Sounds like a movie, a secret conspiracy of the world’s biggest bankers playing with trillions in loans and fixing rates to line their pockets. But it was very real and the big British bank Barclays has already paid $453 million in fines for its offenses. It was playing around with a number called LIBOR, ( London interbank offered rate). Libor is use to figure interest rate that banks charge to loan each other money and hundreds of trillions of dollars of other loans, from mortgages to credit card debt.
Barclays admitted it was doing the cheating since 2005, but Barclays couldn’t have been doing this by itself. The way Libor works is that 16 giant banks report on what rate they are charging that day. The top and bottom four rates are thrown out and the rest averaged. So if you’re going to fudge Libor you have to get together with a lot (all?) of the banking behemoths.
Now the man in the US in charge of watching out for this is the head of the New York Federal Reserve Bank. Back last decade that was Tim Geithner. Geithner is now Secreatry of the Treasury.
Geithner said he found out about the rate problems in 2007 or 2008 and says he sent memos calling for better procedures for reporting Libor. What he didn’t do was report any of the crooks to the Department of Justice or other departments that look into these matters.
Neil Barofsky, the former inspector general in charge of oversight at the U.S. TARP bailout plan was interviewed on “The Daily Ticker”. He says Geithner’s excuses are not “credible”. Barofsky says Barclays confessed to the New York Federal Reserve that it was playing with the rates. Instead of calling the cops and telling Wall St. and Congress that Libor was being screwed up, Geithner not only was silent, but he went ahead and pegged important banks rescue bills to Libor.
Barofsky says Geithner and all the other regulators who looked the other way should be fired and then said, “If they knew about an ongoing fraud, and they didn’t do anything about it, they don’t deserve to have their jobs. I hope we see people in handcuffs.”
Matt Taibbi, who writes about business scams for Rolling Stone was interviewed on Democracy Now! about Libor. He said banks were playing with the rate 1) to make them look more sound at a time when banks were on the ropes and 2) to make money for themselves. He said, ‘They were trading against this information in what essentially was the biggest kind of insider trading you could possibly imagine”
Amy Goodman asked Taibbi what ought to be done. He seemed at a loss for words for a while. He said this was the “mother of all regulatory scandals” because it was involving most or all of 16 of the world’s biggest banks. He said fines wouldn’t work and nor would jailing a few traders. He said it’s a “tremendous question”.
But there is an answer. Replace capitalism with something that’s not totally corrupt and prone to collapsing ever few years.