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Big Banks Have Criminally Conspired Since 2005 to Rig $800 Trillion Dollar Market

George Washington's picture




 

We noted Friday:

Barclays and other large banks – including Citigroup, HSBC, J.P. Morgan Chase, Lloyds, Bank of America, UBS, Royal Bank of Scotland– manipulated the world’s primary interest rate (Libor) which virtually every adjustable-rate investment globally is pegged to.

 

***

 

That means they manipulated a good chunk of the world economy.

We actually understated the impact of the Libor scandal.

Specifically, more than $800 trillion dollars worth of investments are pegged to the Libor rate.   As the Wall Street Journal reports today:

More than $800 trillion in securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans.

(Click here if you don’t have a subscription to the Journal).

Remember, the derivatives market is approximately $1,200 trillion dollars.  Interest rate derivatives comprise the lion’s share of all derivatives, and could blow up and take down the entire financial system.

The largest interest rate derivatives sellers include Barclays, Deutsche Bank, Goldman and JP Morgan … many of which are being exposed for manipulating Libor.

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

They are still part of the group of banks which sets Libor every day, and none have been criminally prosecuted.

They have received a light slap on the wrist from regulators, which – as nobel economist Joe Stiglitz points out – is just the cost of doing business when fraud is the business model.

Indeed – as Bloomberg notes – they’re probably still manipulating the rate:

The U.K. bankers and regulators charged with reviewing Libor in the wake of regulatory probes are resisting calls to overhaul the rate because structural changes risk invalidating trillions of dollars of contracts.

 

The group, established by the British Bankers’ Association in March after probes into allegations that traders rigged the London interbank offered rate … won’t propose structural changes such as basing the rate on actual trades or taking away oversight of the benchmark from the BBA, the people said.

 

Libor is determined by a daily poll that asks banks to estimate how much it would cost them to borrow from each other for different timeframes and in different currencies. Because banks’ submissions aren’t based on real trades, academics and lawyers say they are open to manipulation by traders. At least a dozen firms are being probed by regulators worldwide for colluding to rig the rate, the benchmark for $350 trillion of securities.

 

“I don’t see a significant enhancement to the reputation of Libor without basing it on actual transactions,” said Rosa Abrantes-Metz, an economist with Global Economics Group, a New York-based consultancy, an associate professor with New YorkUniversity’s Stern School of Business and the co-author of a 2008 paper entitled “Libor Manipulation?” [Shah Gilani also warned of Libor manipulation in 2008, and Tyler Durden, Max Keiser and others started sounding the alarm at or around the same time.]

 

“It would only be disruptive if current quotes are inaccurate,” so resistance “is suspicious,” she said.

 

***

 

Traders interviewed by Bloomberg in March at three firms said they were given no guidance on how Libor should be set and there were no so-called Chinese walls preventing contact between the treasury staff charged with submitting the rate and traders who stood to profit on where Libor was set each day. They regularly discussed where Libor would be set with their colleagues and their counterparts at other firms, they said.

 

“Sadly the response looks to be very consistent with the response of policy makers to the banking disasters we’ve seen over the last four years — cosmetic changes, but nothing substantial happens,” said Richard Werner, a finance professor at the University of Southampton. “It’s insufficient and doesn’t really go to the heart of the problem.”

 

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Mon, 07/02/2012 - 19:40 | 2582160 ozziindaus
ozziindaus's picture

This is only news because the same thieves have just put the final touches on their next scam. Same criminals behind different scandals with different faces. It's a "who done it" murder plot where the scene on LIBOR has just ended. Queue the next scene with new actors and suspense plot but never reveal the director.  

Mon, 07/02/2012 - 11:39 | 2580748 artbrown08
artbrown08's picture

It is unfortunate that the truth is never told. Hollywood alway glorifies the Jews, and forgets that when you don't tell the truth. history tends to repeats itself. The biggest problem with this fact is the good Jews take the brunt of these bad deeds, and the fat cats run like cockroaches to eat bagels and cream cheese in some other country. The pigs in the trough will have a hard time running, becuse they have made this global, and there arrogance will be there demise. They have ruined us and made us look like AH's, and it is only common sense that they will pay AGAIN for being the pigs that they are.

