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Federal Reserve Admits It Knew Of Barclays Libor "Problems" In 2007 And 2008

Tyler Durden's picture




 

Last Tuesday we suggested that "Now The Fed Gets Dragged Into LiEborgate" when we observed that "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." It seems that unlike the BOE, which had no idea of any Barclays problems and was merely calling up Diamond now and then to make sure the bank's money market risk mechanisms were operational and to chit chat about the weather (as per the BOE at least), the Fed has decided to take the high road and openly admit it was well aware of Barclays' LIBOR "problems." And like that the Senatorial circus just got exciting, while that popping noise is bottles of Bollinger going off at every class action lawsuit legal firm.

From Bloomberg:

The Federal Reserve Bank of New York was aware of potential issues involving Barclays Plc and the London interbank offered rate after the financial crisis began in 2007, according to a statement from the district bank.

 

“In the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and e-mails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor,” New York Fed spokeswoman Andrea Priest said in an e-mailed statement.

 

In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted,” the statement said. “We subsequently shared our analysis and suggestions for reform of Libor with the relevant authorities in the U.K.”

 

Representative Randy Neugebauer, a Texas Republican who serves on the House Financial Services committee, sent a letter to New York Fed President William C. Dudley dated yesterday requesting transcripts of communications between the district bank and Barclays relating to setting interbank offered rates from August 2007 to November 2009. Neugebauer asked for the documents by July 13.

 

The Senate Banking Committee has begun to schedule briefings “with relevant parties to learn more about these allegations and related enforcement actions,” Senator Tim Johnson, a South Dakota Democrat who chairs the Senate Banking Committee, said in a statement.

 

Johnson also said that he is asking Treasury Secretary Timothy F. Geithner and Fed Chairman Ben S. Bernanke to “be prepared to answer Senators’ questions on this matter” at upcoming hearings.

It knew, and did nothing, or rather, it knew, and advised nobody who relies on LIBOR spreads to fixed income products (that would be everyone by the way, and certainly those who had Adjustable Rate Mortgages and virtually every municipality locking in rates courtesy of JPM's swaps) that Libor was manipulated. And more importantly, the Fed never shared any of this with the BOE or any of Barclays' regulators?

But guess whose favorite's tax expert just got dragged under the bus? Via Reuters:

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a "Fixing LIBOR" meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

 

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

 

"A problem of focusing on the Libor is that the banks in the Libor panel are suspected to under-report the borrowing costs during the period of recent credit crunch," said that report in July 2008 that examined whether a government liquidity facility was helping ease pressure in the interbank lending market.

 

When asked for comment, McAndrews directed questions to a New York Fed spokeswoman. Dudley could not be immediately reached for comment.

Good times. And yes, we are looking forward to Maxine Waters' questioning of Tim Geithner over Lieborgate.

 

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Tue, 07/10/2012 - 10:36 | 2602012 SilverTree
SilverTree's picture

My spider sense is tingling today.

Tue, 07/10/2012 - 10:41 | 2602033 tmosley
Tue, 07/10/2012 - 10:46 | 2602059 tocointhephrase
tocointhephrase's picture

Lob on!

Tue, 07/10/2012 - 11:27 | 2602260 fx
fx's picture

All those ARM-payers got a free lunch due to this.  So what to complain about? And yeah, it's those 30-odd basis points that brought American counties and municipalities to their knees, financially. If it weren't so funny, it could be serious indeed.

Tue, 07/10/2012 - 11:40 | 2602320 Joe Davola
Joe Davola's picture

I'm totally sure Scranton could have kept wages at $7.35

Tue, 07/10/2012 - 10:46 | 2602058 LULZBank
LULZBank's picture

Ohh... SpiderMan !!!

Tue, 07/10/2012 - 10:49 | 2602069 JailBank
JailBank's picture

Well of course they knew. When you are a willing participant in a crime you tend to know what is happening.

Tue, 07/10/2012 - 11:17 | 2602213 Stoploss
Stoploss's picture

See? The FED really can create job's.

 

For lawyers..

