

      That said, all of this just point to the fair-weather design of the system.

    3. LeonovaBalletRusse

      DH, surely they use “Elite Dogwhistlese” – CRACK this “Enigma” code.

    4. Up the Ante

      “It appears common ground that after October 2008 – although not before – Barclays submitters were reducing their Libor figures on explicit instructions from top management – and were under the impression these instructions came from the Bank of England. ”

      And this “common ground” only became ‘common’ because the usual beneficiaries of the LIBOR submissions prior to 2008 took offense. They were objecting to the ‘ringfencing’ that the Iraqi War has brought about. A British ‘coup’ to mirror the U.S.’s.

      What rather large ‘corporation’ in the U.S. minds this not ? Their funding is certainly not threatened in any credible way.

      And the ‘political police’ continue to abet it by their continued silence because their funding is certainly threatened in ‘credible ways’.

  15. Warren Celli

    Xtrevilism vs Evilism.

    Vanilla Greed for Profit vs Pernicious Greed for Destruction.

    The good cop vs bad cop games have now become mind boggling as we all — so badly wanting to believe — grasp at ever smaller and smaller straws of hope.

    And all the while; torture, drone bombing, massive erosion of Civil Rights, swelling prison populations, gross corruption in banking, etc., all initially caused by a few “rogue” underlings, becomes “normalized”. ROTFLMAO!

    At some point you have to wake up to the intentional and very carefully and incrementally orchestrated top down Xtrevilist orchestration that is taking place here. At some point you all have to get out of your little boxes of expertise and make the people that can still afford their cable charges — the people who are watching “Dancing With the Stars” — see these people living in the tents……0.0.qOw1kpPA7zc&biw=1019&bih=662&sei=JaXxT_7uJoGO8wT2r72SAg

    …and make the still marginally solvent TV watchers understand — in Libor free plain English — that they will soon be there. Less time is needed in exposing the never punished crime and more time is needed in down streaming the message and galvanizing a general resistance.

    It is well past time to organize the election boycotts and Constitutional rewrite.

    Deception is the strongest political force on the planet.

    1. LeonovaBalletRusse

      WC, thanks for link. We have been warned hereabouts that the Tent City of Released Convicts near-enough to the “historic” center WILL get much larger, because the prisons don’t have the capacity to hold this “population.”

  16. LeonovaBalletRusse

    “because they wanted to reassure investors” — this is the MOTIVE to commit FRAUD–not just “price fixing” but “price fixing in IN ORDER to commit fraud”

    Two, count’em, two criminal acts.

  17. proximity1

    and, concerning differences, maybe it’s not wholly without significance that, for example,

    Martin Wolf— (from Wikipedia’s pages)

    “… was educated at University College School and in 1967 entered Corpus Christi College at Oxford University for his undergraduate studies. He initially studied Classics before starting the Philosophy, Politics and Economics Course[4] As a graduate student Wolf moved on to Nuffield College, also at Oxford, which he left with a master of philosophy degree in economics in 1971. Wolf has said that he never pursued a PhD because he “didn’t want to become an academic”. Wolf was an active supporter of the Labour Party (UK) until the early 1970s.[3]”

    (by which I don’t at all mean to suggest that Oxford and Cambridge are in any way some sort of proofs against potential moral rotteness, nor, even, the study of the classics, for that matter. But, there’s some anecdotal evidence for us to take into account.)

    1. LeonovaBalletRusse

      Might account for Wolf’s critical intelligence, but his opinions are “FT hedged.”

  18. Susan the other

    It takes time to cushion a fall this big. There has been an odd revived discussion here about the Banks’ “living wills” lately. But even tho these things, these tidbits and facts, come out in some low-key editorial, there is never any follow-up; no discussion.

    What about the almost un-reported story about a month ago that certain London trading desks had left the City and moved permanently to Hong Kong? Getting safely out before some final solution?