Mon, 07/02/2012 - 19:47 | 2582174 ozziindaus
ozziindaus's picture

The biggest problem with this fact is the good Jews take the brunt of these bad deeds

You've got that right. The good Jews will once again be used by the Zionists as scape goats. The Holocaust industry will end this chapter with more "lets never forget" horse shit. 

I was once told by an old man that the intent for Israel was to host the closing scene for the next genocide. Jews and Zionists are polar opposites so it sort of makes sense. 


Mon, 07/02/2012 - 10:51 | 2580631 Bicycle Repairman
Bicycle Repairman's picture

I just want to take a moment and point out that the energy markets are completely free and transparent.

Thank you.

Mon, 07/02/2012 - 10:31 | 2580563 CoolBeans
CoolBeans's picture

If only the majority of us could "withdraw" from the system and cut the cord that feeds them. 

Mon, 07/02/2012 - 09:50 | 2580438 CustomersMan
CustomersMan's picture

 

Here's the best way to fix the "Pricks"

 

1. All derivative contracts are null and void because of all the improprieties involved and manipulation of the underlying rates, and lack of disclosure.

 

2. Return all premiums paid for such contracts.

Mon, 07/02/2012 - 09:42 | 2580410 CustomersMan
CustomersMan's picture

 

Imagine for a second, you own an Insurance Company.

 

You can take bets on anything and everything, collect the premiums you set, and never have to worry about going broke for 2 reasons:

 

1. The FED will back-stop you if you get in trouble

 

2. You control the International Association that determins when you have to pay-off on a bet.

 

No gamble is too big.

Mon, 07/02/2012 - 09:40 | 2580401 Bansters-in-my-...
Bansters-in-my- feces's picture

Here comes another year of record bonuses for the bankers again,I can feel it in my bones.

Mon, 07/02/2012 - 09:31 | 2580388 Patriot Eke
Patriot Eke's picture

That's a lot of balls to juggle.

Mon, 07/02/2012 - 08:21 | 2580185 rsnoble
rsnoble's picture

Since only 2005? That's laughable. They've always been doing crap they shouldn't be doing since the beginning of time.

If Obama hadn't been elected I guarantee the other idiot would've been saying "now looks like a good time to buy stocks" in 2009. Or whatever time frame that was.

It's all flying apart now, this game has become to messy and too big even for the masters of the universe.

Mon, 07/02/2012 - 07:44 | 2580126 midgetrannyporn
midgetrannyporn's picture

Assume it is all bogus, always will be, and then move on.

Mon, 07/02/2012 - 07:57 | 2580147 wonderatitall
wonderatitall's picture

boo friggin hoo...they all work for obama now, so shut up racist

Mon, 07/02/2012 - 08:59 | 2580293 purplefrog
purplefrog's picture

WTF???

Mon, 07/02/2012 - 09:46 | 2580417 moonshadow
moonshadow's picture

yeah- lol-some people just go right to 'rascism' the second they hear any type of negative connotation w' the 'O' word. kinda think it makes THEM the racist

Mon, 07/02/2012 - 07:23 | 2580097 Coldfire
Coldfire's picture

The primary dealers are creatures of the Fed is a creature of the primary dealers. They all manipulate the curve as much as they can, for as long as they can. This is completely consistent with the Ponzi scheme known as fractional reserve banking. Why is this being made an issue now, but only for certain banks? Limited hangout with consolidation to follow? These sure are entertaining times in Bankland.

Mon, 07/02/2012 - 09:11 | 2580330 johnnymustardseed
johnnymustardseed's picture

The whole concept of primary dealers is what holds this FAKE economy together. The FED has given rise to inflated markets that the sheeple cling to. I am amazed that so many visit this blog and complain about banks and then also bitch about the whole Occupy Wall Street movement. Some people get it and some how they are assholes in the eyes of some here. This blog would not exist if it was not for the rigged game and markets

Mon, 07/02/2012 - 10:14 | 2580501 CustomersMan
CustomersMan's picture

 

Like minds, that know something need to congregate somewhere, find each other. No?

Mon, 07/02/2012 - 07:08 | 2580085 Aquarius
Aquarius's picture

Now children,

We are all human beings of the same family, albeit all with differing potential and function. It is just that the system that we have installed favors the bankers and all that hangs off them:

 

So, we change the system to one that is designed to optimize all our talents and needs where one group doesn't get penalized (genocided).

