FDIC Sues 16 Big Banks Saying LIBOR Rigging Hurt 38 US Banks Which Eventually Failed

CNBC reports here:

The FDIC said the defendants' conduct caused substantial losses to 38 banks that the U.S. regulator had taken into receivership since 2008, including Washington Mutual Bank and IndyMac Bank.

Among the banks named as defendants include Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank AG, HSBC Holdings, JPMorgan Chase, the Royal Bank of Scotland Group and UBS.

Scholar Who Sniffed Out The Libor Scandal Now Smells Manipulation In $20 Trillion Gold Market

Bloomberg reports here:

Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper. “The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.” ... Abrantes-Metz advises the European Union and the International Organization of Securities Commissions on financial benchmarks. Her 2008 paper “Libor Manipulation?” helped uncover the rigging of the London interbank offered rate, which has led financial firms including Barclays Plc (BARC) and UBS AG to be fined about $6 billion in total. She is a paid expert witness to lawyers, providing economic analysis for litigation. [Albert] Metz heads credit policy research at ratings company Moody’s.

The Fascist Grip Of Banking: Rate Rigging In LIBOR, Now Also In Municipal Bonds

There is no corner of contemporary economic life which is not in thrall to state-sponsored banking, and so no corner of it which is not rigged to favor the players wielding the taxpayer backstop.

American-style fascism only seems most vivid when "banking's" losses are finally socialized through spectacular bailouts. Just as spectacular as the bailouts are the efforts to re-define nearly everything as banking in order to bring it all under its aegis. Think GE, GM, Chrysler, investment banking and AIG. That process of socialized losses continues apace on a smaller scale with every bank failure carefully orchestrated for Friday nights, to which Americans are now so thoroughly inured due to its frequency and efficiency. That is but the ubiquitous residual background radiation of the system's big bang, the collapse of banking's housing collateral, rapaciously used to leverage private shareholder and investor gains.

But even the spectacular blow-ups do not keep our attention for very long. Like the public servants who have succumbed to regulatory capture by industry, our anger is also subject to capture by the power of banking's propaganda, the central message of which is that the collapse of banking as we know it would mean nothing short of civilizational collapse. But it is merely their revolutionary version of civilization, not ours, based as it is on the dictum "How can you respect a man who needs you more than you need him?" Traditional Americans have always believed instead in "Owe no man anything".

Meanwhile the gains accruing to elites manipulating the levers of industries which have installed doors to the government are harder to ferret-out, the heads-they-win side of tails-you-lose. Lately it was LIBOR manipulation which came to the light, which has been rigged for far longer than since the latest financial crisis. Now the municipal bond market's municipal market data index, MMDI, is in the spotlight, according to this story in The New York Times, reproduced here:

Thomson Reuters, which owns Municipal Market Data, said on Monday that it “has been involved in discussions with regulators” about the rates, which influence the prices of bonds and derivatives in the $3 trillion municipal bond market.

The company released the statement after the municipal bond industry’s self-regulator, the Municipal Securities Rulemaking Board, said that its board was “concerned about the transparency” behind the creation of a few indexes used to set prices in the municipal bond market, the most important of which is the M.M.D. index.

What we may find from this is that local taxing districts have been paying way too much for roads, schools, libraries, cops and firemen, providing gains for the few financed once again on the backs of many (property) taxpayers.

Municipalities, Others, May Have Lost Tens Of Billions Of Dollars On LIBOR-Tied Bonds

So says this story from The Fiscal Times:

As the world has learned in recent months, the banks behind Libor have been reporting incorrect lower rates to make their finances appear more stable. ...

The revelations sparked a major class action lawsuit filed earlier this year by the city of Baltimore, which entered into dozens of swap-based municipal bond contracts in the past decade that were tied to Libor. The suit accused more than a dozen financial institutions involved in setting Libor rates of engaging in a systematic conspiracy that resulted in “hundreds of millions, if not billions, of dollars in ill-gotten gains.”

“Just about every jurisdiction in the U.S. was affected,” said Michael Hausfeld, one of the attorneys representing Baltimore. “It affected hedge funds, money market investors, institutional investors. The total losses could exceed tens of billions of dollars.”

