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The Biggest Financial Fraud of All Time
An anonymous reader sends this excerpt from an article at Bloomberg giving an inside look at how the Libor scandal happened:
"Every morning, from his desk by the bathroom at the far end of Royal Bank of Scotland Group Plc’s trading floor overlooking London’s Liverpool Street station, Paul White punched a series of numbers into his computer. White, who had joined RBS in 1984, was one of the employees responsible for the firm’s submissions for the London interbank offered rate, or Libor, the global benchmark for more than $300 trillion of contracts from mortgages and student loans to interest-rate swaps. Behind him sat Neil Danziger, a derivatives trader who had worked at the bank since 2002. On the morning of March 27, 2008, Tan Chi Min, Danziger’s boss in Tokyo, told him to make sure the next day’s submission in yen would increase, Bloomberg Markets magazine will report in its March issue. 'We need to bump it way up high, highest among all if possible,' [Tan wrote]. ... Events like those that took place on RBS’s trading floor ... are at the heart of what is emerging as the biggest and longest-running scandal in banking history. ... For years, traders at Deutsche Bank AG, UBS AG, Barclays, RBS and other banks colluded with colleagues responsible for setting the benchmark and their counterparts at other firms to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. UBS traders went as far as offering bribes to brokers to persuade others to make favorable submissions on their behalf, regulatory filings show."
... this is no different than what Central Banks like the Federal Reserve, do every day.
From the article: âoeWhen a bank can benefit financially from doing the wrong thing, it generally will,â
how is it nerdy in the /. realm?
"I don't know, therefore Aliens" Wafflebox1
Free markets moderated by Democracy. B 4th July 1776. D Oct 2008. RIP.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
I just want to post in this thread before all the free marketeers try to talk up the joys of unregulated capitalism.
The USA has a 140 year history of regular banking panics and collapses, inspite of the institution of regulations.
And there are those who would still insist that the industry is over regulated, in the face of flagrant and widespread fraud during the last 6 years.
"Free" markets do not lead to competition.
They consistently and repeatedly lead to fraud and monopolies.
[Fuck Beta]
o0t!
I'm Scottish, and while I was growing up RBOS had a branch in every Main Street in Scotland. They had a history hundreds of years old of being a solid reputable institution with a high degree of social responsibility and integrity that ensured that in the global finance world, my small country of 5 million people could punch above its weight. The word Scotland was synonymous with prudence and fiscal excellence and businesses such as RBOS were large profitable concerns employing many thousands of my fellow countrymen. The actions of individuals such as these have dragged the good name of my country into the dirt. Part of the collateral damage is that many blameless employees of the bank have lost their livelihoods, and the damage done to reputations will take generations to expunge. But what really pisses me off is that RBOS have the gall to hijack Flower of Scotland, the semi official Scottish National Anthem on one of their radio adverts. After all the damage that's been done they try to appeal to our patriotism (apparently they sponsor the 6 nations rugby competition ). Sorry but in RBOS' s case I feel anything but proud and patriotic.
So, which one of them is going to be threatened with charges up to 35 years in jail in order to squeeze out a plea bargain?
Oliver.
A lot of loans are indexed to LIBOR or the Fed Funds rate. Fed Funds rate is what interest the Fed demands be paid to lend money to banks. LIBOR is what interest rates banks in London say they will charge other banks to borrow money. It's a system that shouldn't even exist, since it is literally a daily survey. Each bank gives their answer, none are discarded as outliers, and the figures are averaged. I'm surprised it took so long to manipulate LIBOR to be honest.
I hate grammar Nazi's.
He's a libertarian. You don't think he's actually read the Constitution do you?
The world's burning. Moped Jesus spotted on I50. Details at 11.
This article is missing a very important point. A lot of the LIBOR manipulation was done to artificially LOWER the rate for trading purposes or to make a bank look stronger than it actually was.
This lower rate benefited borrowers, just as much as the higher rate hurt them. It depends in detail what kind of loan was involved.
Some municipalities are actually suing based on the idea that they received artificially low interest rates on their bonds because of LIBOR manipulation.
LIBOR is the rate that banks are supposed lend to each other, As a bond market index it is one of the biggest. This has replaced the old “prime rate” index that was published in the Wall Street Journal. Most floating interest rates are tied to this index.
The index is calculated by a person calling up the banks and asking them what rate they could borrow money.
