"That’s An Interesting Conspiracy Theory"

One of the reasons we don't mind (and often enjoy) being labeled "conspiracy theorists" is that as consistently happens, the theory becomes fact, usually with a delay of anywhere between 6 months and 6 years.

A great example is one of our very first posts from January 2009: "This Makes No Sense: LIBOR By Bank" in which we first alleged Libor manipulation.

An even better example comes courtesy of the WSJ which reveals that one of the biggest perpetrators of Libor rigging, the same bank that was raided earlier today for reasons still unknown, namely Deutsche Bank had a quick and easy response to allegations of interest rate rigging: call it "conspiracy theory" and promptly sweep it under the rug.

From the WSJ:

A Deutsche Bank AG executive whose employees have been accused of rigging interest rates told a British trade group that such manipulation was nothing more than a “conspiracy theory,” a London court heard on Tuesday.

 

David Nicholls, who oversaw a group of employees that included some who have been fired for trying to manipulate the London interbank offered rate, or Libor, had a 2008 phone call with a British Bankers’ Association official to discuss mounting concerns about the integrity of Libor.

 

In the recorded call, which was played to a London jury on Tuesday, Mr. Nicholls repeatedly dismissed concerns that Libor could be manipulated. “Banks do not collude to try to set a Libor rating,” he told John Ewan, the BBA official in charge of running Libor.

 

“I think I am just hearing a lot of hysteria about Libor that is just misinformed,” Mr. Nicholls added.

 

When the Deutsche Bank official argued that an individual bank wouldn’t be able to improperly influence Libor, which at the time was set by a group of 16 banks, Mr. Ewan responded: “A cabal of them could.”

 

“What’s a cabal?” Mr. Nicholls asked.

 

“A group together could,” Mr. Ewan said.

 

That’s an interesting conspiracy theory,” Mr. Nicholls responded.

It was also the truth.

David Nicholls left Deutsche Bank two and a half years ago. According to WSJ's David Enrich, he couldn’t be immediately reached for comment, even though it is quite clear what he would have said: continue denying that anything like a massive, coordinated, market0rigging cabal could ever take place.

And yet, nobody has learned anything.

Just like the first big post-crisis settlement involving Goldman Sachs was blamed entirely on one then-28 year old employee and nobody else, so in the case of the massive Libor/FX settlements, not a single senior banker was implicated.

Which is beyond ridiculous. It is also ironic: as the first man charged with Libor rigging, one who was instrumental in turning and handing the case to the prosecution on a silver platter, UBS' Tom Hayes previously told The Wall Street Journal in a text message “this goes much much higher than me.

But if Nicholls couldn't see the open fraud taking place literally in front of him simply because he couldn't possibly imagine of such a "conspiracy theory", how are regulators and prosecutors to possibly conceive that the very people who keep the bribe machine well greased, could be guilty of the same.

So to answer our own question: why has nobody "higher" than Hayes been investigated yet? Because the mere suggestion that executives at UBS, and all the other market manipulating banks, are outright criminals themselves would be, you guessed it, just another "conspiracy theory."