Barclays’ Ex-Chief Spreads the Blame in Rate-Rigging Scandal

[False]

http://dealbook.nytimes.com/2012/07/...te-scandal/?hp

LONDON — Robert E. Diamond Jr., the former chief executive of Barclays, told a British parliamentary committee on Wednesday that the manipulation of global interest rate benchmarks involving 14 traders at the bank had made him “physically sick.” “I can’t sit here and say no one in the industry didn’t know about the problems with Libor,” he said. “There was an issue out there and it should have been dealt with more broadly.” Mr. Diamond also sought to deflect attention from the bank’s role in the authorities’ continuing investigation, pointing out that other major global financial institutions also had been implicated. United States and British regulators, who announced a $450 million settlement with Barclays last week, are currently investigating the actions of more than 10 large financial institutions, including JPMorgan Chase, UBS and Citigroup. The agreement with regulators showed that Barclays traders had altered Libor for their own benefit from 2005 to 2009. Senior executives also told employees to suppress the bank’s rate submissions during the three years through 2009, in response to the financial crisis that was pushing borrowing costs for most global financial institutions to record highs. In addition, the British prime minister, David Cameron, has announced a wide-ranging inquiry into the British banking sector, and expects the results to be published by the end of the year. During his testimony, Mr. Diamond reserved his most angry words for the Barclays’ traders who had manipulated rates to benefit their own trading positions. Regulatory filings show Barclays officials shared information between the firm’s treasury department, which help set Libor, and trading units, which buy and sell financial products on a daily basis. Firms are expected to maintain so-called Chinese walls between the divisions, to avoid confidential information being used in pursuit of a profit. But e-mails among Barclays employees that were released by regulators showed that when a trader wanted the treasury department to change a rate, an employee responded: “For you, anything,” Another quipped: “Done … for you big boy.”

Obviously this is par for the course given the post recession world, but I wanted to get more information on this spreading investigation. It seems like this manipulation scandal has also implicated the big U.S. firms. Can someone with a better grasp of what is actually going on help explain how much of a deal this is or isn't.

[Northside Storm]

It's a huge deal, because LIBOR is a world benchmark interest rate which a whole lot of banks base their interest rates on. It's also a guide for central bank action. The Taylor Rule that the Federal Reserve uses as a rough guideline often takes into account LIBOR as the "true inter-temporal private interest rate" central banks should play on.

It (along with EURIBOR---the European equivalent that Barclays is also implicated in rigging) are massive cogs in derivatives markets around the world. A LIBOR rate settling higher or lower, can be responsible for huge gains or losses in a $350 trillion market.

If it's found out that many private banks manipulated these rates systematically for their own gain, then the system is f**king broken, and criminal prosecutions should ensue en masse.

[Northside Storm]

There is no doubt that the Chinese walls between the retail/treasury branch, and the firms' traders broke down completely at Barclays.

http://ftalphaville.ft.com/blog/2012...r-you-big-boy/

Barclays’ traders located at least in New York, London and Tokyo asked Barclays’ submitters to submit particular rates to benefit their derivatives trading positions, such as swaps or futures positions, which were priced on LIBOR and Euribor. Barclays’ traders made these unlawful requests routinely, and sometimes daily, from at least mid-2005 through at least the fall of 2007, and sporadically thereafter into 2009. The Order relates that, for example, one trader stated in an email to a submitter: “We have another big fixing tom[orrow] and with the market move I was hoping we could set [certain] Libors as high as possible.”

To those who think that prop-trading on risky and complex derivatives is fair game---and to those who sincerely have faith in the crookedest institutions in the land to do right---it's time to eat some crow again.

As if the JP Morgan "whale-CDS trade" wasn't bad enough, now JP is implicated in a power-price fixing scandal, and this. LOL.

Jamie Dimon: 'Why Does The New York Times Hate The Banks?

Gee, I don't know.

The thread of thinking that will allow the banks free reign is toxic. It is one reason, actually probably THE reason, why Mitt Romney is unelectable.

