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Have Banks Been Manipulating Libor for DECADES?

George Washington's picture





 

We've previously noted that Libor manipulation has been going on since at least 2005 ...  and continued long after the manipulation was first reported.

James Bianco notes today that the Financial Times started reporting on the manipulation in 2007, and the Wall Street Journal in 2008 (see this, this, this and this).

But as the Economist reports today, the manipulation probably goes back a lot further:

The FSA has identified price-rigging dating back to 2005, yet some current and former traders say that problems go back much further than that. “Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran closely involved in the LIBOR process. “It was one of those well kept secrets, but the regulator was asleep, the Bank of England didn’t care and…[the banks participating were] happy with the reference prices.” Says another: “Going back to the late 1980s, when I was a trader, you saw some pretty odd fixings…With traders, if you don’t actually nail it down, they’ll steal it.”

Given that homeowners, students, credit card holders, and other borrowers pay more when rates are higher, the banks appear to have fleeced consumers for 10 years during the entire bull run leading up to the financial crisis.

We predict that lawyers can prevail in huge class action lawsuits based on that theory alone.  

As Yves Smith writes:

I expect the firms involved to face a locust swarm of litigation. Lawyers may accomplish what regulators and politicians refused to do: strip the banks of ill gotten gains and bring their preening CEOs and “producers” down a few notches. A day of reckoning may finally be coming.

 


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Sat, 07/07/2012 - 09:59 | Link to Comment blindman
blindman's picture

http://news.goldseek.com/GoldenJackass/1341518400.php
Exposure of Banker Corruption
By: Jim Willie CB, GoldenJackass.com
...
"Anyone with a solid intelligence quotient, a curious manner, and a suspicious streak can detect the recent trail. The MFGlobal client account thefts were a coming out event for the corruption. The JPMorgan margin calls on various positions had become an acute problem. They were very short on cash. With the upcoming December 2011 gold & silver delivery notices adding strain to the near breakpoint, JPMorgan made a decision. They stole the MFGlobal client accounts. They reneged on all precious metals contract delivery. They put all the to-be-delivered metal in their own account. Mission Accomplished, the catch phrase for unspeakable colossal permitted corruption in the USGovt and US financial markets. The losses in May by JPMorgan in the sovereign bond and Interest Rate Swap arena provided the Prima Facie case for the MFGlobal thefts, showing deep losses that will escalate over time. The officials at JPM have been telling scattered truths over the course of the last several weeks. They admit at times that their profound losses are tied to Interest Rate Swaps, which experienced analysts and traders can tell are for defense of the USTreasury Bonds and their entirely unwarranted 0% yield.

LIBOR CONNECTED TO INTEREST RATE SWAPS

The annual now chronic $1.5 trillion USGovt deficits must be financed. They should be financed at a Spain-like 7% yield. The two nations have equally wrecked finances and an equal unemployment rate. But doing so would be far too disruptive. But doing so would be far too costly. But doing so would take away the wellspring of cheap money for the speculation. The big banks enjoy a brisk carry trade off the USTreasury curve that makes easy profits. No other industry is granted such risk free profits. So enter the IRSwap to generate an artificial USTBond rally from a phony engineered flight to safety. The thought of a flight to the safety of massive uncontrollable USGovt toxic debt pit is laughable on its face. The LIBOR price rig has enabled virtually free funds for the IRSwap that supports the vast 0% USTBond tower.

The next connection will soon be revealed. The IRSwaps are fed by the deep source fountain of LIBOR, at virtually free cost. It bears repeating. Too much attention is given to the adjustable rate mortgage feeder process. Not enough is given to the derivatives that are abused by the financial sector in unregulated shadow systems. The big banks have sold too many multiples of Credit Default Swap insurance, to the point that both counter-parties are dead. No net neutrality is a reflection of reality. Too legless swimmers do not rescue each other in the deep waters. They both drown, just like the bank parties involved. However, the big story is the Interest Rate Swap contracts, those arbitraged long-term bond swaps versus short-term bond swaps that enable free money to finance the levers that control the long maturity for the USTBonds. Anyone who believes the TNX fell from 3.6% in 2011 to under 1.8% was from a flight to quality is either drinking Wall Street kool-aid or duped by their marketing flyers or captivated by media propaganda or just plain stupid. The vested interest in watching the 10-year USTBond yield go into ultra-low territory is all very understandable. Many financial asset prices depend upon a low benchmark bond yield.