On the plus side, because it is an opinion poll, it is not distorted by temporary technical issues that can affect the price of U.S. Treasuries.
On the down side, it is an opinion poll and people can lie though their teeth, which is what was done here.
Some of the lying was reporting a lower rate, making the bank look stronger then it was. Some of the lying was to nudge the rate slightly up/down so option contracts would end up in/out of the money. A small difference (less then .1%) could cause an option contract to be worth millions or nothing.
Paul White was supposed to give an unbiased opinion – LIBOR only works if it is an unbiased opinion. There should have been a thick china wall between him and Neil Danziger.
In short, White provided the market with false data (i.e. knowingly lied) to manipulate the market for Danziger gain. That's fraud, insider trading, etc.
When it comes to fraud on a massive scale, this doesn't even come close to the theft of the people's gold by the government and the banks when FDR decided to renege on the promise to redeem US dollars for specie.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
You would change your opinion if you were in my town which is flooded. I'm volunteering at one of the evac centres and we have been overwhelmed with donated goods and volunteers. http://www.news-mail.com.au/videos/bundaberg-devastation-captured-news-crews/17239/
I got to the chocolate box before you, that's why the hard ones have teeth marks.
Each bank gives their answer, none are discarded as outliers, and the figures are averaged
Rubbish ... no-one would be THAT stupid ...
It is the average of the middle 10 out of 18 responses, with the upper and lower 4 eliminated.
So you need AT LEAST 5 out of 18 banks manipulating in a single direction to have any impact AND you need an asymmetric level of manipulation (low and high) so that the competing manipulations are not averaged out.
I don't think personal profit is limited to money in this instance. Increased social status among your peer group is a form of personal profit that drives people.
There is a substantial gold-worshiping cult online that thinks that it is something magical that solves any and all currency and banking woes. I guess none of them have studied enough history to know about the great depression or what backed the currency at the time.
If you really think that, you need to take a break from your current lifestyle. It's... really only the case when money controls people's lives, and we can say safely these people are sick: humans aren't wired that way naturally; at the very least, primitive people care about their family and tribe. That's what evolution has taught us to do; not even bacteria are as selfish as you describe.
Bio questions? Ask me to start a Q&A journal. Computer analogies available for most topics!
As a selfish volunteer, I'd wager that a good portion of those goods were donated to profit from the good feelings.
Sure, I volunteer as an audio technician to help my church and spread its message of peace, love, and happiness... but deep down I also love playing on a nice big sound rig that I didn't have to buy.
You do not have a moral or legal right to do absolutely anything you want.
Guess what, if everyone thought like you do and believed the US dollar was worthless, it would be worthless. Same deal with gold, silver, sea shells, or any other token used to simplify trade. Currency works on trust, period! The fact is international investors trust US treasury bonds more than they trust gold.
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
It can be argued that no act is completely selfless. Yes people enjoy the feeling they get when they help others. It is equally fallacious however to argue that any act is completely selfish. Even some of the most despicable acts in history had partly altruistic motives, perhaps misguided ones, but nevertheless. In cases like this people often justify it to themselves by saying that they are stealing from a corrupt system to benefit their family, especially their children. Terrorists believe they are fighting for the freedom of everyone against corrupt and evil power, nazi's believed they were protecting the purity of a chosen race against evil outsiders, the US military believes that the poor villagers they blow up are evil doers intent on destroying their way of life.
All human action can be seen as either selfish or selfless, but in reality it is far more complex than that. To say that greed is the only motivation of human beings is a hugely jaded and pessimistic view of human nature, and no more justified than it's opposite. It is however wonderfully self fulfilling as you can find evidence to support either position everywhere you look as long as you filter out the evidence to the contrary.
There is an innate selfish tendency in each of us born of self-preservation, but it is not without exception. Mothers in many mammalian species, including our own, will die protecting their young even though the chance of their orphan survival in nature is minimal. Men have died in defense of families, villages, and ideals since the dawn of time. Many who perished under these (and a multitude of other circumstances) were strong and fleet enough to escape the danger, but stayed behind to defend the weak. There is another, seemingly contradictory, predilection at work within us. Since we are much stronger and more likely to survive in groups, natural selection has modified our survival instinct to allow self-sacrifice for the good of the tribe.....& by the by.....The human capacity for justification is virtually boundless. Perhaps because of our need to belong, preferably in a position of respect and admiration, there is no deed so vile that it cannot be rectified in one's own conscience.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway