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Bloodletting
A short story
London has always been the center for the Euro dollar deposit market, but most banks had NY operations that also made markets in Euro depos. For a time, I sat on one of those desks. This was way before the Internet and live-streaming prices. Brokers communicated market prices over squawk boxes that were piled up on every desk. There was constant drone of background noise. I can still hear the voices :
I’m 7/8th bid sixes, looking for an offer
I’m an 1/8th around the figure 4 on threes. Looking to do business in the middle.
Last at three daughters (3/4%) on the offer in twos, buyer wants to build.
I have size spot-next to go, looking for a bid.
Looking for 3 large spot a week.
I have balances to go in threes and fours, I need balances over sixes.
Anyone have an offer on a year?
Now several eighths (1/4%) bid in nines, who wants to dance?
I need a bid in “Tom-next”, somebody please, talk to me.
.
Mostly we just called the players in the market and told them where we were bidding/offering strong. We even sent out faxes and telexes (I was in charge of the faxes). One day the desk got short six-month money and had to pay up to get it back. So the calls (and my faxes) went out. About an hour later the “Big Boss” comes out to the desk and says:
I heard that you are bidding ¼ over the Libor fix for six-month money. What the fuck is that about?
Someone mentions that there was demand and that the Libor “fix” was not the price that cleared the demand, so we had to pay a higher price. The boss responds:
That’s your fucking problem. Don’t make it mine. Don’t show prices to the street that are over the fixing. It makes us look stupid or desperate.
The only thing interesting about this story is that it’s 30++ years old. People have been sandbagging Libor quotes since the concept of Libor was originated.
I don’t believe that there is a money pro on either the buy or sell side over the past thirty years who didn’t understand that the Libor Fixing was “fixed”. If they claim to be “shocked” today, they are either lying or stupid. The same goes for every central banker and treasury official that knows the way to the bathroom.
As far as any consumers who took out a Libor based loan are concerned; they have no claim at all. If Libor hadn’t been “fixed” all these years they would have paid substantially more on those loans. Libor has always been jimmied down, not up.
The world has been looking for an excuse to hang some bankers (and a few regulators). Liborgate looks like it could be the opportunity for the bloodletting. I’m convinced that this is the wrong issue to bring out the nooses.
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The LIBOROR!...the LIBOROR!....
This is a perfect example about whether or not rules and regulation are as effective on people as the corporate atmosphere in which they operate... Just like a child learns and develops from its parents' teachings, young turks learn and develop from their professional mentors and general corporate environment. After a certain point of development, it takes a monumental effort to change perception... to re-define a personal ethics system.
The only way someone could take the gaming of Libor and make a comment that this isn't the scandal you're looking for... this isn't the time to get mad and brandish the noose (figurative I presume) had to have been in the business... had to have seen so many improper things that now everything has a "relative" approach, instead of absolute...
The thing is bruce, as sad and pathetic as it is, people depend on business professionals to care for their well being... expect them to do the right thing for the client... expect them not to take any risks of cheating and stealing... and expect their practices to maintain or fight for goodwill in the industry. This is incredibly naive... probably completely ignorant... but this is the other side of the coin... this is what J6P is thinking... I gave them my $30k savings and this is how they behave? These are the kinds of things they do all day? I don't feel safe... I don't feel like these guys are honest... [while from the manager side, who the fuck is this guy to talk shit? he's got $30k... what the fuck do I care if he goes... fuck him].
The other aspect is... the amount of fraudulent/scandalous behavior that gets made public and gets prosecuted is virtually nil... even if this type of behavior ultimately benefitted debtors in that they got to borrow at lower rates (we can argue whether or not they would have been incentivized to borrow, but for the low rates, but I digress), then it still needs to be exposed to show the sanctity of money and the ethical constraints (or lack thereof) of persons in the biz. Even if you didn't cheat me in particular, I'd sure like to know if you're a cheat elsewhere... because my day will be coming sooner or later. It isn't that liborgate in particular is a huge issue... but it is a huge issue when combined with every other dasterdly deed over the last few decades... especially considering J6P can't ever get anyone to go to bat for him to try and curtail or punish the behavior.
