120715, Libor: The Crime of the Century
Libor: The Crime of the Century, corruption like we’ve never seen it before
Robert Scheer, July 6, 2012 (in: The Nation)
Forget Bernie Madoff and Enron’s Ken Lay—they were mere amateurs in financial crime. The current Libor interest rate scandal, involving hundreds of trillions in international derivatives trade, shows how the really big boys play. And these guys will most likely not do the time because their kind rewrites the law before committing the crime.
Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined. The scandal over Libor—short for London interbank offered rate—has resulted in a huge fine for Barclays Bank and threatens to ensnare some of the world’s top financers. It reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.
How to explain a $450 million settlement for one bank whose defense, in a plea bargain worked out with regulators in London and Washington, is that every institution in their elite financial circle was doing it? Not just Barclays but JPMorgan Chase, Citigroup and others are now being investigated on suspicion of manipulating the Libor rate, so critical to a $700 trillion derivatives market.
Caught as the proverbial deer in the headlights, Barclays Chairman Robert E. Diamond Jr. resigned this week and offered a plaintive defense to the British Parliament that he learned only recently that his bank was manipulating the index on which so large a part of international trade is based. That is plausible only if we assume he was paid $10 million a year to be deliberately ignorant. The Wall Street Journal had exposed this scandal fully four years ago but his bank continued to participate in it nonetheless.
“Study Casts Doubt on Key Rate” was the headline on the May 29, 2008, investigative report, which concluded: “Major banks are contributing to the erratic behavior of a crucial global lending benchmark, a Wall Street Journal analysis shows.” Even then, according to the report, it was known that the Libor rate was being manipulated “to act as if the banking system was doing better than it was at critical junctures in the financial crisis.”
Fast-forward four years to Diamond’s testimony before Parliament this week in which the CEO claimed his recent discovery of a pattern of interest manipulation by Barclays had made him “physically sick.” Who was to blame? According to the executive, subordinates acting behind his back.
The American-born banker, who has dual citizenship in the United States and Britain, is well versed in financial chicanery, having started by putting together derivatives packages at Credit Suisse First Boston back in 1996. He was compelled under parliamentary questioning Wednesday to admit that “I can’t sit here and say no one in the industry [knew] about the problems with Libor. There was an issue out there and it should have been dealt with more broadly.”
He couldn’t deny widespread chicanery within his bank because, as in the collapse of Enron a decade ago, investigators had uncovered an e-mail record of market manipulation so glaring that if the top executives were unaware, it was because they didn’t want to know.
As the New York Times editorialized: “The evidence, cited by the Justice Department—which Barclays agreed is ‘true and accurate’—is damning. ‘Always happy to help,’ one employee wrote in an email after being asked to submit false information. ‘If you know how to keep a secret, I’ll bring you in on it,’ wrote a Barclays trader to a trader at another bank, referring to their strategies for mutual gain. If that’s not conspiracy and price-fixing, what is?”
The US Justice Department made a deal with Barclays, and although it may prosecute some individuals in the scam, it agreed not to go after the bank itself. “Such an agreement makes sense only if that cooperation will allow prosecutors to nail other banks that have been involved in setting the rates, including potential cases against Citigroup, JPMorgan Chase and HSBC,” the Times editorial said.
Both Citigroup and JPMorgan Chase were reported by the Wall Street Journal years ago to be suspected of rigging the Libor interest rate. The leaders of those banks, despite such media exposure, clearly remained confident enough to continue on their merry way.
The sad reality is that they will probably get away with it. The world of high finance is by design as obscure and opaque as the bankers and their political surrogates can make it, and even this most recent crack in their defense of deception will soon be made to go away.
Robert Scheer is the author of
The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).
In The Great American Stickup, celebrated journalist Robert Scheer uncovers the hidden story behind one of the greatest financial crimes of our time: the Wall Street financial crash of 2008 and the consequent global recession. Instead of going where other journalists have gone in search of this story—the board rooms and trading floors of the big Wall Street firms—Scheer goes back to Washington, D.C., a veritable crime scene, beginning in the 1980s, where the captains of the finance industry, their lobbyists and allies among leading politicians destroyed an American regulatory system that had been functioning effectively since the era of the New Deal.
This is a story largely forgotten or overlooked by the mainstream media, who wasted more than two decades with their boosterish coverage of Wall Street. Scheer argues that the roots of the disaster go back to the free-market propaganda of the Reagan years and, most damagingly, to the bipartisan deregulation of the banking industry undertaken with the full support of “progressive” Bill Clinton.
