At issue is a bad barrel,
not a few rotten apples. Western banking is rife with fraud. The business
model of major banks is grand theft.
UK-based Barclays bank was caught in a Libor rigging scandal. Other
major banks are involved. Expect more to come out. How much and who's
named remains to be seen. More on that below.
Libor and Euribor are mechanisms used to set interest rates.
Euribor stands for the Euro Interbank Offered Rate. It's one of the
reference rates for interbank lending.
Libor is the acronym for London Interbank Offered Rate. It's a fundamental
rate-setting benchmark. It's set daily between UK banks for overnight
to 12 month durations.
It's produced for ten currencies with 15 maturities. It represents the
London market's lowest cost of unsecured funding. It's the primary global
short-term rate benchmark.
Since the 1980s, it expanded exponentially in importance. London's status
grew as an international financial center. It's the world's largest.
Over 20% of all international bank lending occurs there and more than
30% of all foreign exchange transactions.
Over 240 of the world's largest banks operate key parts of their international
business there. It's the world's "cowboy finance capital," says economist
In the 1980s, libor began growing in importance. Demand grew for an
accurate measure of the real rate at which banks and other financial
institutions could borrow from each other.
It affects the price and availability of capital. The higher Libor goes,
the greater the borrowing cost for business, individuals, real estate
and other loans.
Libor anchors contracts for multi-trillions of dollars. One analyst
said it's like plumbing. When working well, it isn't noticed. When not,
all hell breaks loose.
It's a vital factor in the interest rate swaps market. These contracts
let one bank or other organization pay a fixed rate of interest on a
given amount of money from another financial institution.
In turn, it pays a floating rate like Libor. The global swaps market
approaches $350 trillion.
According to the Bank for International Settlements:
"(I)nterest rate swaps are the largest component of the global OTC derivatives
"The notional amount outstanding as of June 2009 in OTC interest rate
swaps was $342 trillion, up from $310 trillion in Dec 2007."
"The gross market value was $13.9 trillion in June 2009, up from $6.2
trillion in Dec 2007."
In theory, it lets lenders and borrowers minimize the risk of interest
rate changes. It doesn't always work that way.
Nonetheless, without a mechanism in place, banks might not lend at fixed
rates. They pay depositors floating ones. If rates rise, so do costs.
If they exceed revenues, crises follow.
Predatory Capitalism Failed
Rodney Shakespeare is Professor of Binary Economics at Trisakti University,
Britain. He's a financial expert. He's a regular on the Progressive
Radio News Hour.
He said Libor rigging affects "a thousand trillion dollars" in contracts
of one sort or other globally. It exceeds global GDP 15 or 20-fold.
Barclays reflects a corrupt system. Other major banks operate the same
way. Western politicians permit it. "They uphold the doctrine that whatever
banks do is right."
They're failing. They're zombie banks. The entire system is corrupt.
It's crumbling. Barlays is in the center of the UK storm, but watch
out. Expect more globally, much more. It's coming.
The seriousness of what's known is that a system portrayed as just and
sound is failing. At issue is rampant speculation at the expense of
stimulating real economic growth.
Casino capitalism doesn't work. Economies suffer. So do ordinary people.
The entire banking system risks collapse. Buying time alone is possible.
Barclays is part of a far greater unresolved problem.
John McMurtry calls it the cancer system. The longer it goes unaddressed,
the worst things get. "Organic, social and ecological life" harm grows.
Life-system collapses define the problem. Societies are consumed. Humanity
The system is too corrupt to fix. At issue is clearing it out and replacing
it with an entirely new paradigm.
Central bankers and complicit politicians bear full responsibility for
what's happening. They're heading economies for a worse disaster than
the Great Depression.
As stated above, Western banking is rife with fraud. One scandal follows
another. The latest involves Libor rigging. It's not new.
Last February, the Wall Street Journal headlined "Traders Manipulated
Key Rate, Bank say," saying:
According to an Ottawa court filing, "Canada's Competition Bureau said
a bank it didn't identify has told the agency's investigators that people
involved in the alleged scheme 'were able to move' interest rates."
"People familiar with the (scheme) said the 'cooperating party' is (Switzerland-based)
An investigation affected banks and traders in North America, Europe
and Asia. No one was charged with wrongdoing.
At issue was Libor rigging.
Documents said regulators were also examining "alleged attempts to fix
the prices of certain derivative financial products linked to Libor."
Parties involved "entered into agreements to submit artificially high
or artificially low" quotes.
Traders "used emails and instant messages to tell each other whether
they wanted 'to see a higher or lower yen Libor (rate) to aid their
trading position(s),' according to court documents."
Traders "would then 'communicate internally' with the person at their
bank who was responsible for submitting the Libor quote, before letting
each other know if this attempt to influence the quote had worked."
The Canadian watchdog said six banks were involved: Citigroup, Deutsche
Bank, HSBC, JP Morgan Chase, Royal Bank of Scotland, and UBS.
All major banks commit grand theft. It's standard practice. Corrupt
politicians turn a blind eye. So do regulators. Western banking is rife
All markets are manipulated up or down for profit. Enormous amounts
are made. Governments and banks collude. High volume program trading
drives prices either way. Nothing gets reported unless scandals erupt.
None the wiser ordinary investors get trampled. Financial history includes
many examples of major financial institutions getting a free lunch at
the public's expense.
Methods include market manipulation, insider trading, front-running,
theft and conspiracy, misrepresentation, Ponzi schemes, false accounting,
embezzling, appointing industry favorites as regulators, tax frauds,
profiting from loans that fail, creating phony financial products, and
assuring world financial capitals are banker occupied territories.
