And Now The Fed Gets Dragged Into LiEborgate

Tyler Durden's picture

As was first reported two days ago, and confirmed today, Barclays' natural response to allegations it single-handedly manipulated the interest rate complex for up to $500 trillion notional in IR-sensitive swaps and other products (it didn't - everyone else did it too), was to drag everyone into the scandal, starting off with the Bank of England (and about to drag Whitehall into it too), and specifically the man who was next in line for governorship of the English Central Bank: Paul Tucker. What does this mean? Well, as we suggested also two days ago, now that the natural succession path at the BOE has been terminally derailed, it brings up those two other gentlemen already brought up previously as potential future heads of the BOE, both of whom just happened to work, or still do, at... Goldman Sachs:  Canada's Mark Carney or Goldman's Jim O'Neil. Granted both have denied press speculation they will replace Mervyn King, but it's not like it would be the first time a banker lied to anyone now, would it (and makes one wonder if this whole affair was not merely orchestrated by the Squid from the get go... but no, that would be a 'conspiracy theory'.) Yet the fact that Goldman is hell bent on global domination by stretching its tentacles into every monetary policy administration is no secret: it is only a matter of time before GS also runs the English CTRL-P macros. More interesting is that in addition to the BOE, Barclays today also dragged America's very own Federal Reserve into the fray.

From MarketWatch:

Barclays also said in the document that the lender believed other banks were making Libor submissions that were too low during the credit crunch. “The evidence shows that the intent was to protect Barclays from the unfounded negative perceptions by bringing Barclays Libor quotes closer to the pack but not to affect the ultimate rate,” the bank said.

 

Barclays also cited subsequent research by the New York Federal Reserve staff members that, according to the lender, concluded that banks’ Libor quotes were systematically below their borrowing rates by 39 basis points after the Lehman bankruptcy. “Barclays own submissions for tenors of 1 month to 1 year Libor were higher than actual Barclays trades on 97% of the occasions when Barclays had actual trades during the financial crisis,” the lender said.

Translating the bolded: the Fed knew all along that Barclays self-reported levels were impossible. And did nothing. Which of course was not an issue until 2 days ago. Now that heads are rolling, it is.

So we wonder: will the captured and corrupt congressional critters even pretend to have the guts to escalate LiEborgate on US soil, where the real bodies are buried, or will everyone continue to tiptoe around the issue, hoping it just blows off on its own? If the latter, look for many new and exciting $0.99 apps to hit the iTunes store in the next 12-24 hours. After all must keep the fat, lazy, easily distracted muppets, occupied with cool retina displays and even cooler games where stuff happens fast without draining the battery for hours.