Possible LIBOR Penalties Hardly Match The Enormity Of The Crimes

CNBC reports, here:

Activity in the Libor investigation, which has been going on for three years, has quickened since Barclays agreed last month to pay $453 million in fines and penalties to settle allegations with regulators and prosecutors that some of its employees tried to manipulate key interest rates from 2005 through 2009. ...

Morgan Stanley recently estimated that the 11 global banks linked to the Libor scandal may face $14 billion in regulatory and legal settlement costs through 2014.

These sums are paltry in comparison with the enormity of the skim operation siphoning off profits on hundreds of trillions of dollars worth of transactions.

It almost sounds like the lowball fines were themselves defined by the very regulators already suffering from "regulatory capture".

Satyajit Das, here, provides an in-depth exploration of the LIBOR scandal which includes considerable speculation about the sums lost. He points out that by one unrealistic estimate up to $80 billion is involved, which means the actual damages are far south of that.

On the other hand, he includes this:

Many American corporations and municipalities entered into interest rates swaps where low rates would have resulted in significant losses. The International Monetary Fund estimates the amount lost by municipalities at US$250 billion to US$500 billion in 2010. If successful action is brought under US anti-trust regulation, then banks may be liable for punitive triple damages.

Investment bank Morgan Stanley estimates that losses to banks could total (up to) US$22 billion in regulatory penalties and damages to investors and counterparties, equivalent to around 4-13% of banks’ 2012 earnings per share and 0.5% of book value. In reality, it is difficult to accurately quantify potential losses.

It would seem as of this moment that both banks and regulators have a significant legal and financial interest in suppressing the actual extent to which those last in line for money were fleeced.

Libertarian John Tamny Excuses LIBOR Low-Balling Because It Didn't Hurt Anybody

John Tamny's logic fails on two counts.

Throwing out low-balled LIBOR rates along with the high rates, to achieve the average reported, misses the fact that the low-balled rates would have been higher if accurately reported, thus aggregating all reported interest rates paid on the low end higher up the ladder, necessarily boosting the level at which the lowest rates were thrown out and skewing the average higher.

Here he says it:

As readers are aware, the banks that participate submit what they estimate to be their cost of credit, and the 4-5 highest and lowest estimates are thrown out. ...

Of course assuming Barclays truly lowballed the number in question, its false estimate wouldn't have factored into the calculation. And if it did, as in if Barclays' estimates actually worked to lower various Libor-informed interest rates, then the borrowers on whom lenders allegedly predate would have been made better off.

No, false low estimates most certainly would have factored into the calculation precisely because their input at their true higher level was missing. 

But the real kicker is, so what if they succeeded at cheating! Big deal! At least borrowers got a better deal!

I don't know how much more morally obtuse you can get.

For some people, nothing more than materialism can be imagined, and they're usually either communists or libertarians. For both of them, the end justifies the means.

Dick Bove Sounds Just Like George Bush: We Tampered With LIBOR To Save The Banks

The hypocrisy just never ends. It gets so common no one has the energy left from all the outrage to pick up a torch and a pitchfork anymore. The whole industry is corrupt and all we can hope for is God sends a meteor attack to destroy them all, preferably at the opening bell.

Dick Bove, quoted in a story here:

Bove acknowledged holding what "may be a contradictory stance," but he is sticking to it.

"It will be recalled that the regulators were dealing with a significant financial crisis. To stem the panic, they lowered interest rates, invested in banks, loaned trillions of dollars to these institutions and guaranteed trillions more in bank liabilities," he said in an analysis for clients.

"If the dollar Libor rate had risen sharply in this period all of this activity would not have succeeded."

Every time some new misdeed is discovered we're told that it was necessary to bend the rules in order to keep everything from falling apart.

We're nearly four years on from the onset of the panic, and here we have a leading cheerleader for the banking industry telling us that suppressing LIBOR was necessary to save the system. I seem to recall that was the argument for TARP which relieved NOT ONE SINGLE TOXIC ASSET, and for the Fed opening the discount window to the world with nearly $10 trillion in liquidity loans at ultra-low rates homeowners will never get, and for every other violation of the principles of free markets we have witnessed under Republicans and Democrats alike, all of which amounts to the biggest fascist swindle ever perpetrated on a once free people.

A pox on all your houses! 