Barclays is the tip of the current scandal. Traders in London, New York
and Tokyo colluded to manipulate Libor. Top executives and traders are
They bear full responsibility for the 2008 financial crisis and what
followed. They're up to their ears in fraud today. Media scoundrels
report an illusion of stability. Government probes are toothless.
A City of Baltimore/Charles Schwab et al class action lawsuit names
Barclays, RBS, HSBC, Bank of America, Citigroup, JPMorgan Chase, UBS
and Deutsche Bank.
Perhaps future suits will charge Goldman Sachs, Wells Fargo, and major
European banks not named above. They're all in it together. CEOs and
other top executives conspire with each other and traders to commit
fraud. Why not when corrupt politicians wink and nod and let them do
Bill Black says manipulating Libor is easy. What's coming out reflects
"the largest rigging of prices in the history of the world by many orders
Top executives are directly involved. They have to be because they set
policy and stand to gain hugely from fraud-driven profits.
The US Commodity Futures Trading Commission (CTFC) says:
"US dollar Libor is the basis for the settlement of the three-month
Eurodollar futures contracts traded on the Chicago Mercantile Exchange,
which had a traded volume in 2011 with a notional value exceeding $564
The Wall Street Journal estimates $800 trillion. These type numbers
The Financial Times headlined "Barclays boss discussed Libor with BoE,"
"The bank admitted that it lowballed estimates of its borrowing costs
from late 2007 to May 2009 because it wanted to reassure investors of
its strength during the financial crisis and it believed other banks
were doing the same."
"It also admitted that its traders improperly influenced the rate submissions
from 2005 to 2008 to make money on derivatives."
On the one hand, said Barclays, rogue traders committed fraud. On the
other, bank executives submitted lower daily Libor rates than true costs
to assure higher profits.
In the wake of the scandal, Chairman Marcus Agius and CEO Bob Diamond
resigned. They and other banking crooks should be prosecuted and imprisoned.
Since banker caused crisis conditions erupted in fall 2007, no senior
executive faced charges. Expect none now to be held criminally liable.
At most complicit banks are assessed hand-slap fines. They're then free
to steal again. It's standard practice.
On June 30, London Guardian writer Will Hutton headlined "Let's end
this rotten culture that only rewards rogues," saying:
"The Barclays rate-rigging scandal has once again exposed a world where
men and women with little skill and no moral compass can become very
rich very fast."
"Investment banking is an organised scam masquerading as a business.
It is defined by endemic conflicts of interest, systemic amoral behaviour
and extreme avarice."
"Many of its senior figures should be serving prison sentences or disgraced
and would have been if British regulators had been weaned off the
doctrine of 'light touch' regulation earlier and if the Serious Fraud
Office’s budget had not been emasculated by Mr. Osborne (UK Chancellor
of the Exchequer)."
"It is a tax on wealth generation and an enemy of honest endeavour
the beast that is devouring British capitalism."
It's far more than Britain, of course. It's global, unchecked, and hugely
destructive. Regulatory oversight is absent. Mary Schapiro heads America's
She turns a blind eye to fraud and abuse. She protects Wall Street,
not investors. She lets banks self-regulate, and why not. She's a consummate
As former head of the Financial Industry Regulatory Authority (FINRA),
she promoted self regulation. She also ran the the National Association
of Securities Dealers' (NASD) and Commodity Futures Trading Commission.
She's an expert at quashing fraud investigations.
So are UK Financial Services Authority (FSA) officials. Instead of regulating,
they collude. Political leaders from major parties are involved. Duopoly
power runs Britain and America.
Tories, New Labor, Republicans and Democrats prioritize what serves
bankers. The economies of both countries are financialized. Casino capitalism
runs them. Whatever bankers want they get. Stealing is legitimized without
Whitehall and Washington operate the same way. They facilitate fraud.
Politicians profit hugely from generous campaign contributions and high-paying
jobs when leave government. Central bankers know what's going on and
fuel it with bailouts and easy money.
On July 1, the London Telegraph headlined "Libor scandal: How I manipulated
the bank borrowing rate," saying:
"An anonymous insider from one of Britain's biggest lenders aside
from Barclays explains how he and his colleagues helped manipulate
the UK's bank borrowing rate. Neither the insider nor the bank can be
identified for legal reasons."
He gave presentations. He explained how Libor was rigged. It's easy,
he said. No checks exist. Penalties for getting caught hardly matter.
"(E)veryone" knows what's going on and "everyone" does it. Fraud is
part of the system.
A Final Comment
Ellen Brown describes a "Wall Street Protection Racket of Covert Derivatives....Prop(ing)
Up US Debt," saying:
"Interest rate swaps are now over 80 percent of the massive derivatives
market." Wall Street giants operate a "protection racket of a covert
derivatives trade in interest rate swaps."
"The derivatives casino itself is just a last-ditch attempt to prop
up a private pyramid scheme in fractional-reserve money creation, one
that has progressed over several centuries through a series of “reserves”—from
gold, to Fed-created “base money,” to mortgage-backed securities, to
sovereign debt ostensibly protected with derivatives."
Libor is a vital factor in the swaps market. The cost of money affects
them all. Privately created money at whatever interest rate bankers
set "is the granddaddy of all pyramid schemes."
Despite "a quadrillion dollar derivatives edifice propping it up," eventually
it'll collapse. Money power in public hands could prevent it. It's "ready
to replace the old system when it comes crashing down," says Brown.
Corrupt politicians won't return money control to public hands where
it belongs ahead of time to avoid it.
They benefit handsomely by standing pat. Why mess up a good thing by
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org.
His new book is titled "How Wall Street Fleeces America: Privatized
Banking, Government Collusion and Class War"
Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge
discussions with distinguished guests on the Progressive Radio News
Hour on the Progressive Radio Network Thursdays at 10AM US Central time
and Saturdays and Sundays at noon. All programs are archived for easy