[thadeus]

This recession is what happens when greedy profitwhores have too much power. They just squat and take a huge dump on the rest of us.

[glynch]

Originally Posted by False http://dealbook.nytimes.com/2012/07/...te-scandal/?hp Obviously this is par for the course given the post recession world, but I wanted to get more information on this spreading investigation. It seems like this manipulation scandal has also implicated the big U.S. firms. Can someone with a better grasp of what is actually going on help explain how much of a deal this is or isn't.

I am over in London after vacationing in Ireland, Greece and Turkey. Interestingly only the Turks are not complaining about the economy.

The Barclay-LIBOR scandal is THE big story here.

Two nights shows watched an interesting debate in the House of Commons. Labor wanted to put an additional tax on banker bonuses that would raise 3 billion £ and dedicate it to creating 6 mo starter jobs for recent grads without jobs. Conservatives claimed that taking 3 billion pounds from the poor banks would stop then from making loans and then the cards would not make loans. Labor pointed out they aren't lending anyway. Sounded like D and D

[Mathloom]

Sigh.

What scares me is the bigger picture: were banks colluding in these alleged crimes only in the case of LIBOR?

Is there enough reason to suspect a wider behavioral problem, where the LIBOR scandal is just one illegal instance of this behavior of manipulating markets?

Sadly, if the media is painting an accurate picture of this scandal, then I can't imagine this network of individuals would reject any other illegally profitable opportunities at least during the same period.

Even more depressing is that the state owns more than 80% of RBS, who will be paying hundreds of millions in fines.

The furor is over revelations that Barclays, the Royal Bank of Scotland, and other banks were monkeying with at least $10 trillion in loans (The Wall Street Journal is calculating that that LIBOR affects $800 trillion worth of contracts). Read more: http://www.rollingstone.com/politics...#ixzz1zk9Rx3sF

LIBOR affects most people in the world directly. For example, if I want to take out a mortgage in my country, the interest is a combination of a number of interest components, one of which is LIBOR. So literally every person with a mortgage from the banks in my country was robbed of cheaper mortgages by the individuals implicated in this issue. It's a shame that they will probably not be penalized globally for an international crime, rather they will resign with their bonuses and the companies will settle the damages probably to avoid an investigation and find more problems.

[Mathloom]

U.K. bankers group to speed review of Libor Published: Thursday, April 17, 2008 The British Bankers' Association will speed up the review of the process by which money-market rates are set daily amid concern that some contributors are providing misleading quotes. ......... "This is about the need to ensure the integrity of Libor is absolutely right," Knight said. "We are in this very difficult credit situation and this is the right and appropriate thing to do. We have had people contact us. We recognize the points that have been made. We need to open up and have a good look." ...... "The most obvious explanation for Libor being set so low is the prevailing fear of being perceived as a weak hand in this fragile market environment," wrote Scott Peng, head of U.S. rates strategy at Citigroup in New York. http://www.nytimes.com/2008/04/17/bu....12079747.html

Note the date.

[Johndoe804]

The Fed and other central banks are price fixing cartels. The only reason the authorities are angry about this is because Barclays acted outside of the authority of these cartels. When I hear that Barclays did this for profit, it makes me wonder how we all turn a blind eye to these cartels manufacturing economic downturns for the benefit of their influential board members with interests in every major bank in the world. But wait, its not the same -- the cartels fix prices for our benefit! Right...?

[Northside Storm]

Originally Posted by Johndoe804 The Fed and other central banks are price fixing cartels. The only reason the authorities are angry about this is because Barclays acted outside of the authority of these cartels. When I hear that Barclays did this for profit, it makes me wonder how we all turn a blind eye to these cartels manufacturing economic downturns for the benefit of their influential board members with interests in every major bank in the world. But wait, its not the same -- the cartels fix prices for our benefit! Right...?

uh wut.

You're right that the BBA submission rules were opaque at best, and that central banks were complicit in this crisis.

I really don't know where you're going with the second part. FOMC members, for example, have huge conflict of intrest clauses pushed upon them so that they can't trade on their own desicions (obviously). Bernanke is forgoing a fulfilling career in academics---or perhaps the multi-million dollar payout that comes from being Chief Macroeconomist at JP Morgan Chase, in order to be called a traitor by people who, quite frankly, are in no place to be debating macroeconomics.

[bigtexxx]

Originally Posted by glynch I am over in London after vacationing in Ireland, Greece and Turkey.

Living high on the hog, I see. I guess you're one of the elite rich in the US.

[Northside Storm]

Originally Posted by bigtexxx Living high on the hog, I see. I guess you're one of the elite rich in the US.

There's nothing wrong with being rich, as long as you deserve it.

Texxx, do you think Barclays executives and others caught in bed manipulating key intrest rates deserve to be rich?

[bigtexxx]

Originally Posted by Northside Storm There's nothing wrong with being rich, as long as you deserve it. Texxx, do you think Barclays executives and others caught in bed manipulating key intrest rates deserve to be rich?

lol you must not know much about glynch's anti-rich posts

and I'm no fan of intrest (sic) rate manipulators

[Northside Storm]

Originally Posted by bigtexxx lol you must not know much about glynch's anti-rich posts and I'm no fan of intrest (sic) rate manipulators

So why would you vote for Mitt Romney, who is clearly trying to get in bed with them, and wants to loosen restrictions on prop trading? Citigroup and JP Morgan Chase are implicated. Why would you agitate for less regulatory reform?

Ça n’a vraiment pas d’allure (sic)!

[bigtexxx]

Originally Posted by Northside Storm So why would you vote for Mitt Romney, who is clearly trying to get in bed with them, and wants to loosen restrictions on prop trading? Citigroup and JP Morgan Chase are implicated. Why would you agitate for less regulatory reform? Ça n’a vraiment pas d’allure (sic)!

weak attempt to 1) bait me into your faux trap 2) look smart (?) by throwing some french into your post

just focus on getting the coffee in the office brewed, brah

[pirc1]

It is clear that Banks and other big businesses do not need regulations because they have the best interest of their customers at heart. So deregulations FTW!

[Northside Storm]

Originally Posted by bigtexxx weak attempt to 1) bait me into your faux trap 2) look smart (?) by throwing some french into your post just focus on getting the coffee in the office brewed, brah

Only Rice University grads brew coffee here, us people going to better schools do the paperwork.

(weak attempt to once again evade substantiative debate on this matter noted).

[Mathloom]

bigtexxx, could you at least admit that his support for this type of deregulation is a potential weakness of Romney's?

[Mathloom]

Possibly the biggest crime of the century, zero interest from regular people who are the only victims. Boggles my mind.

July 10 (Reuters) - The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. Following an inquiry with British banking group Barclays Plc in the spring of 2008, it shared proposals for reform of the system with British authorities. The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way Libor rates were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat.

http://www.reuters.com/article/2012/...8IA1GB20120710

[dumbartonbass]

Originally Posted by Mathloom Possibly the biggest crime of the century, zero interest from regular people who are the only victims. Boggles my mind. http://www.reuters.com/article/2012/...8IA1GB20120710

They thought they could get away with it due to the complacency of most people and the complexity of what the crime was. When you've learned how to rob people blind, they tend to remain oblivious.

It's a shame that the narrative is one as simple as "capitalism" vs. "socialism". Those who decry regulation are completely unaware that this is what they're tacitly advocating. And it's crimes like this that make the average person feel suffocated because the exploitation in the global economy is so deeply ingrained. What can we even begin to think of doing?

[MFW]

Originally Posted by pirc1 It is clear that Banks and other big businesses do not need regulations because they have the best interest of their customers at heart. So deregulations FTW!

Yeah great, except there is just one problem. The big banks you rail on also get hurt by LIBOR fixing. Since oh you know, couple trillion dollars worth of mortgage backed securities (among others) pay according to LIB1 + margin to investors and those trusts usually have swap agreements protecting against interest rate risks. This is just kinda a big deal to them too.

And on the other hand, who is asking Paul Tucker questions?

Throw the maximum punishment allowable under the law at Barclays and RBS.