Barclay's LIBOR manipulation

John_Pierpoint

There are some interesting precedents, turned up by the BBC, as a warning:

Once upon a time there was a country, where the government thought it could stay rich by fiddling about with the currency, while fighting a war.

It also had a powerful of group of religious leaders who did not realise that interest is the rent for using some one else's money. Similar to renting some one else's land.

However it was a period when depression should have been flipping over into pay rises for the working masses; but the state was squandering the wealth, and trying to tax the "Got no money, can't pay won't pay" married women; while the financiers were fiddling the rules.

In modern terms the brashest banker was packed off to an open prison, where he lived in some style, receiving visits from a stream of acolytes.

However eventually the eastern home counties lost patience and "tax payers for action" hacked the heads off high profile financiers and tax legislators.

Time to beef up security and move to a castle?

It is all explained here:
http://www.bbc.co.uk/programmes/b01ks2yc
Jonathan Freedland is joined by Nick Leeson, the rogue trader who brought down Barings Bank; former Deputy Governor of the Bank of England, Sir John Gieve; financial historian Adrian Bell, John Coggan of the Economist and Performance poet, Attila the Stockbroker.

Those who fail to learn from history are due to repeat it.

There were five main reasons for these mass uprisings including 1) an increasing gap between the wealthy and poor, 2) declining incomes of the poor, 3) rising inflation and taxation, 4) the external crises of famine, plague and war, and 5) religious backlashes.

http://en.wikipedia.org/wiki/Peasants%27_Revolt

Generali

An interesting solution has been mooted and published in the ever excellent FT Alphaville to keep the reporters of LIBOR honest.

The bank reporting the highest figure for LIBOR should be required to borrow a sum of money at that rate from the Bank of England (e.g. £1,000,000,000). That would be financed by the BoE borrowing the same sum of money from the bank reporting the lowest figure for LIBOR.

The profit could be used to offset the losses to the taxpayer from subsidising insolvent banks and the cost of having to have countless inquiries into banks behaving badly.

If they make enough money they could even build a prison to stick the worst bankers in. I can't think of anything worse than being stuck in a prison full of traders and bank directors.

While we're on the subject of financial shenanigans: Ducks Folly.

John_Pierpoint

Ah the Lloyds "spiral" - I remember thinking "this sounds very dodgy to me", when someone "doing very nicely" in the Lloyds Market explained that the trick was to grab the business and lay off the risk with the other groups operating in the Lloyds market.
Just as with complicated financial instruments, when the music stopped and every one had to sit still while an independent referee unwrapped the whole parcel, some syndicates discovered they had bought back their own dodgy deals several times in the spiral of packaging up the risk and selling it on.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/4613377/Lloyds-of-Londons-collapse-has-lessons-for-todays-crisis.html

worldtraveller

A group of banks being investigated in an interest-rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks’ thinking said.

Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.

It is unclear which banks are involved in the potential settlement talks. More than a dozen banks are being investigated in the scandal, including Citigroup, HSBC, Deutsche Bank and JPMorgan Chase. They all declined to comment.

Reuters

This would probably make a lot of sense for the banks involved, but you can certainly hear the general public screaming "scam", "collusion", "snouts in trough", "all in it together", etc. if it happens. However, this is surely only part of other massive potential liabilities from claims by other financial institutions, individuals, hedge funds, pension funds, etc., but you have to wonder what provisions/reserves, if any, that these banks have put aside for these potential liabilities.

michaels

Hmm - I wonder if it is also about an attempt to stay out of jail in the US!

Generali

These settlements are absolutely wrong. They should be investigated and face whatever criminal sanctions are required under the law.

Lloyds and RBS are basically owned by the Government so any losses are being guaranteed by you. Both banks are on the Sterling Libor Panel (link).

In effect your taxes would be used to pay off prosecutors employed by you not to prosecute people that you want to see brought to book!

Graham_Devon

You really couldn't make it up...

The British Bankers' Association was given weekly warnings in 2008 that the process of setting the Libor interest rates was being distorted.

A former member of the Libor compilation team at Thomson Reuters says it regularly warned senior BBA staff about the problem.

Its reports regularly highlighted the implausible rate submissions of several banks involved in the Libor process.

The BBA denied these had amounted to warnings of wrong-doing.

http://www.bbc.co.uk/news/business-18930191

ILW

Not sure, but it does appear that there is no UK law against influencing libor rates, as they are not an "official" figure but only an opinion at a moment in time.

purch

ILW wrote: »

Not sure, but it does appear that there is no UK law against influencing libor rates, as they are not an "official" figure but only an opinion at a moment in time.

LIBOR itself is not official in any way.

The fact that people/organisations have chosen to use it as an "official" benchmark is their choice.

However as it is known to be used as the benchmark to settle transactions, knowingly/deliberately falsifying the rate for profit must be fraudulent under any law.

On the other hand, deliberately entering a false rate in order to make yourself look good would be harder to prosecute I would think.

nicko33

mystic_trev wrote: »

With thanks to my good friend squiffs over at TMF

fake (but funny)
http://www.dailymail.co.uk/debate/article-2169738/Barclays-best-fixed-rates-Going-Viral.html