BK's short story says that private sector Pds rig a money line that another private sector scam, the FED, delegated to its shareholder kings of fractional reserve banking. The PDs ran the show from London, ever since RN blew the BW cover on USD, and controlled the revenues of the subsequent USD-Oil deal, making the Petrodollar recycling king of the world money market in eurobased zone; located in City.
So the WHOLE shooting match is a deal outsourced by the US treasury, via FED to the PD's; masters of petrodollar plays and thus of Libor money market. And the CBs who protect sovereign currencies look on benevolently as they all belong to the same Eton/ivy league club of big Anglo saxon money that runs Pax Americana money line; even when that money line goes bankrupt as during "crash of 79 days"!
Those central bank shills know that the PDs run the world. So they do everything in their power to give them latitude. And its a crony world where the powerful have the right to cheat to protect their asses at the expense of their dumb clients who foot the bill! We've been socialising debt for donkey's years! Nothing new there in fractional reserve world.
So much for "we the people" and fair, free markets!
Why is BK surprised that now this scam has reached the proportions it has?
He's been seeing this shit storm build up right from day 1, when BW was revoked and the USD became "your problem!" And its gotten worse with every brick that was added to the house of exorbitant privilege, all in VISIBLE irrational exuberance, henceforth in deregulated cross atlantic RR-MT mantra of Big Bang!
...Well we kept the big bad SOCIALIST wolf out, but we made Little Red Riding's granny into his mirror opposite, like a oligarchical king kong on empire state...What a truly american short story!
And a sad, sad epitaph on the tombstone of american financialised capitalism.
Read Hank Paulson's book. He was Treasury Secretary in the critical years of 2006-2008.
Page after page (and his phone records) describe his conversations with all of the bankers and central bankers. He was jawboning all of them. Private information exchanged. Deals with quid pro quos were discussed.
If you want to find dirty linen to hang the bankers there are plenty of other places to look. Places where real damage was inflicted.
If this had anything to do with a conspiracy to cheat small consumers, widows and orphans, then it might be an excuse to hang the bankers.
But that is not the case with Libor. It always an index. Yes it was flawed, but for the most part, it reflected reality. If anything, it understated the true raw-cost of money by an 1/8th of a percent.
Who cares?
I do.
The reason why no bankers are serving time is that in most cases they broke no laws. They broke no laws because they made sure the laws allowed the kind of fraud they committed. Just try to find a criminal statute that prohibits a banker from paying a rating agency for issuing AAA ratings on subprime CDO, from hiring a quant to create a mistaken risk model, from paying brokers for deal flow or paying higher commissions for mortgages with higher risk-adjusted spreads.
LIBORgate is the ONE instance of clear and uncontroverted fraud. The players claimed that LIBOR was mathematically derived from "best offers" when, in fact, those offers were fixed to meet the bankers' demands. But now that we have a bead on these banksters, Bruce tells us to walk away because "there are others who caused much more damage."
Funny, but that has never worked for me when I get pulled over for doing 75 in a 65 zone. Or when I park a little into the red zone. This is because crimes, to be prosecuted, DO NOT REQUIRE VICTIMS.
EXACTLY!!
The real damage is the fraud and manipulation being done by those whose job it was/is to regulate the system in cooperation with those entites they are regulating.
How Tim Geithner got a promotion after the biggest failure of the financial sector in the history of the USA, is still a mystery.
>How Tim Geithner got a promotion after the biggest failure of the financial sector in the history of the USA, is still a mystery
Same way Mervyn King got a knighthood last year, 3 years into the crash, whilst the inflation rate had been consistently above the BoE target (2%) for over a year beforehand.
If they're being rewarded for doing a crap job, then perhaps they're actually doing a good job and our view is incorrect.
No surprise to me. He did a bang-up job, when you consider who he really works for. Same goes for Paulson, same for Kashkari.
Or Gordy Brown selling the Brit's Au a tad cheep before its time. Bang up job indeedy.
@ bruce
Read Hank Paulson's book.
I believe everything Mister Paulson says, bwahahahaha, loved the part when he told Congress that TARP would be used to buy distressed MBS. pffft. "Changed his mind" the next day and used taxpayer money to inject equity into the banks.
well said. Facts are what the world needs.