 

Problem is, that this takes Intellect and Compassion and Reason, and Courage, Honour, and Virtue:

 

Whatever, we also need some adults making the decisions; unlike those that we have today. Economics is a Cult and "Leadership" a Protection Racket, while Bureaucracy  is a disease. Corporation are of course, the Mercenaries and Bankers are fungal Parasites.

 

It's all about function!

Mon, 07/02/2012 - 07:09 | 2580082 Racer
Racer's picture

It isn't even a light slap .....I would call it a golden handshake... after all THEY won't be paying it... the money stolen from the people will and it  is a massive incentive to steal more

Mon, 07/02/2012 - 06:32 | 2580044 groundedkiwi
groundedkiwi's picture

I wonder if  Marcus Aigus drew the short straw at the Bilderberg meeting

Mon, 07/02/2012 - 04:40 | 2579997 JR
JR's picture

Barclays et al. know the sheriff and if you know the sheriff no crime has been committed.

Mon, 07/02/2012 - 03:40 | 2579975 AgentOfNaturalS...
AgentOfNaturalSelection's picture

The militaries of our nations are at the behest of the governments, so at the beck and call of bankers. Revolt now would need to be fast and precise, otherwise you'd be looking down the barrel of many, many many large weapons.

Fast and clean. I have always meant to ask #anonymous to compile a list of the 1,000 most wealthy people on Earth so there can be targets when people finally start dying.

The world banking system is a house of cards and we are one drought or hurrican away from having regime change FORCED onto us; if we were ever willing. We are experiencing revolution in reverse.

Mon, 07/02/2012 - 02:39 | 2579958 OldPhart
OldPhart's picture

Wouldn't it be a hell of a thing if, after the collapse of the derivative market, the net gains/losses to each nation were less than $1 million?  The house of cards will end with the joker face up.

Mon, 07/02/2012 - 09:58 | 2580455 Mitzibitzi
Mitzibitzi's picture

Been speculating about that for some time. I mean... everyone in that 'market' basically owes money to everybody else, right? So if all the shit was unwound, you'd probably end up with one guy in Equador that owes about $11 to an Iranian rug salesman. Everything else has just cancelled out.

Mon, 07/02/2012 - 02:03 | 2579926 Buck Johnson
Buck Johnson's picture

Them saying they won't change the LIBOR should tell you that they know most of the stuff is not right.  They are afraid of causing a contraction and massive burp in the market.  In fact if it does happen they would implode not just the banks but countries.

Mon, 07/02/2012 - 01:48 | 2579909 ebworthen
ebworthen's picture

Kill the Beast!

Mon, 07/02/2012 - 00:50 | 2579861 JOYFUL
JOYFUL's picture

Yur on a roll now George! The facts are in, the data does not lie, even if the entire judicio\politico\mediotico structure fictionalizes reality.

All that's left to do is sum up:

Marx\Engel were wrong - Kapitalism did not collapse from it's own Kontradictions...rather, it Kollapsed[is kollapsing-live time-]from the perfection of it's dialectical development by the Dimonic Duo

= Usury Banking&Kommodity Kartels = JPM\Goldman-Barclays\HSBC\RBS-DeutscheBank+BarrickGold operating as priveleged wards of the Nanny State = the full flowering of 'free market Kapitalism, a house of Kards wallpapered over by Libertarian[Chicago School\MtPelerin]ideology designed to disguise the Kreation of the perfect Kommunist\Kapitalist Terrorist Kontrol Komplex...aka Euro Merika -the Prison Zone.

all brought to yu by the usual suspects...Objectivist neo-trots and Kultural Icons[Zimmerman|GinsburglCohen Axis of Banality]of Khazarian origin, smuggled into positions of power from which they Konsecrated the final elements of the long-schemed Kollapse of the Western Peeples...

some of the more gifted sheep will pause, before their final entry to the chutes of the Big K Ranch Abbatoir, to ask...

what was behind that other door, which was forbidden to our imaginations?

 

Mon, 07/02/2012 - 00:35 | 2579845 zorba THE GREEK
zorba THE GREEK's picture

We are overdue for a revolution. 

Mon, 07/02/2012 - 09:48 | 2580432 Bansters-in-my-...
Bansters-in-my- feces's picture

We get iPhones instead of Revolutionns.

