I've spoken at length about the subprime mortgage loan fraud so I won't go into that here other than to remind it involved trillions of dollars in fraud----not the few hundred billions we have received as settlements----that went right back to the banks as development subsidy. So, when I say tens of trillions of dollars----I MEAN TENS OF TRILLIONS OF DOLLARS IN FRAUD. Today I want to look at LIBOR fraud-----one of the largest frauds in history that again involved trillions of dollars in fraud and government officials are allowing this fraud to disappear. Below you see an article that shows another judge ruling for the banks and look at what she is killing while doing it-----SHE SAYS THIS IS NOT AN ANTI-TRUST OR RICO CRIME.
The SEC, the FED, and US Justice Department, and all agencies with power of prosecution have for a decade or more used the model of settlement for small amounts with no charge. These cases are all settled as civil cases. The small amount of settlement is tied to a law that Congress passed that caps the award in fraud to a small amount over the total of fraud. Maryland has this cap as well. That creates the situation of not being able to use financial penalty as a deterrent in these fraud cases and of course corporations simply build these small settlements into their operating costs. Allowing our government officials on the other hand to arbitrarily decide in the name of the American people to settle without charge is another matter. WE THE PEOPLE DECIDE THAT. We decide that when we vote for a Presidential candidate that runs as a progressive wanting to hold corporations accountable as Obama did. What we got as we know is a pol that serves as center right working for global corporations and Wall Street. Obama appointed people to head these agencies tasked with oversight and accountability that protects banks from losses.
The point with the cap of financial awards on fraud is this----almost none of the actual fraud is found----it doesn't even look as if they looked for fraud. It appears they simply agreed on an amount to pay and approved it so the settlement closed the window of Statute of Limitation. We know there are trillions of dollars in fraud----they pay a few hundred billion. That is not justice and it does not end there. All those trillions in fraud not included are still waiting for Due Process and Equal Protection. It's important to know that these small settlements are not meant for the citizens victimized-----it is simply a way to keep one corporation from undermining competition with another.
THESE ARE CORPORATE SETTLEMENTS TO LEVEL THE GROUND FOR COMPETITION.
You see, global corporate pols have already eliminated the paths to justice for the American people because Trans Pacific Trade Pact does not recognize people as citizens with rights. That is what these failures of justice mean and your pols know this.
DO YOU HEAR YOUR POL SHOUTING THAT THIS JUSTICE SYSTEM DOES NOT MEET THE CONSTITUTIONAL GUARANTEE OF EQUAL PROTECTION AND DUE PROCESS? IF, NOT----THEY ARE GLOBAL CORPORATE POLS---GET RID OF THEM!
The article below shows how captured US courts are as regards a reasonable expectation of justice by the American people. All LIBOR claims against banks come to New York City's Manhattan Federal Court and guess what? The judges appointed to a Federal Court in Manhattan probably have a slight bias to Wall Street. This of course has happened across all industries as corporate cases of fraud always seem to be settled in courts connected with these industries. What this ruling states is that it will be hard if not impossible to approach this massive LIBOR fraud through the most logical way----class action lawsuits. This can be appealed but.....
THE AMERICAN PEOPLE MUST DECLARE THIS A SUSPENSION OF RULE OF LAW. THESE RULINGS ARE NOT JUSTICE----THEY ARE NOT DUE PROCESS----AND COURTS OF LAW ARE NOT ALLOWED TO BE DESIGNED WITH SUCH BIAS.
Baltimore's wealthy think all this is a hoot as a PERESTROIKA of American's wealth is simply stolen with no justice with Baltimore's pols working as hard as they can to set the public up for these losses.
'Only investors with enormous holdings, in other words, have an economic rationale for pursuing fraud or contract claims against particular panel banks'
What remains of Libor litigation with antitrust, RICO knocked out?
By Alison Frankel April 1, 2013 Reuters
Make no mistake: A 161-page ruling late Friday by the New York federal court judge overseeing private litigation stemming from manipulation of the benchmark London Interbank Offered Rate (Libor) has devastated investor claims that they were the victims of artificially suppressed Libor rates. U.S. District Judge Naomi Reice Buchwald of Manhattan ruled that owners of fixed and floating-rate securities do not have standing to bring antitrust claims against the banks that participated in the Libor rate-setting process, even though some of those banks have admitted to collusion in megabucks settlements with regulators. If that result, which Buchwald herself called “incongruous,” weren’t bad enough, the judge also cut off an alternative route to treble damages for supposed Libor victims when she held that federal racketeering claims of fraud by the panel banks are precluded under two different defense theories.