    Libor being too high, not too low, had to be the main reason Hank Paulson gave the US banks emergency funds in the fall of 2008; followed by TARP. Literally meaning tarp. Was that bizarre phone conversation between Paulson and his counterpart in England (when Paulson looks up and says “England just screwed us”) related to Libor? If Libor had been manipulated since 2005 so banks could make a profit on their derivative trades, what was going on in that phone conversation when the BoE refused to allow Barclays to buy up Lehman, under the pretext that British taxpayers would not tolerate it. It was shortly after that that the Fed went zirp. If Libor can be “dislocated from itself,” why not the Fed’s bank rate? I wish I understood this stuff.

    I get the feeling something is about to happen too.

      1. LeonovaBalletRusse

        TIME: call for “Auld Alliance” torches/ropes for Justice in the City. Recall:

        “THE TYRANNICIDE BRIEF” by Geoffrey Robertson.

        What might happen if Steve Keen and Geoffrey Robertson got together with the former Prime Minister of Australia who has a mind bent on justice for all?

        1. LeonovaBalletRusse

          Mix it up with Francophone “Canada” and Maine + Louisiana in attendance.

          1. LeonovaBalletRusse

            Jacob Niedelmann: “THE AMERICAN SOUL” – it lives still in Australian quarters.

    1. Susan the other

      One more thought. This breaking news about Libor is coincidentally connected in time to the EZ’s latest decision to allow Brussels to control banking. I think the EZ decision to federate banking is huge news. But it too is so underplayed you don’t know if you understand what is really going on. One possibility is that if Britain wants to join the EZ bank federation it has to come clean. Remember how sarcastic Sarkozy was with Cameron about Britain not having any industry, just finance?

      1. LeonovaBalletRusse

        Susan: and European Federation must include common currency by any name, as City’s monopoly control of LIBOR/Euribor shows.

      2. vlade

        Except that Sarkozy had no clue (as usual). Believe it or not, industry makes 10% more of GDP in the UK than in France (21% vs 19%) and is only 5% smaller than US (which has about 22%).

      3. Doug Terpstra

        The old Soviet Central Committee and Central Banks today have very little distinction, except that the least among us may end up worse off under the latter, lacking basic shelter, food, or health care. The economy today is massively controlled and must remain so to prevent catastrophic collapse. This is why the law no longer applies, why no oligarchs ever risk jail time, and why citizens are now forced to buy defective products they don’t want and can’t afford.

        Jesse’s Cafe has interesting recent articles on the new, permanent phenomenon of rigged markets and the normalization of fraud. It follows the normalization of war crimes… yawn … such is the banality of evil.

        “Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people who are thereupon absolved from any further obedience.” – Philosopher John Locke

        A quote used by Chris Hedges in his recent article “Time to Get Crazy”, where he’s is apparently rethinking his committment to nonviolent resistance.

      4. Up the Ante

        “One possibility is that if Britain wants to join the EZ bank federation it has to come clean. ”

        Or that it finds German banking fraud more attractive than U.S., at the moment.

    2. Up the Ante

      “Paulson looks up and says “England just screwed us” ”

      That time corresponds to ‘the banks will not lend to each other’ descriptions from that time frame.

      ‘dislocation’ was current, too.

  19. Fraud Guy- Also

    The financial industry has become so amazingly adept at perpetrating major frauds that leave the vast majority of people who are harmed without any direct cause of legal action against them. In the LIBOR case, how does a Capital One credit card borrower or community bank CD saver get standing to sue Barclays? Similarly, how does a member of the public sue Moody’s for deliberately manipulated ratings of junk MBS? How does a homeowner get standing to sue Goldman Sachs for its role collapsing the housing market with fraudulently issued mortgage securities? The answer, in all cases, is that it’s very difficult, if not impossible. The banks’ behavior shows that they do not worry about law enforcement coming after them. Rather, what they do worry about, and hence avoid, is frauds that create thousands of plaintiffs with legal claims that can be clearly established.

    1. LeonovaBalletRusse

      FG, impossible with “transfer of liability” re-hypothecated exponentially, esp. via HFT “with source proximity for some” and with promiscuous robo-signing.

    2. Illegal country

      It seems to me that LIBOR manipulation would directly affect the contract where LIBOR was the index. I would be interested to hear from an attorney regarding contract enforcement if party X was involved in manipulation and was also a party involved with a securitization. Is this a new homeowner defense?

        1. Illegal country

          In Edwards v. First American the 9th Circuit ruled that a homeowner has a private right of action under RESPA. RESPA covers illegal kickbacks and fee splitting as well as a host of other issues. It seems LIBOR manipulation might be covered under this.

  20. proximity1

    This may be a good time for us to remember how our mythology has it that “the Free World ™ defeated The Evil World-wide Communist Menace © ” , right?

    I find myself recalling the phrase from Janine Wedel’s The Shadow Elite, “being ‘dirty’ together” again and again.

  21. proximity1

    So, it seems that, despite some protests from the experts in MBA education, graduate business schools ought to have de-specialized their curricula and made some heavy room for Greek and Roman mythology, and the arts of recognizing their modern-day counterparts; and room for learning real scientific method as taught trhough life-sciences, esp. evolutionary biology, ethology, and genetics.

    Instead, MBA-students have been schooled in orthodox economic theology, including weird quantitative analysis about which no one bothered to care very much that, while it was perhaps esthetically beautiful, it had absolutely nothing to do with actual economic reality and everything to do with the causes and purposes of formal ritual practice, of mythological belief-systems and the psycho-social importance of these in human societies generally.

    Today, literally scores of millions talented, capable people have been reduced to unemployment, many of them have seen their life-savings lost, their careers ruined, their families imperiled all because people who were convinced they could calculate, measure and hedge risk, and could discern what real “value” is, “price” it accurately, with an assumption that they understood what value consisted of in its essence proved instead that they couldn’t do these things.

    All of this incredible social damage, direct and collateral, because of a highly specialized and highly rationalized system, one ultimately based on a superstitious and historicist ideology, produced this marvel of a self-propagating machine, with its privileged class of students who were encouraged along the way not to recognize any limits on their supposed analytical prowess.

    What, today, isn’t corrupt? On the damaged-or-lost casualty-list, we have

    the banking system, the investment finance system, the political system, the educational system, the health-care system–some of these deserve to be shown between “scare-quotes,” so oxymoronic have their very terms become—the agriculture system.

    The things which stand out as still thriving, still robust, are scary indications of our predicament:

    the systems of mass-spectacle, of mass-entertainment, the systems of social mystification and delusion and self-delusion, the production, distribution, sale and use of drugs-used-for-escape–these are doing well, just like networking in fraud, chicanery, and money-laundering and other elements of organized crime.

    When we finish with our outrage over the Libor scandal, maybe we can work on some heart-felt outrage for the things which helped make it practically inevitable.

    1. Up the Ante

      ” .. orthodox economic theology, including weird quantitative analysis about which no one bothered to care very much .. had absolutely nothing to do with actual economic reality and everything to do with [blah, blah, blah] ”

      The professors, realizing their ‘Quality of Life’ rested on their not describing FRAUD and their relation to it, taught the BS you mention.

      “Today, literally scores of millions talented, capable people have been reduced to unemployment, many of them have seen their life-savings lost, their careers ruined, their families imperiled ”

      Their profession, much less than the medical community’s heads, depended on their not describing that FRAUD. There’s your edu-bubble.

  22. CogWheeler

    The Barclays news is going to be the victum of bad timing. Happens all the time. Health care will carry US-news most of July, or until the dual-billion dollar campaigns chose to have us discuss something else.

    They have the BBC. Our news gravitates toward the “LCD”. And that person will never understand LIBOR.

    1. proximity1

      Well, whether we know it or not, we’re in a race to raise that “L-C-D” (lowest-common-denominator) before the system that thrives on keeping it low literally kills us all.

      Paul Krugman’s comumn today is a reminder that it is fantasist of us to assume that the people who supposedly know better and who are supposedly running things will always “draw back” in time before the fateful irreversible tipping point is reached.

      And then, there’s this apparently latent view –or so it seems to me–that defines the present temperament, character of so much in Americans’ thinking, observed by second-hand effects: in part, it’s deeply fatalist about the prospects for improvement, for reform. The view seems to be that “This thing is too big, so big that nothing and no one can wrangle it,” and, in part, another unstated but latent view that seems to look forward to a cataclysmic collapse and an implied re-building afterward, “remaking things better next time.”

      Both of them come from the general sense of helplessness that this mega-technocracy spawns. And both of them share a common ignorance of the inestimable complexity and eons of time that together produced the amazing set of accidents which made this natural world possible and real. We do not get to “start over” with that.

      The notion that we just “let it all collapse” and then rebuild it better, taking advantage of the “lessons learned” is particularly foolish and infantile. As likely as not, what will remain after the collapse will be much of what was worst, with the more desirable aspects lost to us and not susceptible to any efforts to remake them at all, let alone improve them.

      1. LeonovaBalletRusse

        p1, the “tipping point” is bred in the bonehead. Too late now. “The die is cast.”

  23. LeonovaBalletRusse

    “Standing desk” – laptop on chill mat on rectangular cooler with rigid sides.

  24. Up the Ante

    This activity is part of the Iraqi War greenlight given to the banks. Perhaps Tony Blair has something to offer ??

  25. Schofield

    The British establishment are largely a bunch of crooks just like the American establishment. The Brits shipped the crookedness over here. It remains a matter of conjecture whether the real truth will come out that the Bank of England was conspiring with the banks and politicians to manipulate the setting of interest rates like Libor and whether in fact this was condoned as necessary window dressing to stop a run on British banks in the immediate aftermath of the 2008 Financial Crisis.

        1. charles sereno

          Re Bank of England — Pardon, I’m not acquainted with a cricketeer’s(?) jargon, yet I’m chagrined by seeing Paul Tucker run “interference” for (Saint) Mervyn King. Time’s running out for King to have his saving Greenspan moment and a lordship.

    1. Mark P.

      While I largely agree,Schofield, one thing the British have going for them is that they do get class war and suffer less than do most American citizens from delusions about the non-existence of a class system and the moral worthiness of the financially successful .

      1. LeonovaBalletRusse

        Mark, they’s been conned to pay grandly for the “Regal” trappings tourist trade.

        The august roles of these DNA-set parasites can be outsourced to fine actors, using the “trappings” as magnificent sets for “living theatre,” for much less cost to the “common” citizen, and professional actors would play their regal roles so much better. Why should commoners keep carrying this freight for show?

        1. Mark P.

          Beats me. If it were mine to do, I’d send the whole tribe of Saxe-Coburg & Gotha packing and end “the fraud and imposition of monarchy” — to quote Thomas Paine — tomorrow.

    2. Carla

      @S: The Brits shipped the crookedness over here.

      Oh, really, I think we made our own. American ingenuity, dontcha know.

  26. Pantagruel

    Huizinga described how the ethos of chivalry fell apart in The Waning of the Middle Ages, becoming rigid, formulaic lip-service among the court retainers and a joke to everybody else. Corporatist propaganda has reached the same stage: echolalic variations on an idea that’s WTF absurd to unindoctrinated humans. With luck, the dying worldview will take all three branches of this predator state down with it.

    1. Up the Ante

      The Worship of the Corporation, Corporate PsyOps, granting of personhood by the Supreme Court, ..

  27. Miranda

    Folks in the U.S. not up in arms in part because we don’t understand anything about the basics.

    I don’t think I’m stupid, and I read NakedCapitalism every day, but I am illiterate about how banking functions.

    Could anyone point me to an ‘Interbank Lending for Dummies’ article please.

    I have no clue about the mechanics behind and around Libor that led to this scandal.

    1. LeonovaBalletRusse

      Miranda, do you “read deeply,” or just skim? NC’s experts write for a broad audience, justly and precisely. Take your time reading and digesting, which may be a struggle at first, but which pays off with deep comprehension on the “retail” level.

