The Fed And LIBOR - The Biggest Manipulator Of Them All

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors,

The Fed does everything it can to keep LIBOR low.

This chart says it all.



The Fed cannot affect LIBOR directly, but in general LIBOR trades in line with Fed Funds.  You can see that historically as Fed Funds was changed, LIBOR responded appropriately.  There was typically some small premium to reflect the "credit risk" of banks versus the Fed, but it was relatively small, and fairly stable.  3 Month LIBOR would deviate a bit as rate cuts and hikes were anticipated in the market, but in general, it was a fairly stable game.

That all started to break down in 2007.  We saw the first real signs of LIBOR deviating from its normal spread to Fed Funds in the summer of 2007. The Fed responded by cutting the "penalty" rate for using the discount window, and in fact encouraged banks to use the discount window (I still can't shake the mental image of someone sitting in a dark basement with a green eye-shade doling out money to banks that request it).  Then the crisis got worse.  Bear needed to be rescued.  Facilities such as the Term Auction Facility that had been put in earlier were increased in size.  The Fed backstopped some portfolios that JPM acquired as part of the Bear Stearns deal.

As the crisis re-ignited in the late summer of 2008 and peaked after Lehman and AIG, the Fed took step after step to reduce borrowing costs.  The Fed was blatantly clear that it wanted borrowing costs to go down.  They had the obvious tool of reducing Fed Funds to virtually zero, but when LIBOR didn't follow, the Fed took further action.  The Fed did not want bank borrowing costs to be high.

They increased dollar swap lines so foreign banks could borrow.  The Fed stepped into the commercial paper market so banks wouldn't have to use money to meet drawdowns on revolvers.  TALF was another creation to take pressure of bank lending.

The FDIC allowed banks to issue bonds with FDIC backing (so not quite Fed program, but who is going to quibble).

Fears that MS and GS and GE would topple the banks were alleviated by making them banks.

The list goes on.  The Fed has done a lot and trying to control LIBOR as a key borrowing rate is one of the things they have worked on, both directly and indirectly.

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veyron's picture

Lies-man, Lie-bor, ...


Is there anything that isn't a lie?

Nothing To See Here's picture

The government only wants your good

Mr Lennon Hendrix's picture

On July 13th, End the Fed!

Buy Silver!

SheepRevolution's picture

It's not about trying to organize everyone into buying as much silver as possible on a particular day. Being consistent with teaching the sheeple about the monetary system and how banks work, and also teaching them why gold/silver is better than fiat, is the way to go. You would do more good in teaching your neighbour about these things and getting him purchasing gold/silver regulary, than just trying to get everyone to buy on a certain day. I buy silver every month once I get my salary, and this I believe is a far better advice than Friday the 13th, the 5th of November, Independence Day etc.

Mr Lennon Hendrix's picture

July 13th Silver Bomb!

Buy Silver!

I understand your point, which may be how I grabbed the idea to "Buy Silver and Crash JPM" out of the vapors.  And you are right, an idea that is not expressed is wasted.  So spread the good word, tell your friends that silver is real money.  Tell them fiat has no intrinsic value.  Tell them that the definition of money, in all economic textbooks, states "Money must store value".  What is value?  Molecular structure best defines this.  Therefore silver is money.  That and there is no counterparty risk.  That and it is a great medium of exchange, which is why for thousands of years we have minted bullion coins.

Yet there is a financial war taking place.  On the surface it may appear to be East vs West, but really it is the People vs the Goverment/Corporations.  Either way one looks at it, the best thing to do is for us to arm ourselves.  We do this by taking control of the real money supply.

Tell your friends to buy silver.  Tell them to do it whenever they can.  But there is not much time left.  The system has been unravelling since the day it began due to a false economic paradigm, done purposefully or not by the Jekyll Island Mob. 

So on July 13th we will move an amount off of the shelves that will shock the system; we will take back the money supply and rectify our rights.

On this day, Buy Silver!

ebear's picture

Buy silver, crash JPM?  LOL.  

Would somebody please call Myth Busters and have them explain how the Comex actually works?

