Joined: Fri Sep 23, 2011 4:32 am Posts: 206 Location: Living spirit within my temple
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============= LIBOR is the bank-to-bank lending rate. It's self-reported and easy to fake. It has a wide influence in the lending market. We know for sure that traders within one bank faked and manipulated their LIBOR numbers to maximize profits. They did so at the request of other traders. =============
LIBOR (the London InterBank Offered Rate) is the rate at which banks charge each other to lend to each other. A committee made up of 16 banks (some sources say "up to 18") determines the average rate which the banks (within this committee) have been charging each other, and report that as the LIBOR. These numbers are self-reported and are not necessarily based on real trades. They "throw out" the highest four and lowest four numbers and average the remaining eight to make the LIBOR.
Why do we care about the banks trading? Banks lend to each other "to either make a profit or cover any short-term cash shortfalls on the part of the borrower." The banks who are lending the cash make extra profit. If banks have to raise interest rates for lending funds, it means the lending bank is less confident in the loan. This is meant to reflect "the health of the wider banking sector."
Sidebar: For European redditors, you may be familiar with Euribor. This is the equivalent.
However, this committee has been, evidently, lying about it, in both directions (higher and lower than reality.) Because of the fact that numbers are thrown out, it means that it's possible more than just one or two banks are falsifying their numbers.
Effectively, they've been falsifying their credit scores. They've been doing so to make money. Now, "in many cases", these falsifications were made to push rates down, so consumption would go up. They also did this to mask how much financial stress they were under: if they lowered interest rates, it would make them seem more confident. Again: higher consumption, more profit. However, they pushed them higher on many other occasions. They do this, from the evidence we have, at the request of traders. (Comment with more detail on how they make money off this.)
"Every interest rate in the world is based on LIBOR." Ok, not every single one. But "some mortgages and loans are directly linked to the Libor rate." Most of the remaining loans are at least influenced by it, as it is often used as a benchmark, especially for commercial mortgages and loans.
Individual sources of blame aren't clear yet. The recently-quit chief executive of Barclays Plc "blam[ed] a group of 14 traders out of 2,000" and claimed that he "didn't know about their activities until a week before regulators published their findings." However, these requests and exchanges had been going on for years, so there's a lot of questions around why it took so long to come out. This particular bank (Barclays) seems to have born the brunt of the news flurry: I couldn't find much mention of other banks aside from the Bank of England. I did find a reference to an ongoing US aggregated lawsuit against a dozen (+) banks (including Citigroup and BofA), accusing them of this same behavior (reference). However, as this is currently evolving news, it's possible more banks could come under scrutiny. Several others have been implicated thus far: UBS, RBS and Citibank.
But the Libor scandal is the biggest financial scam in world history.
The former CEO of Barclays said today that banks across the world were fixing interest rates in the run-up to the financial crisis.
Professor of economics and law Bill Black notes: It is the largest rigging of prices in the history of the world by many orders of magnitude. Indeed, the scandal effects an $800 trillion dollar market - 10 times the size of the real world economy.
Matt Taibbi explains that this is the "mega scandal of all mega scandals", because Libor is the "sun at the center of the financial universe", and manipulating Libor means that "the whole Earth is built on quicksand."
Local governments, credit card holders, students, small businesses, small investors, homeowners and virtually everyone else in the entire world has been impacted by the manipulation. Credit card debt - almost a trillion dollar market - is pegged to Libor. So are student loans - a trillion dollar market. Mortgages are a bigger market: around $10 trillion dollars in the U.S. The Washington Post notes today: 60 percent of prime adjustable rate mortgages, and nearly 100 percent of subprime ones, were indexed to LIBOR.
That means that when LIBOR rises, so do the prices ordinary consumers pay to, say, get a mortgage.
So how did the manipulations by Barclay’s affect this rate? First, from 2005 and 2007, the bank allegedly varied the rates it reported to the BBA and Thomson Reuters so as to improve its margins on internal trades. For example, it could have placed bets that the LIBOR rate would increase, and then reported artificially high rates which in turn artificially increased the LIBOR averages, so that the bets were likelier to pay off. This ... bumped up mortgage rates – however infinitesimally – for consumers even when the risk of the loans hadn’t changed at all.