      1. Kathy

        Hello, I’m just trying to find a way to tell my son that he may not be playing his final 2 yrs. of his most passionate sport in High School Football this year. And that the only home he has known may be taken away due to the 22 months of hell trying to figure out this mess I never imagined could happen to my family. They insisted on us applying for HAMP, did that 3 times, and 3 times we were denied, as we have no debt, besides our mortgage, insurance, and basic utilities, no deficiancies, which made us ineligible, and that we make too much to be eligible…I am a 42 yr. old woman with a high school diploma, married 23 yrs. to a good man who works way too hard putting roofs over people to protect their shelters…and this includes banks, hotels, Universities, places of worship, and homes…(ironic, huh?) having to face my son, my husband, and our family…ouch. I shouldn’t have had to teach and learn this kind of business, discovering so much about these crooked a$$es but I had/have no choice, to just THINK of not living in our home is gut wrenching, it has affected us mentally, emotionally, and physically…I just want to send my monthly pm’t like I always had. Why do we have to deal with this?? We have complied with their every demand for our info to this “servicer” who wouldn’t even accept a pm’t because they had no idea what our pm’t amount was or what we OWED on our loan… why then with our 20 yrs. of current mortgage pm’ts now having no credibility and was all for naught…so the money thing ya’ll have been discussing, it’s interesting , but people…it cannot come close in affording the ability to explain this to my boy…or will never have enough money to pay the price of removing his uncertainty in his eyes. Please, pray for all of the families affected by this ugly greed… God bless and thank you.

    2. Lambert Strether

      LIBOR is a benchmark for the interest rates that are set on a trillions of dollars of loans and other financial instruments. (Some of them have variable interest rates: Monday, one rate, Tuesday, another). So, if the benchmark goes up, the banks make more money. Those are the incentives.

      So, who sets LIBOR? Why, the very same banks that benefit when it goes up.

      Now, LIBOR is supposed to be an objective, indepedent measure of how much it costs to borrow money: A benchmark, like a thermometer. However, the incentives being what they are, the bankers manipulated the benchmark: Like a thermostat. Just turn it up!

      Because the amounts at stake are so huge — trillions — even a little manipulation of LIBOR is worth millions and millions. Every day. Since at least 2007. All the banks did it, together, everybody was “in on the joke” and nobody said anything.

      And where do you think the millions that went into the banks pockets from manipulating LIBOR came from?

      Why from your pocket!

      Which is why all the C*Os of all the major banks should be in jail for a theft and fraud that’s so collossal that it’s invisible.

      NOTE Finance experts please correct me!!!

      1. Ms G

        Fixing LIBOR up would benefit the banks vis a vis borrowers (e.g., home owners with mortgage).

        But I think I understand that fixing LIBOR down (lower), (which is what seems to have been going on around the time of the crash) also benefited the “self-reporting” bank(s) — by making it look like they could be lent to at a lower rate than their actual financial condition warranted. (Sort of analogous to MOODY’s putting “AAA” ratings on the dreky and super high-risk mortgage packages in order to make them “suitable” as conservative investments by pension funds, municipalities, etc. etc.)

        Corrections, comments most welcome!

        This is my humble partial understanding of this apparently very multi-dimensional (and massive) criminal racket.

          1. Ms G

            How interesting. Wish I could say the theory expressed at this link (fun chart!) seems utterly off the wall.

          2. Up the Ante

            “Here’s a really wild hypothesis: if the LIBOR rate was under manipulation in 2008, is it not possible that the inter-bank lending rate spike (and resultant credit freeze) was at least partly a product of manipulation by the banking cartel?

            Could the manipulators have purposely exacerbated the freeze, to get a bigger and quicker [govt. ringfence]? ”

            fixed it for ‘ya

            “They have been manipulating Libor on virtually a daily basis since 2005. ”

            .. and in the years previous to 2005, on an as-needed basis .. for ‘private investors’ ?


      2. MichaelC

        Who benefits depends on which side of the trade you’re on when the rate is set.

        The main point is that the banks manipulated the rate to benefit their own positions. (i.e they appeared to have a lower cost of funding themselves, the lower rates benefited their derivative positions).

        That means that the intended losers were their lenders (i.e MM mutual fund investors) and the banks derivatives counterparties.