Tue, 07/10/2012 - 11:25 | 2602246 eatthebanksters
eatthebanksters's picture

and hopefully prisons!

Tue, 07/10/2012 - 10:51 | 2602019 hedgeless_horseman
hedgeless_horseman's picture

 

 

...and virtually every municipality locking in rates courtesy of JPM's swaps)

It is probable that JPM, GS, and others knew LIBOR and the Federal Funds Rate would be manipulated down, while they sold the fear that rates would rise to stupid and trusting municipalities in the form of interest rate swaps.  Good rate arbitrage work..if you can get it.

Tue, 07/10/2012 - 10:54 | 2602094 sumo
sumo's picture

Yeah, they knew.

Now that cities and states are going BK, Wall St parasites need new hosts. A juicy FCM with a shaky margin position, anyone? Have some. Plenty more on the grill.

Tue, 07/10/2012 - 11:27 | 2602261 eatthebanksters
eatthebanksters's picture

The guns are being taken out of storage and oiled up....it's only a matter of time...

Tue, 07/10/2012 - 12:58 | 2602403 GeneMarchbanks
GeneMarchbanks's picture

It is probable that JPM, GS, and others knew LIBOR and the Federal Funds Rate would be manipulated down, while they sold the fear that rates would rise to stupid and trusting municipalities in the form of interest rate swaps.

Psssst! Hey, is it, like possible, that they did the same but worse to Greece?

Just curious or must we get back to the Lazy Greeks meme that everyone loves for its simplicity.

Tue, 07/10/2012 - 10:39 | 2602023 ShorTed
ShorTed's picture

It's for your own good...It's in your best interests.  Keep quiet and enjoy this glass of Kool-Aid.

Tue, 07/10/2012 - 10:51 | 2602081 world_debt_slave
world_debt_slave's picture

a la Jim Jones

Tue, 07/10/2012 - 11:15 | 2602202 Zero Debt
Zero Debt's picture

  ** Party At The Fed **
   ~~ Drinks List ~~

Teetering On The Brink $7.00
Bailout Orgasm         $6.50
Bloody Firewall        $8.80
Isolated Incident      $6.50
Subprime Slingshot     $9.30
Chairman's Delight     $15.50

   ~~ Food List ~~

Triple Tranche Sandwich $4.80
Mezzanine Chicken Wings $3.50
Pork Derivative         $2.90 

"Every FOMC day is happy hour day"

Tue, 07/10/2012 - 10:39 | 2602024 azzhatter
azzhatter's picture

and you know Maxine hates that skinny little white boy

Tue, 07/10/2012 - 10:41 | 2602035 Stuart
Stuart's picture

shocked I am, shocked.  Alot of busy work but nothing is gong to come from this... nobody of significance is going to go down.  Why, because it would expose and implicate those very same officials that would bring forward fraud charges.   It's a credibility trap....  alot of verbiage but in the end..."whatcha gonna do about it punk".    

 

Tue, 07/10/2012 - 10:42 | 2602038 LawsofPhysics
LawsofPhysics's picture

The master of rate manipulation speaks...

Do you really want free markets to return?

End the fucking Fed, Audit the fucking Fed, and then prosecute the fucking owners and executives of the Fed accordingly.  I suggest we have a guillotine at the ready for a speedy trial.

NIRP and ZIRP is fucking theft as there will always be a very real cost for captial creation (no matter what a nobel prize winner tells you), especially when nothing of real fucking value is created as a result.

Hold tightly on to those physical assets folks (especially those that generate revenue) the facists/socialist fucks are coming for the rest of your wealth.  They "know better" than you ignorant peasants.

Tue, 07/10/2012 - 11:50 | 2602357 eclectic syncretist
eclectic syncretist's picture

In times past when the banksters have went too far they took so much of the peoples money that in the end they ended up with the homes and land of many, while the ordinary hard working people lost their homes and land.  Look for the game plan to be no different this time.  Pay off your debts.  Have no money in the too big to fail banking system.  Buy land and other non-perishable commodities to prevent them from stealing your savings.