Buchwald’s opinion didn’t address every Libor case that’s been filed, since she only ruled on bank motions to dismiss two class actions (one by owners of Libor-pegged securities and the other by derivatives traders) and individual claims by Charles Schwab entities. She held, moreover, that some claims based on the banks’ supposed violations of the Commodity Exchange Act may go forward, although she also said she had doubts that Eurodollar contract traders would ultimately be able to tie losses to misconduct by the Libor banks. But unless and until the 2nd Circuit Court of Appeals reverses Buchwald, Libor antitrust and RICO claims in federal court seem to me to be dead.
That’s because Buchwald’s ruling is based on her interpretation of the law, not on facts. The judge said investors simply couldn’t show that any injury they received from manipulation of the Libor process was the result of anticompetitive behavior by panel banks because the rate-setting process was collaborative, not competitive. (In that process, 12 or so banks would report their own interbank borrowing rate to Thomson Reuters, which would calculate the daily mean rate to be disseminated by the British Bankers’ Association.) And though plaintiffs argued that the banks colluded to suppress Libor in order to lower the interest rates they would have to pay on securities pegged to the interbank rate, Buchwald said that the manipulation was not designed to hamper competition between the banks, which she said was a necessary element of antitrust standing.
“Even if we were to credit plaintiffs’ allegations that defendants subverted this cooperative process by conspiring to submit artificial estimates instead of estimates made in good faith, it would not follow that plaintiffs have suffered antitrust injury,” she wrote. “Plaintiffs’ injury would have resulted from defendants’ misrepresentation, not from harm to competition.”
As for RICO claims (which were only asserted by Schwab and not by the classes), the judge said in a broad holding that they are barred both under the federal law precluding investors from transforming securities fraud allegations into racketeering suits and under the U.S. Supreme Court’s ruling in Morrison v. National Australia Bank that U.S. laws don’t apply outside of our borders unless Congress so specified. Buchwald rejected arguments by Schwab’s lawyers at Lieff Cabraser Heimann & Bernstein that the banks’ misrepresentations were directed at investors and that not all of them related to securities. And even if that were true, Buchwald held, the RICO case would be impermissible under Morrison, which has been read by courts in the 2nd Circuit to preclude racketeering cases in which the illegal enterprise was based overseas. In Libor, the judge said, rate-reporting decisions were made by banks all over the world, but the center of the enterprise was London, where the British Bankers’ Association is located.
Buchwald didn’t dismiss the antitrust or RICO counts with prejudice, but I don’t think there’s much chance that the claims can be revived through an amended complaint with additional facts because Buchwald didn’t even dig into investors’ specific allegations. I doubt the classes will waste their time with an amended complaint. Instead, the plaintiffs may file a motion for reconsideration, arguing that the judge misapplied the law on horizontal price-fixing. Buchwald said that even if the classes can show a price-fixing conspiracy among competitors – a so-called “per se” violation of antitrust laws – investors must separately show that their injury was due to the defendants’ anticompetitive behavior. Class action lawyers, on the other hand, had contended that because collusion by competitors is inherently illegal under federal antitrust laws, they have standing to sue regardless of whether their injury was due to dampened competition or simply to rate-rigging. If lead counsel from Hausfeld and Susman Godfrey, which represent the broadest class of investors, don’t persuade Buchwald to change her mind (or if they decide not to bring a motion for reconsideration), you can expect their argument at the 2nd Circuit to turn on the trial judge’s interpretation of standing to sue for injuries in a horizontal price-fixing conspiracy.
Meanwhile, the other Libor cases in federal court are likely to remain on hold. Under the rules for multidistrict litigation, the federal judges who oversee such cases have transferred every case filed in federal court (as of mid-February) to Buchwald for pretrial proceedings. Last August she said she would stay all of the other suits until she ruled on the banks’ motions to dismiss the class actions since her analysis of those motions would affect the other Libor cases. Some plaintiffs whose cases have been transferred to Buchwald have since filed motions contending that they’re not covered by the class actions, usually because they’ve brought state-law and federal racketeering claims in addition to the federal antitrust claims asserted by the classes. Buchwald has not said how she’ll handle the additional suits now that she has tossed federal antitrust causes of action (as well as California state-law antitrust claims), and two plaintiffs’ lawyers in the follow-up cases told me they’re still trying to figure out what to do. The simplest solution would be for the other cases before Buchwald to remain stayed until there’s a more definitive finding from the 2nd Circuit on the antitrust standing question.
Plaintiffs whose cases haven’t yet been transferred to Buchwald – such as the Federal Home Loan Mortgage Corporation, which sued Libor banks in March in federal court in Virginia – may fight transfer to her court, but the MDL rules are pretty clear that Libor suits in federal court go to her.
But for all of the doors closed by Buchwald’s ruling on Friday, there are a couple left open, albeit only a crack. I’ve mentioned that the judge left alive some claims under the Commodity Exchange Act, whose statute of limitations gets a thorough 40-page going-over by the judge. (I’m not kidding: 40 pages.) Securities investors have a more favorable cutoff date for claims than derivatives investors under the Supreme Court’s 2010 ruling in Merck v. Reynolds. So even if buyers and sellers of Libor-pegged securities can’t bring antitrust claims, they may still be able to sue panel banks for securities fraud under the federal Securities Act or under state common laws, said Daniel Brockett of Quinn Emanuel Urquhart & Sullivan. (Caveat emptor: Quinn Emanuel, which has been pushing its Libor securities fraud theory since February, seems to be eager to represent clients with Libor securities claims.)
As Brockett pointed out in an interview with me on Monday, Buchwald’s opinion strongly implies that the facts alleged by Libor plaintiffs are better suited to fraud and misrepresentation suits than to antitrust claims. “There was a fraud here,” he said. “Fraud claims are viable as long as the statute hasn’t run.” So too, he said, are claims that individual banks on the Libor panel breached swaps contracts with individual investors. (In the Virginia suit filed last month, Freddie Mac brought such breach-of-contract claims against Bank of America, Barclays, Citigroup and several other banks.) Depending on choice-of-law clauses in the contracts, investors could have up to six years (under New York state law) to bring common-law fraud or contract cases against banks that sold them Libor-pegged securities.
There’s a catch, of course, in that these cases would have to be filed by individual investors who can show that they relied on misrepresentations about Libor’s legitimacy. (If there were a viable securities class action on behalf of owners of Libor-pegged securities, which aren’t traded on stock exchanges, you can bet that it would already have been filed.) Only investors with enormous holdings, in other words, have an economic rationale for pursuing fraud or contract claims against particular panel banks. But Quinn Emanuel and at least one other big securities fraud firm I talked to believe such investors are out there.
If the 2nd Circuit upholds Buchwald, the Libor litigation may end up resembling securities litigation over mortgage-backed securities. After federal courts narrowed the standing of lead plaintiffs, MBS class actions ended up being much smaller than investors’ lawyers originally expected. The 2nd Circuit subsequently expanded standing for lead plaintiffs in MBS class actions, but in the meantime individual investors in mortgage-backed notes, including German banks that held tens of billions of dollars of MBS, brought their own suits in state and federal courts. We’re still waiting to see how profitable those cases turn out to be.
The individual consumer has no way of knowing if these interest rates paid on all kinds of products are being calculated right so we cannot know we are losing money illegally. State and local governments like Maryland and Baltimore had tied public deals to these LIBOR schemes which the judge above is saying will lead to no recourse. The fact that banks overseas cannot be pursued under anti-trust or RICO means they are open to fleece other nations with no legal recourse. This all plays to the definition of ANTI-TRUST. Remember I spent the day talking about how global corporate pols define it a products and prices and not size of institution or danger to economic stability. It is ridiculous to think Anti-Trust does not protect citizens from institutions being too large to fail or too large to provide oversight and accountability----THIS IS NOT AN INTERPRETATION OF THE LAW----IT IS A RE-WRITE. If we look only at product availability and prices, we all know products with interest are all the same----there is price-fixing. It was a violation of Anti-Trust that allows these global banking groups to work out of sight in conspiracies that defraud. An International bank has already become too large and our national laws unable to protect the American people from these crimes. THEY SHOULD NOT BE DOING BUSINESS IN THE US IF THEY ARE NOT TO ABIDE BY US LAWS. As the judge stated Congress passed a law that says Anti-Trust does not go beyond our border----this was done to protect global corporations committing crimes overseas that ultimately harm the American people. DO WE THE PEOPLE HAVE EQUAL PROTECTION IF CONGRESS CAN PASS LAWS THAT PRECLUDE THAT PROTECTION?
OF COURSE NOT----CONGRESS CANNOT PASS LAWS THAT LEAVE AMERICANS UNABLE TO ACCESS JUSTICE.
Those following financial journalism have known about the trillions of dollars stolen in LIBOR fraud for years. This article makes it sound new----what Clinton neo-liberals and Obama have done is allow absolutely nothing be done about how these vital financial transactions are monitored. Take the Wall Street ratings corporations like Moody's and Standard and Poor-----when it was found they were ground zero in the subprime mortgage fraud there was talk about reforming the rating system-----AND NOTHING WAS DONE-----THESE RATING AGENCIES WERE NOT PENALIZED AND THEY OPERATE AS NOTHING HAPPENED. So, too with LIBOR. What is worse is that Obama and Clinton worked these entire years after the crash helping write Trans Pacific Trade Pact with policy that completely eliminates any banking regulation worldwide. So, we know Congress has absolutely no real intent with the Financial Reform Bill.