Put the fucking phones down.!!!!!!!!!

Mon, 07/02/2012 - 07:50 | 2580135 RECISION
RECISION's picture

True.

And yet, and yet...

Somehow it just doesn't ever quite happen.

TPTB have us weighed up to perfection.

Leeching right up to the pain threshold... intercepting all the flashpoint vectors.

Consuming, but not combusting.

Mon, 07/02/2012 - 00:18 | 2579817 TulsaTime
TulsaTime's picture

Ah, score another one for the power of free markets and the direction of the invisible hand.  Another NOT a surprise brought to you by the same fuckers that have brought you everything else.  If only they would see the light and have a godly inspired ZIRP, none of this would have happened. 

Mon, 07/02/2012 - 00:00 | 2579800 printmoremoney
printmoremoney's picture

Throw the top 100 of these corporate, bankster and shadow economy thieves in jail. Trigger a debt Jubilee and burn all the bullshit derivatives. Wake up the next day, and let the real world economy be the only game in town. We would have a shot at a real life, as normal people. Why do we let these Criminals sit in their offices and laugh at us?

Mon, 07/02/2012 - 07:54 | 2580145 RECISION
RECISION's picture

Because you are not prepared to sacrifice, to pick up a gun and go and off a few of them.

The tree of liberty must from time to time be nourished with a little blood - yours as well as theirs.

Sun, 07/01/2012 - 23:58 | 2579797 MFL8240
MFL8240's picture

The Greedy Jewish sewer back in the news.  Time to rid the world of these fucking gangsters. 

Mon, 07/02/2012 - 08:40 | 2580233 WTFx10
WTFx10's picture

Five people who belong to that Jewish Criminal Organization did not like you telling the truth.

Mon, 07/02/2012 - 00:21 | 2579826 Savyindallas
Savyindallas's picture

It's been that time for a thousand years  -if not more. In fairness though-they are not all Jewish. Plenty of goyim in the mix of Banksters that need to be wiped off the face of the earth.

Mon, 07/02/2012 - 08:42 | 2580236 WTFx10
WTFx10's picture

The ones who are in control and hold the potus strings are the Rothschild's Jews others are just patsies getting paid and living well for their services to their masters.

Mon, 07/02/2012 - 10:03 | 2580467 Mitzibitzi
Mitzibitzi's picture

There's a basic inequality right there! They never advertise those jobs, do they? Hell, I might have wanted to become a minion of the evil bankster cabal. But no-one told me about it.

That's against my Human Rights, that is!

Sun, 07/01/2012 - 23:54 | 2579792 Right-on Left-off
Right-on Left-off's picture

Now just wait a minute ...

Wasn't this beneficial?  Didn't it save the whole banking system?  Shouldn't we be thanking them and even more so than those thanks we gave to Hank Paulson?

Where would you be now if all paper assets went to zero including da Dollah?

Good thang there is still someone looking after us.

Sun, 07/01/2012 - 23:40 | 2579782 world_debt_slave
world_debt_slave's picture

well, as someone else posted on ZH, where are the blood sucking lawyers to start class action suits?

Sun, 07/01/2012 - 23:48 | 2579788 HungrySeagull
HungrySeagull's picture

There is not 1200 trillion dollars in all the world.

Not even (*Counts.. aww screw it) sufficient currency or liquid assets to buy the world.

One word... Jubilee.

Now. Tell us. Who is engaged in that line of work? Should they become unemployed? What of it?

Hmm?

Mon, 07/02/2012 - 00:16 | 2579814 world_debt_slave
world_debt_slave's picture

exactly, collapse the system

Mon, 07/02/2012 - 08:05 | 2580078 falak pema
falak pema's picture

who collapses what? 

Whereas there are a lot of centrifugal forces pulling the system apart, some uncontrolled as part of past momemtum; aka QE/LTRO to maintain the wheel spinning; some newly concocted, aka Euro currency war; some hidden under the carpet, aka derivatives rehypoth/Libor manipulation; all of it points to same direction : we are out of control of CB centripetal efforts. 

The CB centripetal and the dysfunctional market centrifugal maintain the ship on its current lurch and slowing piston pumped surge; its heading more and more into bigger iceberg terrain, its hull already bleeding from past accidents. We stay perched like seagulls on its upperdecks or like scampering mice  in its underwater engine rooms where the steam is boiling hot, like in Athens central spot. 