Tue, 07/10/2012 - 10:42 | 2602039 CreativeDestructor
CreativeDestructor's picture

Tell me who the fuck didn't know about the Liebor bullshit

Tue, 07/10/2012 - 11:36 | 2602286 LouisDega
LouisDega's picture

Whats a Liebor?

Tue, 07/10/2012 - 10:43 | 2602042 Jim B
Jim B's picture

It is a club, bankers and central bankers or parasites on the real economy!  The system has become totally corrupt! 

Tue, 07/10/2012 - 11:50 | 2602360 JohnG
JohnG's picture

And.....per George Carlin: "You ain't in it!"

Tue, 07/10/2012 - 10:43 | 2602045 yogibear
yogibear's picture

The Federal Reserve Ponzi master doesn't want to stop a good scam. It can warn to cover itself. That's about it. The federal Reserve also helped to keep the Libor scam going.

Tue, 07/10/2012 - 10:43 | 2602047 Mr_Wonderful
Mr_Wonderful's picture

Cute Mob pump and dump today.

Tue, 07/10/2012 - 10:44 | 2602050 Kaiser Sousa
Kaiser Sousa's picture

"Cuff'em Dano..."

All together now.....FUCK YOU BERSTANKE!!!!

Tue, 07/10/2012 - 10:45 | 2602055 Snakeeyes
Snakeeyes's picture

No kidding! Yoiu mean The Fed doesn't have droves of economist and analysts that can look at charts of Fed policy and LIBOR????????????????????????????????///

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

Tue, 07/10/2012 - 10:49 | 2602065 sumo
sumo's picture

"Good times. And yes, we are looking forward to Maxine Waters' questioning of Tim Geithner over Lieborgate."

Man, I would pay in gold and silver to see Ann Barnhardt question Tim Geithner.

Tue, 07/10/2012 - 11:06 | 2602068 dcb
dcb's picture

As I have said the only reason to appoint geither and bernanke with their record of failure is to maintain a cover up!!!

Tue, 07/10/2012 - 10:51 | 2602073 Duke of Con Dao
Duke of Con Dao's picture

now for a little Libor theatre... 

here's Barclays Bob on the hot seat:

YouTube - Rare Footage of Banker on Hot Seat - MP Asks Barclay's Diamond: Are you Complicit or Incompetent

followed by Paul Tucker on the spit turned lustily by Labor MP Mann:

YouTube - Squirm Worm, Squirm! Chairman Paul Tucker roasted by Parliament Inquiry over LIBOR Manipulations

... outside of jail it doesn't get much better than this... Duke

 

Tue, 07/10/2012 - 10:51 | 2602074 Venerability
Venerability's picture

Even if you're not that mad about GATA - I'm not - read this extended Le Metropole Cafe post from last night: 

http://news.goldseek.com/LemetropoleCafe/1341831900.php

Zowie!

Be sure to read the bits and pieces - from Fleet Street, not Bill Murphy - on Hillary Clinton's blind trust and how her Gold and Silver Shorts paid for her zillion dollar Westchester estate.

So nice that all the rest of us were bleeped for such a good cause. 

Tue, 07/10/2012 - 11:01 | 2602140 sumo
sumo's picture

THis would definitely be Hillary "Cattle Futures" Clinton's style, to trade on inside info.

Tue, 07/10/2012 - 10:51 | 2602078 search
search's picture

My God, such an incestuous cluster fuck could not be dream't by the most fertile imagination. At least the taxpayers are there to take one for the team : )

Tue, 07/10/2012 - 10:52 | 2602084 FranSix
FranSix's picture

Did anyone check the relationship between Libor and Gold lease rates?  Lease rates are Libor minus the Gold Forwards Rate.  Has the gold forwards rate been determined by LIBOR, or is the GOFO the result of sales of leases into the  market irrespective of price, thus affecting LIBOR?

Sounds like a chicken and egg theory, but there would have to be a strict relationship between the two. 