"Look. I obviously have made a decision to make sure the economy doesn't collapse. I have abandoned free market principles to save the free market system. Having said that, I'm very confident that with time the economy will come out and grow and people's wealth will return."

-- President Bush, 2008

Bob Diamond Has A New Gig: LIBORACE

See it, here.

Geithner's NY Fed Knew Of Barclays Bank LIBOR Lies In April 2008 And Did Nothing

The little twit who got away with failing to report income on his tax returns and became our Treasury Secretary should hang for failing to report this.

As reported here:

The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates.

At the time, a Barclays employee told a New York Fed official that "we know that we're not posting um, an honest" rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to "fit in with the rest of the crowd."

Although the New York Fed conferred with Britain and American regulators about the problems and recommended reforms, it failed to stop the illegal activity, which persisted through 2009.

America's LIBOR Banks' Silence Is Deafening

John Carney for NetNet, here:

I asked Bank of America, Citi, and JP Morgan Chase to provide answer[s] to four sets of questions about their Libor practices.

1. Who makes the Libor submission for your bank? How many people involved? Who does the submitter report to? How high up in management does decision go? Is it reviewed before or after submitted to BBA? Who signs off on changes?

2. How is the submission calculated?

3. Has this procedure changed over time?

4. Is it under review following Barclays scandal?

Not one of the banks would provide the information requested. Bank of America and JPMorgan declined to comment. Citigroup did not return phone calls.

The Financial Markets Are Completely Corrupt Monday Through Friday. On Weekends They Just Have The Staggers.

Simon Johnson on the completely corrupted financial markets, for The New York Times, here:

Robert E. Diamond Jr., who resigned last week as chief executive of Barclays, reportedly said, “On the majority of days, no requests were made at all” to cheat on Libor. The Economist, which does not make a general habit of criticizing prominent people in the financial sector, observed, “This was rather like an adulterer saying that he was faithful on most days.”

New York Fed's Geithner Knew All About Libor Irregularities In 2008

So says a story, here:

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a "Fixing LIBOR" meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited. ...

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were "on the case reasonably quickly" after questions were raised in 2008.

"It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting," Duffie said. "I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior."

Libor Scandal Is A Ridiculous Witch Hunt By Hypocritical Governments

So says Guy Spier for CNBC here:

[T]his seems like a ridiculous witch hunt to me, and there is an atmosphere of “shoot first, ask questions later”, which is unwarranted, and is ultimately highly destructive to London . . ..

I find the hypocrisy to be massive: There are the Bank of England, the Fed and other central banks who, in cahoots with their respective treasuries are massively and successfully manipulating interest rates via quantitative easing — something which comes at very high and real cost to those members of society who were parsimonious spenders, and who saved up money for a rainy day, who are now earning pittance on their savings.

And these most responsible members of society are extremely ill-served by ... self-serving and bloated governments ... which ... for far too long, they have been living beyond their means and ... borrow too much.

Libor Shmibor: If Anyone's Been Manipulating Interest Rates, It's The West

Not just one fine formulation about our banking problems from Nicole Gelinas, reminiscent of Ambrose Evans-Pritchard's picturesque "debt draws forward prosperity", but two in one column just loaded with even more good sense (emphases added in red):

If the West had let markets work in the years leading up to 2008 and beyond, there’d be no need to get rid of this crop of bad actors. When bubble-era banks went out of business because of their disastrous mistakes and mischief, they would have taken their failed leadership with them.

Yes, a few firms did fail, but not enough to change the institutional culture of Wall Street and the City (London’s financial district). Instead, institutions that should have gone under, including the Royal Bank of Scotland, have forged ahead, dragging problems that should have been solved by now into the future and harming economic growth. ...

[I]f anyone has been manipulating interest rates to pretend that everything is A-OK, it’s Western governments. In recent years, central banks in America and Britain (and in Europe) have bought hundreds of billions’ worth of bonds in an effort to keep global interest rates low, financial firms afloat, and middle-class borrowers placated. 

Yield on up to 1 Year LIBOR Exceeds 2 Year Treasuries

Mish tells the insane tale here:

Overnight, 3-month, 6-month, and 1-year LIBOR rates exceed yield on 2-year treasuries.