DO YOU HEAR YOUR POLS SHOUTING THAT TRANS PACIFIC TRADE PACT SEEKS TO TOTALLY DEREGULATE GLOBAL BANKING AND THAT NO JUSTICE HAS HAPPENED FROM FINANCIAL FRAUDS? IF NOT, GET RID OF THEM AT ALL LEVELS OF GOVERNMENT!
Below you see an article that addresses this new 'manipulation' policy that the financial industry has been clever to create-----not clever but devious----as it has never been done before because everyone knows it harms the economy. Since we have people in government that live to harm the US economy-----Clinton Wall Street neo-liberals and Bush Wall Street global corporate neo-cons----we are seeing the FED and these banking groups pulling policy schemes out of the closet that should not see the light of day. Keeping financial measures 'ARTIFICIALLY LAW' as the FED is doing to interest rates and inflation rates------even as those rates are not really low------is what creates the BUBBLE. As this article states----this artifically low LIBOR for a decade has fueled the coming economic crash to the point of disaster. Add to that the FED's ARTIFICAL inflation and interest rate and the global financial market will not only collapse----but with a BIG BANG.
6/03/2014 @ 1:51PM
This New Libor 'Scandal' Will Cause A Terrifying Financial Crisis
Two years ago, a major scandal rocked the world after it was revealed that big international banks had long been manipulating the Libor interest rates to fraudulently boost their profits. As outrageous as the Libor rate-fixing scandal was, it pales in comparison to another Libor “scandal” that is occurring at this very moment, but has received virtually none of the attention that it rightfully deserves. The ultimate fallout of this much larger, little-known Libor “scandal” will be nothing less than an international financial crisis.
The next two sections explain the basics of Libor and the rate-fixing scandal, but can be skipped for those who are already familiar with it.
What Is Libor?
“Libor” is an acronym that stands for “London Interbank Offered Rate,” which is a benchmark interest rate that is derived from the rates that major banks charge each other for loans in the London interbank market. Each day at 11:30 am London time, banks report their estimated borrowing costs to Thomson Reuters, which publishes the average of these estimates in the form of the Libor benchmark interest rate. The Libor is calculated for five different currencies and seven different maturities up to one year.
As the world’s most important benchmark interest rate, the Libor is used as a reference rate for hundreds of trillion dollars worth of commercial and consumer loans, derivatives, and other financial products across the globe. Libor-based loans are quoted using the Libor rate plus a certain number of basis points, which depends primarily on the particular lending institution, the type of loan, and the borrower’s creditworthiness. For example, a loan’s interest rate may be quoted at “157 basis points over 1-year Libor”, which equates to 1.57 percent plus the current 1-year Libor rate. The 1-year U.S. dollar Libor rate is currently 0.535 percent, so the loan in this example would have an interest rate of 2.105 percent.
The Libor Rate-Fixing Scandal Explained
In June 2012, a scandal ensued after it was revealed that major banks – particularly Barclays, UBS, Rabobank, and the Royal Bank of Scotland – had been manipulating the Libor for their own benefit since at least 1991. As mentioned earlier, the Libor is used as a reference rate for hundreds of trillions of dollars worth of derivatives – a market that is dominated by big banks. Traders at numerous banks had colluded with each other to submit fraudulent daily Libor rate submissions so that they could boost the profits on their derivatives positions as well as create the illusion that the banks were in a healthier financial condition than they actually were during the Global Financial Crisis.
Because of the large notional amount of derivatives and loans that banks hold, even minuscule changes in the Libor rate can equate to millions of dollars worth of profits or losses. For example, Citigroup stated that it would have generated $936 million in net interest revenue in the first quarter of 2009 if interest rates fell by 25 basis points or .25 percentage points, and $1.935 billion if rates fell by 1 percent. A Barclays trader’s instant messages that surfaced during the Libor scandal investigations showed that traders could earn ”about a couple of million dollars” for every .01 percent that Libor was manipulated in their favor.
The derivatives market is a zero-sum game in which there is a loser for every winner, so all of the fraudulent profits that banks and traders earned from manipulating the Libor came at the expense of other unwitting parties that were on the other side of their trades. Many of these losing counterparties were not savvy speculators or banks, but parties such as U.S. municipal governments that lost approximately $10 billion on their derivative hedges and U.S. homeowners who paid higher mortgage rates as a result of the manipulations. In addition to the realized financial losses, Libor manipulation harmed the integrity of the global financial system and served as another confidence blow at a critical time during the financial crisis.
After a lengthy and ongoing investigation into the Libor scandal, U.S. and European authorities have fined the institutions that were involved with the manipulation a total of $6 billion and pressed criminal charges on twelve people so far. According to an estimate by securities broker and investment bank Keefe, Bruyette & Woods, the guilty institutions may eventually pay approximately $35 billion in legal settlements in addition to regulatory fines.
This Is The Real Libor Scandal
Amid all of the attention that the Libor rate-fixing scandal has received, the world is completely overlooking a far worse Libor “scandal” that has been occurring right under our noses this entire time. Though the Libor rate-fixing scandal is certainly no trivial matter, the losses caused by it amount to a few tens of billions of dollars, which is ultimately a drop in the bucket compared to the size of the global economy and financial system. In addition, as dramatic as the term “rate-fixing” sounds, the Libor manipulations only moved the Libor rate by a few basis points (basis points are .01 percentage points) for just a few brief moments at a time. The Libor manipulations did not move the rate by significant magnitudes such as from 5 percent to 2 percent, for example.
The vastly worse Libor “scandal” that I am referring to is the fact that the Libor has stayed at record low levels for the past half-decade, which is helping to fuel a massive economic bubble around the entire world that will end in a devastating financial crisis that will be even worse than the Global Financial Crisis. Instead of causing a few tens of billions of dollars worth of losses like the Libor rate-fixing scandal, the “Libor Bubble” will gut the global economy by trillions of dollars.
You notice that the judge ruling on LIBOR cases has eliminated most pathways the public has to receive justice and that with this judges ruling----it will be only the wealthy that will pursue this as fraud and misrepresentation. As with Maryland Attorney General Doug Gansler who settled the subprime mortgage fraud of trillions of dollars for $25 billion----simply sitting by and allowing the US Justice Department to settle for a canned amount they pulled out of their hats-----the current Maryland Attorney General Frosh will do the same thing. Make no mistake----if these pols were raising cane over this the courts would be fearful of these rulings. It is main street yet again that will be victim with no justice.
This video reminds the citizens of Baltimore that City Hall places its citizens in the hands of Wall Street fraud at every turn and Baltimore Development Corporation makes these Global banks the center of downtown Baltimore development. This happens because Baltimore City Hall works for Johns Hopkins and Baltimore Development Corporation and not the citizens of Baltimore. NO DEMOCRATIC PARTY IN BALTIMORE-----JUST LOTS OF POLS WORKING FOR NEO-CONSERVATIVE JOHNS HOPKINS AND WALL STREET! Mayor Rawlings-Blake was first out of the lineup of mayors pretending to seek justice since she and O'Malley have tied the city to billions of dollars in losses to Wall Street in one deal after the other. Fast forward to today----even the small settlements that have been made are being sidetracked by courts.
POLS ARE NOT FIGHTING FOR FRAUD RECOVERY IF THEY ARE NOT SHOUTING LOUDLY THAT THE SYSTEM IS RIGGED AND KEEP BRINGING THE PUBLIC BACK TO THESE WALL STREET DEALS!
Remember, in the past this never happened because we had politicians that worked for the American people. Taking these mechanisms out of the hands of banks is of course the solution ------and that would have happened had we not had a captured Democratic Party. Simply voting these Wall Street Clinton global corporate neo-liberals out of the people's Democratic Party will reverse this and
WE THE PEOPLE WILL SEEK JUSTICE BECAUSE WHEN A GOVERNMENT SUSPENDS RULE OF LAW IT SUSPENDS STATUTES OF LIMITATION!
If your pols are saying----WE DIDN'T SEE THAT COMING-----they are lying. Anyone watching and reading financial journals has known Wall Street has been systemically criminal and would not have partnered with Wall Street deals to begin with. As we see in Maryland and Baltimore-----these pols are doubling down on Wall STreet deals and every candidate for Governor of Maryland except me were committed to these Wall Street development deals. That is how you know these pols are working for global corporations and not you and me!
Please take time to listen to this video and read the transcript....this is all illegal and we can reverse this!