In fact, if this debacle has a name, Scheer suggests, it is the “Clinton Bubble,” that era when the administration let its friends on Wall Street write legislation that razed decades of robust financial regulation. It was Wall Street and Democratic Party darling Robert Rubin along with his clique of economist super-friends—Alan Greenspan, Lawrence Summers, and a few others—who inflated a giant real estate bubble by purposely not regulating the derivatives market, resulting in the pain and hardship millions are experiencing now.
The Great American Stickup is both a brilliant telling of the story of the Clinton financial clique and the havoc it wrought—informed by whistleblowers such as Brooksley Born, who goes on the record for Scheer—and an unsparing anatomy of the American business and political class. It is also a cautionary tale: those who form the nucleus of the Clinton clique are now advising the Obama administration.
A muckraking exposé of the bipartisan origins of our greatest financial scandal
In The Great American Stick-Up, long-time Los Angeles Times columnist and Truthdig Editor-in-Chief Robert Scheer has a controversial thesis: the great financial meltdown, the crash widely regarded as the result of extraordinary circumstances, is, at its heart, an old-fashioned swindle. The architects of our financial calamity knew what they were doing, and now they are the figures anointed with the task of repairing the damage by the Obama administration.
The Great American Stick-Up exposes the bipartisan group who have played a formative role in shaping the financial collapse, yet still remain below the media radar for the part they played. They are the ultra-power couple of Phil and Wendy Gramm, whose roles in the private sector and government have pushed for the wholesale deregulation of the banking sector for two decades; two former leaders of Goldman Sachs, Robert Rubin and Henry Paulson; and former Treasury Secretary Lawrence Summers. These figures paved the way for the great banking meltdown of 2008.
The story of this group provides a vivid framework to understand the web of moneyed influence that threatens America’s future. It shows that the events of the previous year could have been anticipated, and that there are culprits responsible who continue to wield enormous power over our lives.
About the Author
Robert Scheer is the editor of TruthDig (www.truthdig.com). He was a national correspondent and columnist for the Los Angeles Times. His last book is entitled The Pornography of Power. Scheer lives in Los Angeles.
A veteran reporter with exclusive access to whistleblowers, Scheer reveals how Ronald Reagan, Bill Clinton, Larry Summers, Robert Rubin, Phil Gramm, and others colluded in the fundamental corruption of our economic system. The shocking twist is that the prelude to the meltdown was not due to astonishing misuses of power—but rather the clandestine business of business as usual—and these are the figures still in charge of our financial destiny.
What Our Readers Are Saying
flyfisher, August 12, 2010
My first disappointment in Pres. Obama was when he chose Timothy Geithner for Sec. of the Treasury and Larry Summers as an economic advisor as both of these guys were Wall Street insiders. I have found it fascinating (and appalling) that it took less than 10 years after deregulation of the financial industry and the repeal of the Glass Stegal Act, which grew out of the “Great Depression”, for Wall Street and the banking industry to run us over a cliff, yet again. The laws that were in place were created to protect the citizenry and they worked well on our behalf for almost 70 years.
Our constitution says “By the people, for the people”, not by the corporation, for the corporation. If “we, the people”, don’t find the will and a way, to turn things around, what is left of the middle class will be gone and we will all be indentured servants to the Mega Multinational corporations. We are almost there now.
I, personally, voted for Mr. Obama because I desperately wanted “change that we can (could) believe in” All I am seeing is more of the same, caving in to big monied interests at our expense, at every turn.
A couple of other good books that touch on these subjects are “Thieves in the Temple” by Andrew Eggleston, and “Unequal Protection: The Rise of Corporate Dominance and Theft of Human Rights in America” by Thom Hartman.
I really do not understand why we seem to be so pacified while more of our meager wealth and certainly our civil liberties are being taken without a fight. I now feel again, as I have felt in past years, that I, as an individual and a citizen, have no representation in Washington D.C.
bselig1, August 6, 2010
Great title. How true it is. Sadly, it’s destroying our country. Until there are term-limits for Congress it will continue this way. They have to spend too much time obtaining money to run for office there is little time for work and caring about anything else but their “ego-centric” self. It is not their fault entirely- it’s our system that creates it by our Representatives having to be campaigning all the time. This includes the President, who is constantly having to be on the road for other candidates in his/her party . “Show me the Money” is the name of the game and the players are the Bankers and Large Corporations who supply what they need quickly, which also leads to unholy self-serving friendships ie: “It’s just business”. Who you know is what counts. Not a shocker for me.