Mr Lennon Hendrix's picture

Are you familiar with how price is determined by supply/demand?

If there was a shortage of supply in silver for industrial demand and investment demand, it would raise the price.  If the price raised JPM would be forced to cover, and they are naked short silver, which means they would have to go into the market and procure bullion, which would squeeze the price more.  Or they would write big checks to cover and those that asked for delivery would take the cash and move into bullion themselves, causing a further squeeze.

Any defeatist attitude will get you nowhere fast; I'll tend to my task.

Buy Silver!

ebear's picture

Buy as much silver as you like, but if you think that will crash JPM, I reiterate... LOL.  Silver is a tiny market.  So, how big is JPM's position relative to their total book?  1%?  .01%?  .0001%?   It's like trying to kill a bear by swatting a fly on the end of it's nose.  All you get is a slightly annoyed bear.  Anyway, no need to bring down JPM - they're doing a smashing job of it all by themselves.

Kyron95131's picture

it works like it does cause poeple think ninjas have GPS on every piece of silver and gold in existence and they visit your house daily dressed as mailmen... so they buy paper to gain a false sense of security. so they trust the same institutions to say their investment is safe even though they are safeguarding themselves against the same fraud. lols?

if 5-10% of poeple took what they actually owned the comex's jig would be up as a fractional reserve exchange and the shit would hit a wall of fans. we'd prolly see another Corzine esc event to cover some contracts. 

but most investors of this idea are of western civilization to say that which motivations are driven buy fear of everything, which is ironic.

when i buy, i take delivery.

i love ninja movies, but know they are movies.

debtor of last resort's picture

I did my job for today. And yesterday, and...

Kasperfx's picture

What good is buying if the banking cartels can simpley menipulate the markets prices ? I mean even if everone startes buying and prices spike up do to the volums all thya have to do is sell or even easier, adjust the price at the feeds sources to their liking.  what we need is a new exchange out of the banking gov reach this will show the true free market prices . 

world_debt_slave's picture

I started buying Silver in 2004 after reading "The Creature from Jekyl Island", then in 2007 the Feds stole my Silver from a NORFED warehouse raid ( still haven't gotten it back).

Start buying your Gold and Silver and if you can, do it every chance you can, get the metal in your hands and put it in a safe place.

alangreedspank's picture

Please don't. Don't buy when everyone else is.

I am more equal than others's picture

Wasn't it Benjamin Franklin who said 'neither a borrower or lender be'? 

When prostitutes lower their prices/costs does it entice you more or less?

There is an inevitable inversion somewhere in our future.  Culling to killing. 

WmMcK's picture

The Bard's Polonius. Bill also said something about "get thee to a nunnery".

vast-dom's picture

please copy and paste this article to Fed fraud hotline:


Federal Reserve Consumer Help:


I have been saying for years that the fed is destroying the markets by altering all rates. doubtful and most unfortunate that some brave soul will not step up and use this oppurtunity to leverage Barclays et. al. against The Fed. 


gojam's picture

Scientists Announce Discovery of the ‘God’ Gene.

"Scientists are 99.999% sure that they have found the ‘God’ gene, the gene which makes some members at the top of our society act as if they were gods."

palmereldritch's picture

I guess that makes them LIeBORtines...well to them it was free money after all...moral hazard anathema.

Bansters-in-my- feces's picture

"Is ther anything that isn't a lie ? "

NOPE, even the Joo lie 4th lie,aint no independence.

All Risk No Reward's picture

How about the Fed criminally breaking their mandate for 25 years running? 

Weapons of Mass Debt

Why don't that FACT get any press?

What about the fraudulent mechanics of a debt money system that systematically assets strips the suckers in society?

Debt Money Tyranny

philipat's picture

As I understand it, LIBOR is set based on quotes from 15 Banks. The top four and bottom four rates are eliminated then an average is taken of the remaining seven. So one Bank alone cannot even scew LIBOR. let alone fix it. I wonder who is next? It should be one of the US Banks involved so that the US regulators have less excuses to look the other way as usual.