Nobody wants to collapse the system in first world, as we all depend on it for our own survival. But the system will collapse as its entropy's arrow; and that's that. 

You want freedom? Keep you head out of water, freedom is a relative concept, always has been. As we are all on a limited time line anyway. The sun is out today and I'm ready for munching a crunchy veggie followed by a soft and honey sweet in the middle crepe suzette. 

Sun, 07/01/2012 - 23:49 | 2579759 casey13
casey13's picture

But you have a tin foil hat on if you think they are manipulating the gold market.

Mon, 07/02/2012 - 10:52 | 2580634 chdwlch1
chdwlch1's picture

I'm amazed at the foresight in this Peter Warburton article from 2001...it applies to the Fed's (et al) manipulation in the entire commodities complex...

"Central banks are engaged in a desperate battle on two fronts

What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November, I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

Central banks, and particularly the US Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.

The US dollar is not as vulnerable as it may appear

The key to understanding how this can happen is to consider how little information the flow of funds accounts provides about the true ownership of assets and liabilities. As far as the ?US? external capital account is concerned, hedge funds based in the Caribbean are overseas investors. The activities of overseas branches of US commercial banks are also considered to be foreign transactions. Also, London, and Zurich are clearinghouses for all manner of nominee accounts and anonymous trusts. Around two-thirds of all US bonds recorded as UK-owned belong to UK entities representing non-residents. To fear that foreign investors will one day abstain from fresh investment in US financial assets, leaving the current account deficit uncovered and the US dollar prone, is to suppose that foreigners are the sole instigators of these external financial flows in the first place. It is quite likely that a substantial proportion of these external flow-demands for US corporate bonds and equities are, in fact, US-originated. US residents' subscriptions to leveraged hedge funds reappear as foreign investment in US securities. US commercial banks’ overseas branches borrow in euros locally to invest the proceeds in US bonds, playing the yield curve.

Thinking in these terms, a collapse of the US dollar versus the euro appears much less likely. It may still occur, but more plausibly in the context of cancelled credit lines and forced asset disposals. The obvious example is the slump in the US dollar against the yen in 1998 as the hedge funds lost their credit lines from Japanese banks and were compelled to unwind their carry trades.

Beneath the surface, the values of the dollar, the yen and the euro have been eroded simultaneously by the over-extension of credit. The latent losses in the credit system, emanating from non-performing loans and defaulting bonds, represent a charge against the value of the currency, as surely as if the edges of the notes and coins had been trimmed away. There has been a reduction in the quality of credit rather than an increase in the quantity of money (net of writeoffs). The search is on for a valid yardstick, a measure of monetary value that has not been (and cannot be) distorted by central banks’ firefighting and wrecking tactics."

Sun, 07/01/2012 - 23:12 | 2579729 proLiberty
proLiberty's picture

The Federal Reserve is owned by the member financial instituions proportionately to their capital, and the Fed is at the mercy of  Congress, so the Fed Head knows who butters his bread and where it gets buttered.

Part of the job of the Fed Head is to keep the politicians who keep the butter happy, and the best way to do that is with interest rates as low as possible.

So, in a round about way, the lower LIBOR is, the better for everyone, at least on the borrowing/printing/inflating side of the Big Fiat Deal.

 

Mon, 07/02/2012 - 11:47 | 2580775 Not Too Important
Not Too Important's picture

And it sucks for all the pension funds and retirement plans that are invested in LIEBOR rate-related funds. All the municipal plans, state plans, on and on it goes.

You can bet all these funds' lawyers are just chomping at the bit to sue everyone in sight. There won't be any government sponsored whitewash of this (mortage fraud settlement). Try and keep the state AGs from blowing this up. All the states are broke, courtesy of GE Cap, the Squid and all the rest. This is going down bigtime.

And Barclay's wasn't doing this behind closed doors, either. It involved every level of employee, all out in the open:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9368430/...

They just don't care. This is going to be hard to hide, once the lawsuits are filed.

Even TEPCO shareholders are suing for $67 billion dollars over the Fukushima disaster:

http://www.abc.net.au/pm/content/2012/s3534291.htm

Big bucks to be had. The lawyers may be our last line of defense - or at least until the courts are shut down.

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