LIBOR Scandal More Than Fraud - Whole Game is Rigged
Costas Lapavitsas: From multimillion dollar losses by cities like Baltimore to pension fund losses and much more, the LIBOR interest rate scandal shows that such mechanisms must be taken out of the hands of banks and be run in public interest - October 3, 14
Costas Lapavitsas is a professor in economics at the University of London School of Oriental and African Studies. He teaches the political economy of finance, and he's a regular columnist for The Guardian.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The Lapavitsas Report on Economics with Costas Lapavitsas, who now joins us from London.Costas is a professor of economics at the School of Oriental and African Studies at the University of London. He's a member of Research on Money and Finance, and he's a regular columnist for The Guardian newspaper.Thanks, Costas.
COSTAS LAPAVITSAS, PROF. ECONOMICS, UNIV. OF LONDON: Pleasure to be here, Paul.
JAY: So what have you been working on this week?
LAPAVITSAS: I think one of the most interesting things to hit the news this week is the Libor manipulation case and the fine that has been imposed on the large British bank RBS for manipulating the Libor.I think we need to talk a little bit about this so that people understand the significance of it, because it hasn't really been widely appreciated by the public.Now, the Libor is not a real interest rate. It's a benchmark. It's a benchmark that is set privately by the banks and in secret. There's a committee of banks that does that. On the basis of the Libor, a whole host of other interest rates that are charged to people for their mortgages, to businesses, and so on are determined.Now, the case and the fine imposed on RBS has discovered, has found that actually RBS has been colluding with brokers and others to manipulate the Libor. This is a criminal dimension. And they've been charged. The British governmentâ.
JAY: Hang on one sec. Just for people that haven't followed this story at all, just a little more on why this matters so much.
LAPAVITSAS: This matters enormously for a number of reasons. As I said to you, as I said, this is not a real interest rate; this is a benchmark. If the banks determine the benchmark in an untruthful way, then they can influence a whole host of other prices, and they can influence the receipts they make from people to whom they've lent money and from the various transactions they make in the derivatives markets. For the banks, the ability to manipulate the Libor is a key mechanism to make extra profits, basically. And they've got this ability to do it because they set the Libor privately and in a special committee, which they run themselves.Now, the British government is making out that this is a criminal act, which it is, of course, because collusion with the aim of making extra profits is criminal. The point is, howeverâand this is something that the British government wishes to keep quietâit isn't simply criminality here. It looks as if the entire game is rigged from beginning to end. In other words, it isn't simply collusion and illegality. The game is rotten. And it is rotten for two reasons, I would argue. First, the banks have got an incentive to present falsely low rates, because they in this way appear to be stronger than their competitors. And the banks have got an incentive to manipulate the rate sometimes up, sometimes down, because they make different payments in this way on their derivatives portfolio. The banks, then, have got clear incentives to manipulate it, and they signal their incentives to each other. So this committee doesn't work. It doesn't work systematically in the public interest; it works in the interest of banks. This is becoming increasingly clear, and this is going to be big news, I think, in the months to come, because, of course, there are more banks that would be hitâthat will be charged fines in the months ahead.
JAY: How did we get to a situation that a group of banks, most of them private, or maybe all of them privately owned, get to determine what is essentially the most influential rate in the globe? I mean, in theory, central banks are supposed to establish rates, I would have thought.
LAPAVITSAS: Central banks establish the rates at which they themselves lend to the banking system. However, there is also a private market for funds. There's the money market. And in the money market, banks interact with each other and work out the rate at which they lend to each other. This is the most important price in the financial system. It's more important than the rate at which central banks lend to banks. It's the most important financial price. And presumably, in a neoliberal free-market system such as the one we've got today, it ought to be set through the free competition among the financial institutions. It isn't. And that's the significance of this. This rate is actually manipulated. These banks have got a secretive committee. They work out the rate, which is the Libor. They don't transact at this rateâthis is a benchmark. And they announce it on a daily basis. They manipulate it. They handle it. And by manipulate it, they affect all other actual interest rates at which people undertake [unintel.] transactions.
JAY: Now, just to make this concrete for people, a city like Baltimore claims it's lost millions of dollars that could have been spent on schools or roads or housing or whatever, and they've lost this money, they claim, because of this fraudulently set Libor rate. But how does that work? Why is Baltimore out money because of what some bankers are doing on this committee?
LAPAVITSAS: Because the prices Baltimore would have been charged on various loans it took or on derivatives transactions it engaged inâI don't really know the particulars of the Baltimore case, but the prices it would have been charged and the rates it would have been charged would have been false. They would have not have been true rates. They would have been based on the Libor, a premium would have been added to the Libor, and the Libor rate that would have been used as the base for this would have been a false, manipulated rate. And by manipulating it, the banks would have seen to it that money would have gone into their coffers, that their coffers would have gone up. It's a hidden, silent transfer of income and wealth from the public in general to the banks. It's arguably one of the biggest scams in the history of finance.
JAY: And Baltimore's leading a class action lawsuit of various cities, with Baltimore being the lead city, suing these banks to try to recover this money.
LAPAVITSAS: They're right to do so. As I said, I mean, there is obviously outright criminality in some respects, because these banks have been proven to have colluded with one another to handleâthey manipulate the rate directly. But the point I repeat is that criminality aside, it looks as if the entire game is rigged, that the banks actually can know how to handle and manipulate the rate without actually directly colluding with each other. And that's what's wrong about it, and that's what's bad about it, because it shows that the so-called free market in finance simply doesn't work. I want to stress the importance of this. You see, neoliberalism and free markets, which is the mantra that we've been listening to and hearing for decades, pivots on the banks and the financial system. This is where it's supposed to be free. This is the markets, these are the markets, and the institutions are supposed to be as free as possible. Well, they're not. They're actually managing this rate, manipulating this rate in their own interests. And they are doing it through a private meeting. You know, Adam Smith wrote more than two centuries ago that when you let capitalists meet in a nontransparent way on a regular basis, then they will do two things: they will defraud the public and they will raise prices. He argued that two centuries ago. Well, there you are. When you let banks meet on a daily basis, privately, without transparency, without public scrutiny, what they will do is to manipulate this key rate, the fundamental rate of the financial market, to make extra profits. That's what they've been doing. This is one of the biggest scandals, as I said before, in the history of finance. It's about time the public realized what's happening and demanded intervention.
JAY: Alright. Thanks for joining us, Costas.
LAPAVITSAS: Thank you.
JAY: And thank you for joining us on The Real News Network.
This last article shows how the national news media assumed from the beginning of this scandal's exposure that crimes were obvious and proving this would be the simplest of court proceedings. AND IT SHOULD BE. Then alongs comes a New York judge to rule out most avenues for justice with an 'interpretation' that cannot even be held seriously.
Since this fraud came to light almost nothing has happened as justice for this LIBOR fraud. Even the few cases that did end in a settlement have since been dismissed by courts. As you see below this fraud was huge and systemic and the American people have no way to prove it is not still happening. Global corporate pols are still discussing how to fix this even as Trans Pacific Trade Pact seeks to eliminate all bank regulations for the world's banks. Any state in the US that ties itself to Wall Street financial instruments-----and Maryland and Baltimore are soaked in these deals----have pols who know citizens are being fleeced by these deals---GET RID OF THESE WALL STREET POLS----ALL MARYLAND POLS ARE WALL STREET POLS!
'But this time it's different and here's why: The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers'.
LIBOR Fraud May Be the Mother of All Bank Scandals An estimated $1.5 trillion was stolen from customers in the LIBOR scandal.
By James Rickards July 23, 2012 | 4:30 p.m. EDT US News and World Report
Barclays PLC and its subsidiaries will pay about 453 million US dollars to settle charges that they tried to manipulate interest rates that can affect how much people pay for loans to attend college or buy a house. Britain's Barclays is one of several major banks reportedly under investigation for such violations.
Investors have by now heard of the LIBOR scandal engulfing the banking industry. LIBOR stands for the London Interbank Offered Rate. To some it may be just the latest entry on a list of bank frauds and blunders in recent years, from mortgage scams to MF Global and the London Whale.
In fact, this may be the mother of all scandals--the one that finally leads to criminal charges and the insolvency of major banks. The fraud is breathtakingly easy to understand once past a small amount of jargon. Indeed, the simplicity of the fraud is the greatest threat to the perpetrators because here at last is a fraud that is easy for juries to understand and for prosecutors to prove.
LIBOR is the interest rate at which top-tier banks in London offer to lend to each other on an unsecured basis. The loans are usually short term, typically a day, a week, or several months. Historically the banks in the LIBOR market were among the strongest credits in the world and this type of lending was considered extremely low risk. As a result, LIBOR was among the lowest interest rates available in the market. Other interest rates including corporate loans were benchmarked to LIBOR and expressed as a spread, such as LIBOR plus 1 percent. LIBOR became the base rate used in calculating a vast number of other products and transactions.
LIBOR is set by a committee of banks sending their estimates of the rate at which they could borrow to a trade association. The banks on the committee are among the largest in the world including J.P. Morgan, Citibank, and Bank of America. The trade association would discard the highest and lowest rates and average the rest to arrive at the official LIBOR. This would then be published on financial news services. Payments due under LIBOR transactions would be calculated using that published rate.