Tue, 07/10/2012 - 10:53 | 2602087 Cursive
Cursive's picture

I can understand the POV of those who would say, "Big fucking deal, you know the Fed rigs all of their markets - that's why they exist."  I agree with that, but the difference is that the Fed has run a successful PR campaign that they are a wonderfully "objective" and "independent" organization that serves the public good, i.e. our benevolent money masters who make our lives all the more wonderful.  That PR facade is crumbling.  Slowly.

Tue, 07/10/2012 - 10:53 | 2602088 Temporalist
Temporalist's picture

 

JPMorgan Silence on Risk Model Spurs Calls for Disclosure

"The U.S. Securities and Exchange Commission is probing JPMorgan’s belated May 10 disclosure that a change to its mathematical model for gauging trading risk helped fuel the loss in its chief investment office."

http://www.bloomberg.com/news/2012-07-10/jpmorgan-silence-on-risk-model-...

 

Tue, 07/10/2012 - 10:55 | 2602106 Shizzmoney
Shizzmoney's picture

You gotta be fuckin' kidding me!

Tue, 07/10/2012 - 10:59 | 2602118 boiltherich
boiltherich's picture

The daily outrage from the FIRE sector of the economy....ho hum, nobody will ever again pass or enforce a law or rule regarding banksters, they bought and paid for our government. And just to add a little salt into the wounds here is what the CNBS headline paragraph has to say about it...

"The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed."

FLAWED. Get it? Implying LIBOR is inherently subject to mispricing credit. No human interaction, no greedy conspiracy to rob the public, just a FLAW we have to learn to put up with. And if LIBORgate is simply a flaw then front running algos are what? A rounding error? Derivatives are nothing but a nuisance without economic impact? No need for tedious congressional investigations. No need for the SEC to wake from it's perma-nap. Don't go getting all excited about reforming and regulating the industry because we all know how badly that worked out after the First Great Depression.

http://www.cnbc.com/id/48134191

Tue, 07/10/2012 - 11:54 | 2602382 Sandmann
Sandmann's picture

Just pretend the Fed Reserve NYC was meeting in Afghanistan with Saddam Hussein pulling the strings. Now you can bomb Iraq and Afghanistan to deal with the threat to America and hunt down Saddam and Taliban foes who seduced the NY Fed.........

Tue, 07/10/2012 - 10:59 | 2602129 east paris trader
east paris trader's picture

You have to admire the slims ability to paint the tape.   By executive order, they must kill gold by at least $15 when the Ben comes before Congress.   So what to do?  I know!  Let's run it up to 1600 then attack -- pain the fail.  As our Greek friend would say, "Gene-yous, Gene-yous"!  Thiefs.

Tue, 07/10/2012 - 11:02 | 2602143 El
El's picture

Come on, folks. Isn't it time to end the Fed already? What is it going to take?

Tue, 07/10/2012 - 11:11 | 2602182 Getting Old Sucks
Getting Old Sucks's picture

We're still only peeking behind the curtain.  It's still early but eventually, it will open wide and then BOOM, everyone's broke.

Tue, 07/10/2012 - 11:58 | 2602399 eclectic syncretist
eclectic syncretist's picture

Just like the "wildcat banks" 150-200 years ago.

http://www.britannica.com/EBchecked/topic/643626/wildcat-bank

Tue, 07/10/2012 - 11:24 | 2602220 falak pema
falak pema's picture

The embarassement of the Economist; paragon of free market libertarianism since three decades, staunch supporter of Thatcherist Big Bang, now caught with its pants down on its anti-statist rants as it admits that the scions of Brtish private enterprise are in cahoots with those very same people who are supposed to regulate them, in the name of the people. Shocking!

Ain't The Economist rolling in dirty sheets; like the WSJ.

The Bank of England and the LIBOR scandal: Absolutely not | The Economist

What is libertarian ideology coming to ; when "free big banging" rhymes with "central manipulation"!  Who is paving the road to serfdom? 

Words and theory have no sense there where acts and hands behind curtain become all too visible. What becomes of  de Tocqueville's main thesis now turned upside down :

The phrase tyranny of the majority, used in discussing systems of democracy and majority rule, is a criticism of the scenario in which decisions made by a majority under that system would place that majority's interests so far above a dissenting individual's interest that that individual would be actively oppressed. The phrase also refers to tyrants and despots whose behavior causes similar oppression.

The idea goes back at least as far as Plato's Republic, while the phrase itself originated with Alexis de Tocqueville in his Democracy in America (1835, 1840)[3] and was further popularized by John Stuart Mill, who cites de Tocqueville, in On Liberty (1859); the Federalist Papers frequently refer to the concept, though usually under the name of "the violence of majority faction," particularly in Federalist 10.

...These were the underlying ideas that fanned Hayek's book and economic theory that both Maggie and Ronny espoused. Now look what  happens when you give a free hand without restraint, in fact in total cahoots and greedy collusion, to those who are the torch bearers of Big Bang revolution in FIRE mode!...

....We need some violence of the majority faction here! To turn the tables on the Oligarchs who own those republican corrupt representatives in Senate and Government!...

Real events dictate the solutons required and the methodology to be applied; not ideology!...  


 

Tue, 07/10/2012 - 11:26 | 2602252 GeneMarchbanks
GeneMarchbanks's picture

  Who is paving the road to serfdom?

US citizens.

Damn, it's like a jingle you can't get out of your head.

Tue, 07/10/2012 - 11:28 | 2602269 falak pema
falak pema's picture

I'm embarrassed at embarassed! 

Tue, 07/10/2012 - 11:52 | 2602373 Sandmann
Sandmann's picture

The Economist has been a joke for years selling more in the USA than in Europe and tailoring its message to Americans. It is staffed with Old Etonians and such ilke and is basically an upmarket comic rather than a serious periodical. It is a Time Magazine for people who own dictionaries but hardly a serious periodical

Tue, 07/10/2012 - 11:21 | 2602224 Meesohaawnee
Meesohaawnee's picture

they are manipulating the global equity market as we speak. ie the "stealth  short ban" ,, come on. Were not shocked

Tue, 07/10/2012 - 11:24 | 2602241 eatthebanksters
eatthebanksters's picture

How much more evidence do we need to prove Geithner is a lying and corrupt crook working for the biggest crime boss in the world?

Tue, 07/10/2012 - 11:36 | 2602309 Seasmoke
Seasmoke's picture

i am trying to remember if when Turbo Timmy cheating on his taxes was when i finally woke up or was it some other scam

Tue, 07/10/2012 - 11:25 | 2602248 Hype Alert
Hype Alert's picture

Don't you miss the old days when someone stole from people something was actually done about it?  This won't stop until those days return.

Tue, 07/10/2012 - 11:25 | 2602249 fx
fx's picture

All those ARM-payers got a free lunch due to this.  So what to complain about? And yeah, it's those 30-odd basis points that brought American counties and municipalities to their knees, financially. If it weren't so funny, it could be serious indeed.

Tue, 07/10/2012 - 12:18 | 2602481 TheBird
TheBird's picture

I have to say as someone with a fairly long history in FX, MM and futures both on the banking side and eventually my own fund the outrage and naivety of comments about "LIBORgate" really are outstanding.   

First, there is no legal obligation behind libor submissions. 

Second, it is a pretend rate and even with the most lilly white pure submitter it is an imperfect rate subject to interpretation. 

Third, that libor is used as extensively as it is as a bench mark for various other products is not the fault of the trader submitting a rate. And don't forget there are two sides to every trade on products that use libor. The bank is not always on the same side.

Fourth, why should a bank *not* protect its own internal interests? If submitting a 1bp lower (or higher) rate helps another group, great.  Do you honestly believe that were a bank to ask for offers from every other bank that it would get the same rates from all? Or that the trader responsible for the submission has been magically able to determine that precise average?  The answer to 'where do you lend' is always dependent upon the name.. "I lend at 3/8 to good names"  Your idea of good and mine are likely to be different. Likewise, if the market is tanking and I am long, I sure as heck will not show a good bid to any corporate client asking for a price.  Guess that makes me 'unethical' for reading them and taking into account my employers profitability.

Fifth, enough already with these crocodile tears for muncipals who bought IRS.  Why are you assuming they all swapped to fixed?  And further, if a municipal treasurer is using IRS to try to make money by picking a direction in rates then HE SHOULD BE JAILED.   Please go review the 1990s and wonders like Orange Cty.  They knew exactly wtf they were doing.  The purpose of a swap is to reduce borrowing cost by use of the comparable issuing advantages each party may have.  Muncipals should NOT BE TRADING THEIR OBLIGATIONS.  And there are other ways to structure debt with swaptions, caps, collars, floors, etc at the time of issuance.

And finally six, you make me laugh with these hypothecial poor souls who got hosed on their ARM reset.  Hosed because most of the banks kept the rate low?  Hosed because of a +/- 1bp submission?  Are you high? Go get an arm mortgage calculator and find out what 1bp does.  And then factor in that many of the 'bad' submissions were lower, not higher. 

So please save your misplaced outrage.

Tue, 07/10/2012 - 13:13 | 2602606 falak pema
falak pema's picture

If there are no legal obligations to observe equity in loan ratings,  why is there an enquiry and why are there claims of impending class action suits?

You cannot have a half pregnant woman; you can't have a half culpable bank for price fixing. There has to be a legal benchmark to judge those who decide interest rates amongst their own kind; its not a thing you decide on the toss of a coin or on whether you like his face or not. What is all the noise about in regulatory and government circles if what you say is so obvious?

So you're the FX and legal expert; read this  :  How Barclays Made Money On LIBOR Manipulation - Business Insider

And tell us all why did Barclays cough up that dough already! 

Tue, 07/10/2012 - 15:30 | 2603237 TheBird
TheBird's picture

Please show the legal contract which Barclays and the other banks who submit LIBOR signed.   You can't because there is none.

There is no price "fixing" involved.  You are not compelled to buy any product set to LIBOR.  You are not compelled to create any product which uses LIBOR in any way.  You could just as easily use the funds rate or any one of many other short term rates.   And to be a price "fixer" you must control the commodity.  Have you ever worked in the industry?  Without doubt, no.   Because if you had you would realize that every bank has thousands, if not hundreds of thousands of positions they hold.  Some larger, some smaller, some affected one way by rates, some in other ways.  On any given day they may even have an outsized exposure in one area (perhaps due to a large deal or an a/l mismatch).  The same applies to the non-bank counterparts.  They are not all on the same side.  Not everyone pays fixed.  

As to the noise, just like your noise it is all theatrics and politics as is usually the case when people talk about things they do not fully understand.    Kinkda like Google being fined by the FTC not for breaking the law but for breaking a 'privacy promise'.  GMAFB.

Want real crime? Go chase MF Global or PFGBest.

Tue, 07/10/2012 - 11:28 | 2602270 Meesohaawnee
Meesohaawnee's picture

yea i like the headline on idiot vision website "the fed MAY"..yea  right. "May" my ass.

Tue, 07/10/2012 - 11:35 | 2602300 Seasmoke
Seasmoke's picture

man was my money taken from me by getting a Fixed instead of an ARM.......but i did get me a HELOC !!!!!!!!!!!!!!!!!!!!!!!!!

Tue, 07/10/2012 - 11:50 | 2602358 Sandmann
Sandmann's picture

Federal Reserve Bank of New York.......that outfit.....Timothy F Geithner and Jamie Dimon and poor old Dick Fuld.

The NY Fed does for New York what Bin Laden couldn't

Tue, 07/10/2012 - 11:59 | 2602407 Duke of Con Dao
Duke of Con Dao's picture

see BoE's Paul Tucker roasted alive by Labor MP Mann:

http://www.youtube.com/watch?v=JLq0KD7CVw4

 

Tue, 07/10/2012 - 12:43 | 2602551 legerde
legerde's picture

I have an honest question.  Why are people so bothered by Libor rigging, and are not bothered by US Treasury rigging, or Fed Funds Rate rigging?