But the reality is that foreign creditors abandoned the USGovt debt auctions. The reality is that primary dealers to those auctions found themselves stuck with inventory. The reality is that an avalanche of USGovt debt supply could not be handled with absent demand. The reality is that the USGovt borrowing costs required, if not demanded, ultra-low yields to prevent a worse explosion in deficits. The only true aspect of the flight into USTreasurys is that the European sovereign bonds have turned toxic. But the Europeans are far more likely to purchase German Bunds, and they have, driving their yields lower than the USTBonds. Some arbitrage has pulled the two to almost equal, evidence that IRSwaps are at work in the Bund backyard. The story will come out soon enough, how the LIBOR rate was rigged extremely low in order to facilitate management of the ultra-low 0% Fed Funds rate, and to enable the IRSwaps to do their magic in keeping down the long-term USTBond yield. The LIBOR has been and continues to be the feeder system for the IRSwaps that enforce the 0% and 1.5% yields on FedFunds and TNX. The factor is mentioned on financial networks with quick passing and no emphasis. They still sell the flight to safety rubbish story."
...

Sat, 07/07/2012 - 11:27 | Link to Comment Winston Smith 2009
Winston Smith 2009's picture

Excellent article you link to, but he greatly damages his credibility when he unnecessarily delves into 911 Truther territory and the $240 billion dollar Russian bond story.  He needs to stick to absolutely known facts.  There's plenty enough of them to prove the point that the financial system is rotten and corrupt to the core.

Sat, 07/07/2012 - 12:40 | Link to Comment blindman
blindman's picture

i continue to hold the author in high esteem
and his credibility remains in tact. the 911
truthers will be proved correct in their sceptical
attitude regarding the portrayal of events as
described by the msm and government. the truth,
when it comes out, will be so ugly that few will
even be able to look at it? you don't get to the
current state of cultural senility without the
institutions of education, media/information and
government systematically avoiding the truth and
perpetrating misconceptions and lies. just an opinion/
complaint.
the zero post on the history of the fed was great,
did you catch that?
The History Of The Federal Reserve System
http://www.zerohedge.com/news/history-federal-reserve-system

Sat, 07/07/2012 - 09:32 | Link to Comment Chuck Walla
Chuck Walla's picture

It would come as no surprise.  Banks used to set interest rates on credit cards with LIBOR. Since so much income was being produced, why wouldn't they manipulate it would be the better question.

Sat, 07/07/2012 - 09:12 | Link to Comment deerhunter
deerhunter's picture

typical foursome at country club   banker, insurance man, lawyer and a doctor.  Which one do you need the most,   if at all?  Man setting tee time,  the politician who can make a fivesome seem not only normal but perfectly sensible,  sarc OFF

Sat, 07/07/2012 - 07:52 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

fiat = power for the matrix, fiat implodes so does our matrix..keepers of the fiat are aware that some tax units have become awake and unplugged. the fiat wars continue with most tax units still with "eyes wide shut"..but the numbers of the awake are growing like a virus in the system, the wars go on with the many totally unaware.

Sat, 07/07/2012 - 07:04 | Link to Comment dizzyfingers
dizzyfingers's picture

http://confoundedinterest.wordpress.com/2012/07/06/libor-fixing-and-the-fed-funds-target/

LIBOR “Fixing” and The Fed Funds Target: Trouble in Thames City

Sat, 07/07/2012 - 06:02 | Link to Comment dizzyfingers
dizzyfingers's picture

judith@judemcdonald

Bank of America paid ZERO in Federal Taxes for 2011.

Sat, 07/07/2012 - 05:39 | Link to Comment dizzyfingers
dizzyfingers's picture

http://jessescrossroadscafe.blogspot.com/2012/07/why-do-bankers-seem-to-be-uniquely.html

Why Do Bankers' Seem to be Uniquely Immune to Punishment?

Sat, 07/07/2012 - 09:22 | Link to Comment Vendetta
Vendetta's picture

the corrupt protect the corrupt?

Sat, 07/07/2012 - 04:02 | Link to Comment torak
torak's picture

Manipulation for decades?  Why would you think they haven't been?

Sat, 07/07/2012 - 01:11 | Link to Comment world_debt_slave
world_debt_slave's picture

yep, scoundrels from the beginning. The way to stop this thing is to END THE FED.

D.R.I.P. Don't Re-elect Incumbent Politicians

Enact Term Limits on their thieving asses

Fri, 07/06/2012 - 23:49 | Link to Comment Shizzmoney
Shizzmoney's picture

So in the end, we rely on lawyers.

We are so fucked.

Fri, 07/06/2012 - 22:49 | Link to Comment printmoremoney
printmoremoney's picture

The lawyers and bankers are the same thing. Lawsuits are a joke. They own the Justice system. You can have all the Justice you can afford, remember? $$$

When I see Jamie DieMan and Fukfein with vertical bars in front of them and they are pimpin Obama to the lifers on Deathrow and all the debt has been deleted from the BIS Black Screens, then I will believe we made some progress.

