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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."
From the article: âoeWhen a bank can benefit financially from doing the wrong thing, it generally will,â
Except even the Federal Reserve has a little bit of a mandate to do what's in the best interest of America and long-term financial stability, whereas these people have no guiding principle but profit. I'm not saying the Federal Reserve is doing a great job with that, but there's a real difference between state-aligned central banks protecting their currencies and this kind of collusion.
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.
Whenever I see comments about "What is the govt doing?" my immediate response is, try living in a country with no govt and see how it compares (Somalia, Afghanistan etc). Sure the govt is far from perfect, but if you live in a western country then it is probably providing a net gain for you as a citizen. What is your bank providing you?
The Fed buying up US bonds (for the past couple of years) has nothing to do with bailing out banks, and everything to do with printing money. And about half the nation thinks that printing money is a great idea - I don't, but hey, democracy, not dictatorship of lgw. For a while they were buying up securities, mortgage-backed stuff that it would be a real stretch to call bonds, but again that was not bailing out individual banks (other parts of the government did that, but not the Fed - the Fed shuts down individual banks, and was shutting down many each week during the downturn), but rather keeping financial infrastructure intact. Again, I don't think that was the right plan, but most experts disagree with me.
It's amazing how fast geeks will go off on a rant about imaginary banking scandals - c'mon slashdotters, don't be that crank with a firm opinion about a deeply technical subject that's he can't be bothered to actually study.
This libor scandal is the real deal. It's as dirty as it gets. The more you know, the more pissed off you will be about it. Instead of saying "oh yeah, well, this other imaginary stuff is worse" try a little research. This is the kind of cheating that makes even a libertarian like me say "maybe we should have some more government oversight of these fundamentally dishonest weasels."
Socialism: a lie told by totalitarians and believed by fools.
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.
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.
"Whenever I see comments about "What is the govt doing?" my immediate response is, try living in a country with no govt and see how it compares (Somalia, Afghanistan etc)."
That's really not very relevant. You might as well tell someone who has a broken arm that they should be grateful, because you know a guy with no legs.
However, that isn't a logical argument at all. The fact that somebody else has it worse does not negate the fact that this person is in severe pain. And the fact that a few people (and comparatively, it is only a few) do not have a government, has little or no bearing on whether our government is doing the right thing. We have some serious problems here at home and comparing our government to no government does not even remotely add anything to the knowledge pool.
Just a suggestion, but next time maybe try arguing about the actual topic at hand, rather than just calling everyone crybabies?
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!
So, let's pick apart LIBOR – and I would love to hear your suggestion.
One of the reasons why people favor LIBOR is that it is the freest of the indexes. T-Bills can have technical issues of how and when the government issues the bonds. The Prime Rate (another self reporting index) can be influenced by Fed and Government policy.
LIBOR, or the London Interbank Offer Rate – and I will emphasis London here – is the rate that international banks – outside of US government regulation – will offer to borrow the US dollar. In terms of liberation terms this is about as close as one can get in the modern banking work to a bond index free of government regulation.
So, we have a contract between two parties - British Bankers' Association and the RBoS. RboS promised to provide accurate information and then intentionally lied – they broke that contract.
Why do you think should happen? What structural changes would you suggest? And have the noticed the lawyers lining up clients as they are going to sue the banks? (which nobody is sure how that is going to work – for every client that was shaved a dollar another picked up a dollar – the RGoS shaved points in both directions on short term contracts – it just a logical bloody mess)
Q: What goes "Pieces of seven, pieces of seven"?
A: A parroty error.
A bank is a place to store wealth and ease my monetary transactions.
Bingo!
And if the banks stuck to doing what they're supposed to do, the two things you describe above, instead of playing around with collateralised debt obligation, derivatives, and nuclear warhead testing for all I know, we wouldn't be in this fucking mess.
Hej! Nasi tu byli!
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.