The Federal Reserve openly manipulates rates. For an example see ZIRP:  http://www.moneycafe.com/library/fedfundsratehistory.htm

Does anyone believe that people dont profit by knowing in advance (oh sorry, predicting) what the Fed policies will be?   We are all counting on the Bernanke Put to keep the markets from stalling.   People invest based on the belief that the Federal Reserve will or will not engage in QE3.  Aren't bailouts another form of market rigging?   How about Operation Twist.   The Fed wants to keep UST yields controlled. 

Market rigging is officially sponsered by the governments of the world.   Why is it at all surprising that Libor is manipulated?  We should have outrage at all of it, not just Libor.

So, back to my question.  Whats the difference?  Why are people so bothered by Libor rigging, and are not bothered by US Treasury rigging, or Fed Funds Rate rigging?   Are people just not willing to recognize the severity of the situation, or do people somehow find certain rigging acceptable?

Tue, 07/10/2012 - 15:43 | 2603284 TheBird
TheBird's picture

They are bothered because it is 'dirty grubby bankers' and it makes people feel good to hate on them, nothing more.  And unlike the funds rate or bidding in treasuries, LIBOR fixings are complete make believe even in the best of circumstances.   The FED however ACTIVELY distorts the funds rate by open market operations.  The Fed actively distorts the treasury market by QE and Twist.  In the end they may lose control of it, but for now the Fed and Treasury control the bond and money markets and are as close to price fixers as you can get in such a large marketplace.

If anything, the most compelling part of the LIBOR story was that banks felt they had to report low during the crisis to avoid being nationalized.  So the Fed and the Treasury (and other wonderful govt bodies in other countries) talked up a solution which instead of letting the market sort things out on their own just added fuel to the fire. 

Tue, 07/10/2012 - 16:38 | 2603484 legerde
legerde's picture

Thanks for the help.   You emphasize ACTIVELY.  I guess the answer is that the media/populace find the Fed's manipulations acceptable because its for our own good?  Maybe the Fed disarms everyone by doing it out in the open?

Your second paragraph is very compelling.   What a tangled web.

 

Thanks again for your help in trying to help me make sense of the double standard..

Tue, 07/10/2012 - 13:11 | 2602670 bubbleburster
bubbleburster's picture

http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act

Perhaps I am naieve, but my own gut sense of the only measure that can restore confidence and keep OWS people from really going ballistic is to ensure that Glass Steagall is restored.  Mervyn King is sort of making noises about doing something like this in the UK and I think that the Congress should act now and quickly. 

http://www.dailymail.co.uk/news/article-2171506/Fixing-Libor-rates-carried-decades-claims-bank-whistleblower.html

From that page ....

It came as Bank of England Governor Sir Mervyn King said today banking reforms should be passed into law as soon as possible to prevent the plans being watered down.    In a radio interview with the BBC, the central bank boss hinted he would have preferred a complete separation of retail and investment banking rather than the ring-fencing proposed by the Vickers commission."

Tue, 07/10/2012 - 15:26 | 2603223 I dont belong here
I dont belong here's picture

Yawn.

Tue, 07/31/2012 - 19:37 | 2666844 impeachbob
impeachbob's picture

 

I sincerely believe that these dodgy Banker scandals are set to continue, since, a couple of years back, Directors of a business that about fifty people worked for (myself included), exploited their workers, by using holes in Employment law to withhold staff wages and ultimately cheat employees out of the money that they had worked hard to earn ( http://bobblackmanmp.info/ ).

 

Despite Employment Tribunals agreeing that staff were treated badly, the High Court said that they are powerless to help because their is noting stopping this in law, whilst the local MP wasn't interested in helping.

 

So, now, to rub salt in the wound, the local MP, and even Government officials simply try to kick the issue into the long grass, by claiming that it's not in the public interest to do anything about this matter, whilst refusing to have the Directors struck off, failing to introduce new laws to outlaw these kinds of sharp practices, and not even bothering to call for an inquiry into this scandal.

 

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