IMHO the LIBOR rigging is mainly important because it's in the news. I don't mean because of the effect of the news but by the very fact that it made the news. The 'fringe blogs' have complained about rigging for as long as there were blogs but the MSM always pretended that there was nothing to see, just move along. That changed. Whoever it was that broke the story (WSJ?) had to get it through editors and corporate legal and the whole nine yards to get it in print so it could have been sidelined with ease, but it wasn't. It's like some upper capo in the mafia just got whacked. You don't touch a made man without authorization (according to the movies). Something has changed and the waters are roiling from movements under the surface. My gut says LIBOR is of little importance but the roiling water is very significant.
Abso - posit - lutely
Us nuts on the fringe are just annoying to TPTB. This "scandal" and its timing have been in the playbook for a long time. It is being trotted out now as part of a bigger plan - probably with goals that extend way beyond roiling the "markets".
bingo.. excellent point... mentioned it below too.
Did the French bring out the guilliotines for exactly the right reason, or did they just sum it all up and act?
I thought it was a volcano that caused bad harvests. The people were hungry. They blamed the "Ins".
So they stormed the Bastille and cut off their heads.
i thought it was global warming
Did you really just blame the French Revolution on a volcano?
Why not?
After all, Keynes blamed economic depressions on intangible "animal spirits".
There was a wee bit of excess going on at Versailles too, methinks.
Yeah, first time in history.
Most people do not realize the "French Revolution" was really more like a 10 year long riot. So, when you think about the guillotines and all that, think more along the lines of that beating in the LA riots where some poor fool got yanked out of a truck and beat to death by an angry mob.
Regards,
Cooter
"Atlas is shrugging my friend and "ignorant farmers" like myself have had enough."
Indeed. Many have caught on to the scam and have gone Galt on this so-called "market." in Dec 2007 I pulled every cent from my 401K and bought gold. I have sat on that ever since. Kinda makes me feel like a genius right about now. Oh the poor stupid banksters...they think they have everything under control (press, paper prices, politicians, and the police) but alas they're running out of stupid asses to screw. There's a certain level of idiots that are necessary to keep their scam alive. Once the requisite number of people finally get wind of the rip-off, it's over.
This whole thing is so freaking stupid. You would not have to pull your money from your 401(k) and dig up half your backyard if the 99% of the people that have no idea they are standing in the middle of a shootout organize and start seriously hold people accountable. I read a while back in China they caught two financial guys running a ponze scheme. They took a dirt nap. That is a serious deterrant. Sites like this are fantastic to get a real sense of what is happening out there but until people actually start organizing this will continue to be a one way street. Now I have to get back to the fast money halftime show and see if they like tech or financials here.
unless you have Gold in your bank lock box, it's just as vulnerable. MFGlobal was sitting on warehouse receipts and they clipped
everyone by 28%.
Not So safe deposit boxes
true that
f-in kill the bankers! (if u know what i mean)
Schwab's lawsuit acuses LIBOR rigging banks of violating RICO. Whatever it takes.
"In the lawsuit it filed last year, Charles Schwab accused 16 banks of violating not only antitrust laws but also the U.S. Racketeer Influenced and Corrupt Organizations Act, or RICO. Designed to fight organized crime, the law requires a "pattern of racketeering" such as repeatedly committing certain federal crimes like wire fraud. The banks' behavior may qualify.
If they lied about Libor, they may have committed wire fraud by sending Schwab and other customers information about the phony rate or, as Barclays did, emailing internally about manipulating the benchmark figure. And if they even remotely coordinated their activities, they may have formed the "criminal enterprise" necessary for a RICO violation.
In addition to triple damages, RICO winners can get legal fees and the losers' property. A RICO action seems the most likely to succeed against the banks - and the most effective way to force a hefty settlement."
http://newsandinsight.thomsonreuters.com/New_York/News/2012/07_-_July/Br...
RICO is tough to prove in court, especially when the "bad acts" have been committed in London.
RICO is easy to prove, they had multiple frauds which is a material misrepresentation for a material gain, and
they had multiple parties and they did it as part of an organization.
doesn't matter if half the parties were in England. The British governmental reports are evidence now
Agreed. RICO is typically used in criminal activity where the individual crimes of a syndicate are hard to prove.
I think Bruce has been too infuenced by Eric Holder... who apparently thinks ANYTHING is too hard to prove for prosecution.
Client #9 would have had a fighting chance. He had the balls to go in hard (as "Ashley" would no doubt confirm).
Isn't bloodletting done with leaches?