    3. Warren Celli

      Miranda — If you read this NC web site daily you will see that it reveals a lot of the jargonized untruths, lies, and hypocrisy of those in the upper levels of the world of banking — in street talk that’s called baloney. You will also hear a lot of judgmental talk about the rightness or wrongness of that jargonized baloney — that’s called morality. Over time you will find that as baloney goes up morality goes down.

      LIBOR is kind of like a bank operated baloney pump. The baloney that comes out of it is paid for with your hard earned tax dollars.

      The real world importance of this to you is that as baloney goes up and morality goes down your wallet moves to empty. Keep this chart as a handy reminder.

      Deception is the strongest political force on the planet.

  28. GCT

    The slog in Great Briton broke this story on their site last week. A very good read by the way. I suggest some of you go check it out.

  29. Friedman's Ghost

    There are many things at NC that I do not agree with (which is why I read here) but this is spot on. Indeed the American public has little tolerance for ideas which require too much thought (or anything dealing with numbers). Too busy with much more important things like social issues or what “Snookie” will be wearing today…

    1. alex

      Friedman’s Ghost: “the American public has little tolerance for ideas which require too much thought”

      Which ironically is a notion that itself doesn’t require too much thought. A tired refrain at best. The American public has little tolerance, as opposed to the public of which countries? And how much thought does it take to dislike corruption and price fixing?

  30. jack

    I doubt the US MSM will even mention any of this; as to why?

    Probably because you really think MSNBC is a valid counterforce to FOX…

    When Bloomberg won its lawsuit against the FED and forced it to reveal what was the extent of the 2007-2008 bailout they were limited to a small time window of a month or two.

    When I read that article, a few years back, in passing they, the Bloomberg staff, were not sure if the amount of the total bailout was 4 trillion or even higher….as the amount of exposed information was such a tiny slice of reality, in effect they were making a educated guess.

    NO one has a true and clear idea as to the true amount of the bailout and where 85% of the money really went.

    The boardrooms of corporate America including the MSM have far too many individuals whose families more than likely indirectly or directly one way or another also got bailed out back in 2008 because they had great sums invested in Hedge Funds, Mortgage backed Securities and Credit Default Swaps and a laundry list of derivatives and other suspect paper.

    The numbers hinted at by Bloomberg betray this suspicion on a grand scale; as does the behavior of electronic mass media to really perform any due diligence and keep hitting this story in any way that makes sense or even approaches reality. Such behavior coming from the top to my mind speaks more about the why and where and who are the truly guilty.

    Suffice it to say we can not even rely on Bloomberg to get to the truth because they are just as hamstrung by the institutional corruption as say Democracy Now or Thruthdig at every level because after all that was the whole reason for Regan revolution – destroy government that functions for the benefit of the average person and replace with lobbyists machine serving the super rich.

    One has to wonder then, if things like the Debt crisis in Europe and the economic destruction seen is really the result of more gaming of the system where the cost of borrowing by governments, like Greece, was driven up on purpose by the same scheming bunch of money laundering scum.

    As the motives behind all this may be, just maybe, is because if we had a honest world wide debate on the nature of taxes and the nature of the super rich they would lose that argument – hence they game behind the scene and pretend it is all an ‘accident of the market’.

  31. Rouge Trader

    I love how they are described as “rogue traders”. You know what that reminds me of? How the Pakistani ISI calls jihad supporting members in its organization “rogue elements”!!! haha LMAO

    As for the English journalists, where were they when the financial debt became 900% of GDP?

    Your grasping at straws

    1. enouf

      just curious;

      Did you accidentally misspell (the first-half of) your nickname?


      1. enouf

        BTW, mine (nickname) is/was done on purpose ..i’m just having trouble pronouncing yours, the way it’s spelled.


    2. Up the Ante

      “As for the English journalists, where were they when the financial debt became 900% of GDP? ”

      Fending off Corporate PsyOps ?

  32. Psychoanalystus

    I am not a fan of Charlie Rose (a.k.a. “oligarchs’ lapdog”), but this is a truly prophetic 1994 interview with Sir James Goldsmith about Globalization and what it will do to the world and the U.S. in particular. Looking back 18 years since that interview, it is truly eery to see how it all came to pass. The only thing that he did not predict is this massive fraud-centered economy we now live in.