Other loans - like small business loans - are usually based on Libor as well.
But that is all small potatoes compared to the $350 trillion in swaps tied to Libor. Virtually every single local government in the United States has been scalped by Libor manipulation.
The big banks have robbed the whole world.
Indeed, the scandal is so big that it will further destroy trust in our financial system and drive many people from investing in the capital markets altogether.
_________________ We are all expressions of ONE Source - ONE Mind. We are actors on the stage of iMAGICnation, in perpetual self exploration. We are both the Dreamer & the Dream. Reality is in consciousness. I think therefore I am I am consciousness and potentiality
Joined: Fri Sep 23, 2011 4:32 am Posts: 206 Location: Living spirit within my temple
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LIBOR: Not a Scandal, but a Funeral
THE END OF AN IMPERIAL SYSTEM
July 14, 2012 - The real story surrounding the news that the London Interbank Offering Rate was manipulated is that the financial system that mechanism is a part has died, and a return to the Glass-Steagall Act in both London and the United States is the first step to replacing that system.
========== Banksters used LIBOR as organised criminal instruments to control financial institutions & Governments around the World ==========
Pro-Glass-Steagall Faction in London Blasts Dope Cartel Bankers
Both the Financial Times and the Guardian—two publications that have been voices for the recent Glass-Steagall convert faction in the City of London—published damning exposes of the global bankers ties to drug cartels in their weekend editions. Under the headline "Global banks are the financial services wing of the drug cartels," the Guardian's Washington correspondent Ed Vulliamy detailed a string of recent cases where big international banks were caught laundering billions of dollars in drug cartel money and were only given civil fines and no jail time for top executives. Vulliamy cited the Levin-Coburn Senate hearings last week and juxtaposed the kid gloves treatment given to dope bankers with the long jail sentences given to smalltime crack dealers. The Guardian piece noted that the same Mexican casa de cambio, Puebla, implicated in the HSBC money laundering from Mexico to the United States, was also involved with Wachovia Bank branches in London and Miami, in similar money laundering schemes.
Martin Woods, the whistle blower in the Wachovia case, told the Guardian that it was a scandal that no one from the bank went to jail: "These are the proceeds of murder and misery in Mexico, and of drugs sold around the world. But no one goes to jail. What does the settlement do to fight the cartels? Northing. It encourages the cartels and anyone who wants to make money by laundering their blood dollars."
Vulliamy also reviewed the cases of Barclays Private Bank, which was exposed six years ago for laundering funds for Colombian cocaine cartels. The money laundering through five Medellin Cartel accounts continued even after police were tipped off to the scheme.
Coutts Banks, the Queen's own top-drawer bank, has been also caught this year laundering drug money—for which they received an 8.7 million pound sterling fine—and no criminal prosecutions. At the end of the article Vulliamy quoted from Dr. Antonio Maria Costa, the former head of the UN Office on Drugs and Crime, who recently gave an exclusive interview to EIR. Costa told the Guardian that the four pillars of the current global banking system are: drug money laundering, sanction-busting, tax evasion and gun trafficking.
The article ended on a powerful note: "The stark truth is that the cartels' best friends are those people in pin-stripes who, after a rap on the knuckles, return to their golf in Connecticut and drinks parties in Holland Park. The notion of any dichotomy between the global criminal economy and the 'legal' one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent—one and the same."
The Financial Times ran a nearly full-page expose of the Dope, Inc. banks under the headline "Taken to the cleaners," featuring a large photograph of $200 million in cash seized in a raid on the Mexico City home of Zhenli Ye Gon, an importer of precursor chemicals for Mexico's thriving illegal methamphetamine industry. While the Financial Times account lacked the punch of the Guardian's expose, author John Paul Rathbone also interviewed Dr. Costa, who candidly said, "Today I cannot think of one bank in the world that has not been penetrated by mafia money."
_________________ We are all expressions of ONE Source - ONE Mind. We are actors on the stage of iMAGICnation, in perpetual self exploration. We are both the Dreamer & the Dream. Reality is in consciousness. I think therefore I am I am consciousness and potentiality
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