All we have to do is program the servers with good code and lock thieves like Banksters out of it and we have a system. When they try to steal, the Puter says the No No error message. Operation not allowed. Justice!

The pyschos that want to own the world are not capable of controlling themselves, poor things. They must have little dicks or small breasts (I am not sexist). Let the Matrix nueter them.

Do I ask too much?

Sat, 07/07/2012 - 00:35 | Link to Comment El Oregonian
El Oregonian's picture

Yes you do.  It seems like, along with the pending financial collapse, moral integrity seems to be crumbling as well. No respect offered-none given. We really can't expect much when we fail to exercise that ourselves. Honor is above all, and your word should be your bond. Until then, expect to see everything swirl around the drain.

I find myself just as guilty and in the future I will expect more from myself before I should expect more from others. It should be everyone's goal.

 

 

ad mortum decus

Sat, 07/07/2012 - 02:12 | Link to Comment Vic Vinegar
Vic Vinegar's picture

We really can't expect much when we fail to exercise that ourselves.

I find myself just as guilty

Speak for yourself, or the cat above if you wish. 

Have either of you bought physical?  Taking action > navel gazing.

Fri, 07/06/2012 - 21:19 | Link to Comment skipjack
skipjack's picture

Yeah, but who wants to enrich shyster lawyers, either ?

Fri, 07/06/2012 - 21:07 | Link to Comment Aziz
Aziz's picture

Washington:

How hard is it to under/over report this data?

My guess is that banks have been manipulating it from the start. 

Fri, 07/06/2012 - 21:28 | Link to Comment CH1
CH1's picture

My guess is that banks have been manipulating it from the start.

Central bankers and their friends have manipulated everything they could touch since 1792 in the US. Not sure of the dates elsewhere.

Fri, 07/06/2012 - 19:53 | Link to Comment Snakeeyes
Snakeeyes's picture

I read the complaints. Now seperate Ben's manipulation from Barclay's manipulation, if you can.

http://confoundedinterest.wordpress.com/2012/07/06/libor-fixing-and-the-...

Fri, 07/06/2012 - 18:12 | Link to Comment Vic Vinegar
Vic Vinegar's picture

"Have banks been manipulating LIBOR for decades?"

Yes.  Now

What are you going to do?  Give us a link about something we should care about?  Or complain about how sheeple won't wake up?

Me - I choose neither.  I choose the Kardashians.  Kim K and Kris K have more relevance in my life than something I cannot do anything about.

Fri, 07/06/2012 - 20:01 | Link to Comment I am Jobe
I am Jobe's picture

How about TomKat?

Fri, 07/06/2012 - 20:05 | Link to Comment Vic Vinegar
Vic Vinegar's picture

Since you asked:

-Katie Holmes seemed like a sweet girl from small-town Ohio.  But her panties got too wet knowing a famous movie star wanted her.

-I used to think Scientology was bullshit, Rupert Murdoch's twitter feed-style.  But hey...if a religion works for someone, who I am to judge?

Fri, 07/06/2012 - 19:45 | Link to Comment knukles
knukles's picture

No more than gold or silver.

But don't forget, Vic.  You can't eat a Kardashian.

Fri, 07/06/2012 - 20:22 | Link to Comment spinone
spinone's picture

You can, but they taste yeasty

Fri, 07/06/2012 - 20:24 | Link to Comment Vic Vinegar
Vic Vinegar's picture

case in point

Fri, 07/06/2012 - 19:54 | Link to Comment Nobody For President
Nobody For President's picture

Shame on you knucks for throwing out a straight line like that....

Fri, 07/06/2012 - 20:02 | Link to Comment Vic Vinegar
Vic Vinegar's picture

Mos def.  Never throw an 85 mph fastball down the plate on the internet when there's plenty of off-speed pitches out there.

Sure, you and I will die having made 'witty comments'... those that don't get it are suckers.  Or worse yet, sheeple who watch the Kardashians!

Fri, 07/06/2012 - 22:05 | Link to Comment Earl of Chiswick
Earl of Chiswick's picture

Normally enjoy your contributions mr george Washington

 

but what you have contributed here is piss poor

 

now if you were writing about LIBOR manipulation four or five years ago as in see this and this and this that would be good but your see this and this and this refers to articles where the ink is still wet

 

 

Sat, 07/07/2012 - 00:18 | Link to Comment putaipan
putaipan's picture

still looking for any zh feedback on gwash's CAFR. i still think it's in the trillion dollar bearer bonds/ nasara realm and am looking for a little more grounded feedback/commentary. thanks.

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