    Highly recomended!

    1. Aquifer

      An excellent argument indeed by Sir Goldsmith – too bad more folks weren’t paying attention. He lays it all out, as did some others at the time …

      He also mentions, with praise, Vandana Shiva – Goldsmith is no longer here – Shiva is, still time to pay attention ….

      1. GCT

        Thank You for posting this link. Very eye opening indeed. No one listened and still most do not listen. I am actually off to buy his book.

        1. Sandi

          Yes, thank you; that was incredibly prescient. Too bad he’s not still with us. I wonder if Charlie choked on crow yet?

          1. Anon

            Do you know who James Goldsmith was?

            He was a billionaire corporate raider and asset-stripper who tried to shutter one of British journalism’s finest publications, Private Eye, when it got on his case.

            They had to fight him through the courts for years (in one year alone, he issued 60 writs agaisnt them), and nearly went bankrupt several times because of him, and narrowly escaped jail.

            Of his era, he was the poster-boy for the 0.0001%, so don’t let the veneer of anti-globalisation greenwash fool you.

            His brother Teddy, effectively a neo-Malthusian, founded and ran The Ecologist magazine to promote his this view, and it was later taken over by one of James’s sons, Zac, who is now a Tory MP, with personal fortune in the region of £300m. Power to the people, eh?

            The idea that James Goldsmith could represent any possible solution to the Libor mess and the global banking crisis is risible – he was a proponent of disaster capitalism long before it became fashionable.

            James Goldsmith features heavily in Adam Curtis’s 1999 documentary, The Mayfair Set, about the beginnings of deregulation under Thatcher:


          2. Up the Ante

            Anon says,
            ” .. a proponent of disaster capitalism ”

            Disaster capitalism, that’s a euphemism for deserting the buying of ‘Made in America’ only ?

  33. Fïrëan

    Many USA municiplaites entered into interest rate swaps which benefit the counter party if the floating rate, based on Libor, is lower. If one of the Banks admits to having manipulated the rates, and maybe the other banks under investiagtion are found to have manipulated too, then the municipalites, which are going broke because of the burden of the swaps,can file class action against those banks for damages. They, the municipalities ( and others), are paying out in the rates swap, at a fixed rate yet receiving at the lower floating ( libor based) rate.
    The case of the Mayor and City Council of Baltimore and the City of New Britain Firefighters and Police Benefit Fund has already been given coverage in the media, I’m not sure how the readers here have missed this case. At least two of the defendants are British banks which are now owned by the tax-payers, (as well as Barlcays Banks and Bank of America, Citigroup, and JP Morgan . . ). Which makes one wonder why the British Government are going so hard on Barclays alone, if the other defending UK.government owned banks are found at fault then who pays out the damages ?
    The defending USA banks are presently trying to get the above mentioned case thrown out of court.

    In february of this year, 2012, it was announced, and reported in blomberg news and other business news, that same banks were under investigation in Canada of Yen Libor rate manipulation.
    It’s a bit erroneous to claim that the Libor fixing is not getting coverage in the US media. It’s been there for a while, and so has this investigation into the manipulation. Yet, as in the UK and elsewhere, the matter failed to arouse any level of outrage.
    Interested to know how other derivatives are affected by a manipulated Libor ; the spread betweenn the swap rate curve and the Treasury yield ? ?

  34. Strategist

    Looking at Paul Mason’s reporting, two possibilities:

    1) The Bank of England was colluding with all the banks to make it look like the LIBOR rate wasn’t going through the roof, as a response to the credit crunch, to try to keep the system alive.

    2) Bob Diamond is using the BBC’s Robert Peston as a means of trying to move the blame away from him onto others (the Bank of England/”the authorities”)

    Probably both are true, and in a way Diamond is justified in refusing to be the only fall guy if, as seems likely, it emerges that all the big banks were involved.

    If the Bank of England was involved in this the British establishment has a big problem.

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