Guest Post: The Great LIBOR Bank Heist of 2008?
Submitted by John Aziz of Azizonomics
The Great LIBOR Bank Heist of 2008?
The LIBOR manipulation revelations ask some interesting questions.
Washington’s Blog notes:
Barclays and other large banks – including Citigroup, HSBC, J.P. Morgan Chase, Lloyds,Bank of America, UBS, Royal Bank of Scotland– manipulated the world’s primary interest rate (Libor) which virtually every adjustable-rate investment globally is pegged to.
That means they manipulated a good chunk of the world economy.
They have been manipulating Libor on virtually a daily basis since 2005.
While the implications of this to the $1200 trillion derivatives market would seem to be profound, one question I have not seen asked much yet are the implications of the manipulation to the reality of the 2008 financial crisis.
Here’s a really wild hypothesis: if the LIBOR rate was under manipulation in 2008, is it not possible that the inter-bank lending rate spike (and resultant credit freeze) was at least partly a product of manipulation by the banking cartel?
Could the manipulators have purposely exacerbated the freeze, to get a bigger and quicker bailout? After all, the banking system sucked $29 trillion out of the taxpayer following 2008. That’s a pretty big payoff. LIBOR profoundly affects credit availability — and the bailouts were directly designed to combat a freeze in credit availability. If market participants were manipulating or rigging LIBOR, they were manipulating a variable directly tied to the bailouts.
That means that every single tick must be under scrutiny; we know that rates have been manipulated for profit. I am no conspiracy theorist; it may just be a coincidence that a massive spike in a variable we now know to have been manipulated contributed to a credit freeze that led to historically-unprecedented bailouts. Yet it is no great leap of the imagination to say that the crisis may have been deliberately worsened for profit.
Investigators should investigate.
(H/T to Saifedean Ammous)