LMAOLORI's picture

Janet Calls Out The Media

Reprinted with permission:

“Sometimes Being Responsible Means*****ing People Off”

By Janet Tavakoli – July 3, 2012

Last week, Gillian Tett of the Financial Times wrote how five years previously, she and her fellow journalists were intimidated into backing off of a huge story about banks manipulating LIBOR. This is the London Interbank Offered Rate set by a poll of leading banks to determine the benchmark interest rate referenced by many home mortgage loans, floating rate notes, collateralized debt obligations, and many other financial instruments:

“At the time, this sparked furious criticism from the British Bankers’ Association, as well as big banks such as Barclays; the word “scaremongering” was used. But now we know that, amid the blustering from the BBA, the reality was worse than we thought. As emails released by the UK Financial Services Authority show, some Barclays traders were engaged in a constant and pervasive attempt to rig the Libor market from 2006 on, with the encouragement of more senior managers. And the British bank may not have been alone.”

(“LIBOR Affair Shows Banking’s Big Conceit,” Financial Times, June 28, 2012.)

At the heart of the allegations is what appears to be a blasé criminal conspiracy within Barclays. Moreover, Tett is correct. Barclays is far from alone.

Unfortunately, the intimidation was a success. The BBA and Barclays chose their word carefully, because accusing journalists of “scaremongering” suggests they are irresponsible sensationalist hacks. In essence, through lies and intimidation, they threatened to ruin careers.

The Financial Times backed off. As a result, the best coverage of the ongoing scandal came from a controversial blog with mostly anonymous writers called ZeroHedge. It pounded on the story harder than mainstream financial media. Not only are other banks implicated in the scandal, the Bank of England, a bank regulator, is also implicated.


LetThemEatRand's picture

The Financial Times is owned by Pearson, LLC, the largest publisher in the world.  Any illusion of objectivity when it comes to reporting on other multi-national companies is just that -- an illusion.  No doubt Pearson and the few other gigantic companies that control our international media will come together and explain to the few sheep who are even aware of this story why the manipulation was really no big deal, that the banks were just trying to save the world from collapse and protect their depositors, etc.

Not Too Important's picture

ZeroHedge rules the universe! Pound those stories, bitchez!

max2205's picture

Let's add derivatives to the FDIC load...., oh, BAC ... Done that

falak pema's picture

Citi bank has publicly said, the US government won't let us banks go down ever. They repealed G-S for Citi in Sandy Weill days. So they should know. 

Libor is just a crony instrument of that dictat. Print to infinity, Zirp n control interbank, you own the shooting match. And who is the FED? Is it the people? No its those very banks. So basically the whole show is theirs and as long as USD is reserve it will stay that way. Its poured in concrete. You have no say. Thats Oligarchy rule #1. 

Not Too Important's picture

Repealed G-S, courtesty Clinton, Rubin and Greenspan.

Lest we forget.

All Risk No Reward's picture

Don't forget 8 years of Bush approval, the same guy who sued the state of New York to preven tthem from making "ability to repay" a requirement for making a loan.

"Hope and Change" also signed his name to the exact same program, so the only real conclusion is they all work for the money power behind the mega bank, criminal societal asset stripping criminal Ponzi operators.

Weapons of Mass Debt

Debt Money Tyranny

Who is doing this to us?  Let John Taylor Gatto try and explain with sourced documents: The Ultimate History Lesson:

The Ultimate history Lesson Commentary:
Joshua Falken's picture

Bank of England Governor, Sir Mervyn King shared an office at MIT with Ben Bernanke.

As Tony Blair's government played poodle to America, I am sure Mervyn was happy to accomodate his old buddy Ben in those trying times.

Trimmed Hedge's picture

Doez this mean Teh Bernank will resign..??


Have a Happy & Safe Fourth, y'all!  :)

dolce vita's picture

its like playing yourself in chess bad moves, you own the board, pieces, clock, make rules as you go.


two words; paw-thetic

moskov's picture

So I was right.