We now know that some of the banks on the committee lied about the rates for a period of six years from 2005 to 2010, perhaps longer. The lies had two purposes. The first was to make money for the bank by lowering what it had to pay on LIBOR-based contracts. This is a kind of direct theft from customers. The second reason involved hiding the fact that some banks were being asked to pay high rates during the Panic of 2008. This is considered a sign of distress. By lowering the reported rate, the banks were made to appear healthier than they were and committed a fraud on the market as a whole.
We also know that regulators acted as aiders and abettors of the fraud by ignoring clear signs, including admissions by the banks themselves, that the rates were rigged. Regulators passed vague proposals back and forth about the need to improve practices instead of calling law enforcement agencies to investigate and prosecute the crimes.
One might expect that the scandal will follow the familiar pattern of bogus bank contrition, slaps on the wrist, large but not life-threatening fines, and pious promises not to do it again soon to be ignored. In short, it's just another scandal.
But this time it's different and here's why: The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers. Cutting that amount in half to allow for the fact that some customers benefited from the fraud while others lost still gives implied damages of $1.5 trillion, greater than the combined capital of all of the too-big-too-fail banks in the United States. Taken to the full extent of the law, these damages are enough to render a large segment of the global banking system insolvent. These damages will be pursued not by regulators, but in private lawsuits by class action lawyers.
Bank defendants in cases like this typically ask a judge to dismiss the case because the claims are too vague. However, the facts in this case have already been made plain by Barclays, which is the one large bank to settle its case with the regulators. Once the plaintiffs get past the motion to dismiss, they begin discovery, which gives the class action lawyers access to internal E-mails, tape recordings, depositions, and other books and records of the perpetrator banks. Based on small glimpses of the doings at Barclays, the communications of the other major bank LIBOR trading desks could be shocking.
This kind of private legal process takes years to play out. In the meantime, some arrests and criminal charges by the government seem likely. In the end, legislatures may have to intervene to limit total damages to avoid the destruction of the too-big-too-fail banks. In this sense, the LIBOR litigation may come to resemble the tobacco litigation where the big tobacco companies embraced a government-backed deal with damages of over $200 billion to avoid eventual bankruptcy in the face of state and private lawsuits.
Of course, the insolvency of a major bank in the face of LIBOR rate rigging charges cannot be ruled out. In that case, good riddance. The big banks have perpetrated a crime wave longer than that of Bonnie and Clyde. If it has taken the law this long to catch up with them, it's better late than never.
LIBOR crime is not Anti-Trust or RICO??????? REALLY???????
The Racketeering Influenced and Corrupt Organizations (RICO) Act
is a group of federal laws passed by the United States Congress in 1970 to deal with organized racketeering activity. RICO law is specifically directed at individuals or organizations involved in systematic, long-term illegal activities. It increases criminal penalties and allows civil claims to be pursued by injured parties against individuals, businesses or groups for actions taken as part of a criminal organization. An individual can be charged with racketeering under RICO statutes if, within a 10-year time frame as part of a criminal enterprise, he or she commits two crimes from a list of 35 detailed in the act.
Of the 35 crimes that form the body of RICO law, eight are state crimes and 27 are federal. Bribery, gambling, murder, arson, extortion, prostitution, counterfeiting, drug dealing, acts of terrorism and kidnapping are among the 35 crimes. It also is possible to prosecute white-collar crimes under RICO law. Embezzlement and obstruction of justice appear on the list, as do mail, wire, bankruptcy and securities fraud.
Ad The RICO Act originally was legislated to prosecute the Mafia and others involved in organized crime, but over time, the definition of what constitutes racketeering activity has expanded. Consequently, the application of RICO law has broadened to include a variety of individuals, organizations and activities. Among other enterprises, RICO law has been applied to drug cartels, street gangs, corrupt police departments, political parties, protest groups, terrorist organizations, corporations, managed care companies, bankers and insurance and securities firms.
Both criminal and civil punishments exist for violations of RICO law. A convicted defendant may be sentenced to as much as 20 years in prison for each racketeering count and/or fined up to $250,000 US Dollars. In addition, the defendant forfeits all rights over the enterprise and any gains derived from the racketeering activity. Defendants also may be sued in civil court, where a plaintiff may be awarded as much as three times the amount he or she lost. The intent of the many punishments and penalties is to completely cripple and eliminate the organized criminal enterprise involved.
Legislation equivalent to RICO law is found in countries other than the United States. Australia, Canada and New Zealand have similar legislation and regulations. The International Criminal Police Organization (Interpol) has developed a standardized definition for RICO-like crimes. In spite of this, the implementation and enforcement of RICO legislation varies widely around the world. Generally, most countries cooperate with the United States in the prosecution of RICO crimes only when their own laws have been broken.