Not always
Let me summarize the entire current global problem 4 everyone. Too many moneychangers in too many temples & not nearly enough pissed off guys in white robes.
you might not have finished the rest of the story. The fella in the white robe was nailed to a tree. In this world, the money changers always win.
This is fascinating stuff; all technical science and crafts have this inner language that is unknowable by the laity and everyone in that realm understands perfectly - I had a sense as an outsider that of course Libor was rigged, that was its purpose - someone has to call the shot, right or wrong, and that starts the ball rolling - nice to know there was some serious greed involved, too - reinforces my sense of human nature. Yes, we have other problems, namely about half the human race wanting the other half to support it and goddam well going to find a way to do exactly that - maybe it sues the other half for it.
Dammit. I was going to vote for Mickey.
Just because he's a now deceased fictional character doesn't mean he wouldn't make a good president.
Speaking of bloodletting - Just got laid off yesterday from my company after 15+years in the CPG industry - many others with lots of experience (and pension expense) let go. I know many of you have nice day/week trading strategies that I would love to dabble with in my new free time (gotta have something to do besides job hunt). What do you think the best way is to take advantage of the "mindless" volatility?
Don't do it. Buy metals and survival supplies instead. The whole market is rigged, fundamental analysis is dead, you will never beat the algos, your account could be rehypothecated at any time, you are always one black swan away from a total wipeout. Only insiders win. If you can't resist the casino, at least keep a rigorous list of fake trades and see how that goes for a couple months. That should be long enough to help you feel better about staying out.
dude, stay out. I've been trading for the largest institutions for 25 years. Now is definitely not the time to get in.
95 % of retail traders lose all their money. That's a fact. Or the prudent ones waste 2 years before they realise the odds are totally against them and they've been playing with fire. If you have no specific edge nor experience, odds are totally against you.
Ann Bardhardt's advice. Heed it:
http://barnhardt.biz/
People are emailing asking what firm I recommend.
NONE.
GET OUT.
GET OUT.
GET OUT.
GET OUT.
GET OUT.
GET OUT.
GET OUT.
GET OUT.
GET OUT.
The ENTIRE SYSTEM is totally, completely corrupt and therefore NO FIRM IS SAFE. Don't be stupid. Don't be obtuse. Snap yourself out of the Stockholm Syndrome that you are clearly stuck in. Get ALL MONEY out of the ENTIRE FINANCIAL SYSTEM, including stocks, bonds, retirement accounts, futures, EVERYTHING.
But what about . . .
What part of EVERYTHING are you not comprehending?
One. More. Time.
If you can't touch it, if it isn't physically on your property such that you can stand in front of it with an assault rifle and PHYSICALLY defend it, you don't own it, and it could be confiscated/stolen from you at any time, if it ever actually existed at all.
Best advice.
Here's from a farmer who is completely out.
Ann Barnhardt sounds like fun...get in, get out! Stop fucking about!
That's poetry in motion.
I am taking licence with my gun, I mean pen. She sounds desperate.
Desperate wouldn't be the word I'd use to describe her. She's actually challenged militant Islamists to come and get her, if they can survive the experience.
As for her market views, I see very few others willing to not only sound the alarm, but close down their business due to ethical concerns about trying to do business with a criminal cartel.
wow, tuff lady and takes no shit, makes her ever better iconic target for sensual wit from a twit. As she acts like she looks.
Not that I don't admire her stance against fundamentalist baloney as long as its sincere and not a cover for racial smear.
For a free enterpriser she is indeed in trouble as are all those who believe in the free market in the land of US zombie fiat.
A'yup.
Might I also add reading some history with your free time. Start with an out of print Will Durant collection and then get back to me.
Regards,
Cooter
Do things that makes your heart happy. That probably does not include full time trading.
Do what Tyler says (ONLY Tyler, not guest posts) and don't bet it all at once.
Or, for fun, set another stake aside for your own experimentation, like anticipating 'no news' equity surge and fade cycles, or DXY-commodity pairs. But you'll likely lose or wash there.
It's hard to compete with the savage algos in the HFT surf these days. I don't do it any more.
Oh and you'll need at least $30-40K to make it pay and live through some bad days. And watch the taxes. Ugh.
Longer term (1 year+) plays abound but I don't think that's what you're asking about.