The Fucking FED did Fucking Manipulate the Fucking interest rate of the Fucking T-bills

francis_sawyer's picture

Fuck yea!... (& 'tits')...

Mentaliusanything's picture

It would not be to hard to imagine that the Fed approached the banks it was supporting with an edict - 'Because you owe use for allowing you to continue breathing, we would like in return that all of you who have input to the daily overnight bank lending rate, do all in your power to manipulate it to reflect what we want"

Not to hard at all.

This is becoming "Liborgate" for the 20 "dirty deeds done dirt cheap" Banking brigade

Landrew's picture


It's so fascinating and connected like the universe! Who would ever have thought you could derive the grand unified theory of the universe from the financial services industry. Like our universe (one of eleven) it will end and begin again with a singularity.Working in dark energy and dark matter nothing surprises me anymore ha! 


Plymster's picture

The Fed's interest rate "decisions" tend to follow Treasury yields (or at least they have since the 80s), so wouldn't it be more appropriate to say that the Treasury Yields are what's "manipulating" Libor?

Of course, now that the Fed is openly printing money to buy Treasuries (thus manipulating Treasury yields since 2008), it's most accurate to say that the Fed is manipulating Treasuries to manipulate Libor.  At best, the Fed is manipulating Libor in this way as bonus from its actions manipulating Treasuries.

OutLookingIn's picture

There are NO "free" markets any longer.

Just interventions and manipulation.

There are NO accurate government statistical releases any longer.

Just manipulation.

There is NO "rule of law" any longer.

Just one law for the law breakers and all the rest of laws for everyone else.

George Carlin said it best;  

Ima anal sphincter's picture


Just one law for the law breakers and all the rest of laws for everyone else.

People ARE waking up. The question is, can we rip this back and destroy the bankers or will "they" squash us and achieve their ultimate goal?

Kasperfx's picture

your right on that and as long as we the people place our weath with the banks and suport the gov by paying taxes it will aways remain the same, i propose a new free market were price out of the banking and gov hands. theirs more brilliant minds outside the gov and banking so why not organize and do something about this. 

Not Too Important's picture

This is the end of it all - trust. Everything else has been a skirmish - Linda Green, Madoff, Corzine, etc. This is killing any trust in the Central Bank system, around the globe. It doesn't matter what the poor and broke think, this kills off any one with money investing.

As far as OPM, the lawyers will be cancelling contracts and suing for clawback. No new investments until the lawsuits are cleared up, which will take years. There will be no 'global class-action' settlement. The lawsuits will total into the hundreds of trillions.

The system will be shutting down. If 'they' do offer something different, the sheeple might accept it, but no one with money will. All trust is gone.

'They' screwed themselves with Fukushima, and 'they' screwed themselves with all the massive financial fraud. It's going to get ugly. Or uglier, depending on your point of view.

Kasperfx's picture

Time to exchange your corrupted cash/money for hard untaxable assets.. 

Arnold Ziffel's picture

ZIRP is here to stay for a looong time with gradual (and continued) loss of purchasing power of the dollar. The loss has been somewhat muted by the slow collapse of the euro...but the Fed's goal (besides banker bonuses) is to force rates lower to perpetuate low mortgage rates and slow the inevitable House Price Plunge...or 'HPP' as my financial advisor calls it.



jomama's picture

holy shit.  that chart tells a hell of a fucking story.

El_Puerco's picture

“The Bottom line here is, accounting fraud, is now Wall Street business model "...

Quinvarius's picture

If the banks are all borrowing from the Fed and not each other, LIBOR means nothing anyway.

straightershooter's picture

Back off, ZH, What I did was not fraud at all, it was a policy response (Read, ZH, I have the license to do anything I want, fraud or not. Unless the sheeple woke up and a total collapse ensues, nothing could happen to me. Doubt me, Just ask Congress.), so says BB.



Fraud can't never be committed by authorities-in-charge, i.e., regulators. To regulators, all frauds committed by regulators are simply policy response, deemed necessary and in the interest of public.

Anybody printed money, based on the coinage law, death sentence is the only penalty. For BB, print money is his mandate. See the point?