Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktNew thread for the LIBOR investigation:
Here are some links:
Matt Taibbi:
A Huge Break in the LIBOR Banking Investigation
Another Domino Falls in the LIBOR Banking Scam: Royal Bank of Scotland
Reuters:
Barclays’ gift to private antitrust plaintiffs in Libor case
Bloomberg:
Barclays Big-Boy Breaches Mean Libor Fixes Not Enough
Daily Mail:
“Earlier, Tan Chi Min, a former head of delta trading for RBS’s global banking and markets division in Singapore, alleged that managers at RBS condoned collusion between its staff to set the Libor rate artificially high or low to maximise profits.
He named five staff members he claims made requests for the Libor rate to be altered and three senior managers who he said knew what was going on.
Mr Tan, who was eventually sacked for gross misconduct, worked for RBS from August 2006 to November 2011and alleges that senior members of staff knew about Libor fixing, and that the behaviour started while Fred Goodwin was chief executive”
My overarching question would be at what point do repeated patterns of criminal misconduct from the same organizations cease to be isolated incidents of specific bad actors and instead become a systemic problem with the organization itself?
All Things in Moderation 
jnc:
Thanks for setting up my weekend reading list.
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“A U.S. judge ordered Barclays Plc and the U.S. Justice Department on Thursday to explain if the bank’s $453 million settlement of allegations it manipulated interest rates affects a 2010 settlement in a case involving alleged illegal dealings with banks in countries like Iran and Cuba.
The order came from U.S. District Judge Emmet Sullivan in Washington, D.C., who has been overseeing the separate $298 million settlement by Barclays of claims it violated U.S. trade sanctions. Sullivan gave both sides until July 11 to address his question.
The 2010 deferred prosecution agreement specifies that Barclays could become “subject to prosecution for any federal crimes of which the United States has knowledge.” Those include the alleged illegal transactions Barclays conducted for customers in Cuba, Iran and Sudan from 1995 to 2006.”
Yes Holder really IS Reno/Gonzales incompetent, though not on the same low IQ level.
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Hi, John!
You look like you’ve been getting in bar fights for the last couple of days or something! 😉
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OT
I read the beer can chicken comments earlier this week and while we don’t cook chicken that way, our son does. We only eat chicken once a week or so and usually split it in half and put it on the rotisserie. I won’t eat it unless it’s really well done. I can barely make myself eat it then. Regardless of the TMI segment of this comment I found an interesting beer can post with lots of other ideas for bbq’ing chicken that I thought some of you experts would enjoy. BTW, beer can (butt) chicken isn’t that great from what this guy says but I really couldn’t comment on that.
http://www.huffingtonpost.com/craig-goldwyn/beer-can-chicken_b_1634001.html
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jnc (from Taibbi):
The consequences of this boggle the mind. For instance, almost every city and town in America has investment holding tied to LIBOR. If banks were artificially lowering the rate to beef up their trading profiles, that means communities all over the world were cheated out of ungodly amount of money.
And yet every mortgage in the US is also tied to LIBOR. That means that homebuyers “all over the world” were actually subsidized with ungodly amounts of money!
On the other hand, it is also apparent that not only did Barclays provide artificially low LIBOR submissions, they also at times submitted artificially high submissions. So I guess communities “all over the world” were also being subsidized with ungodly sums while homebuyers were being cheated out of it.
Sigh. As usual Taibbi’s overwrought populist idiocy obscures the real story.
The fact is that so-called main street was just as likely to have benefitted from attempted manipulation as to have suffered from it. Sometimes Barclays tried to manipulate the rate higher, sometimes lower. Investors like high rates, borrowers like low rates. There are no obvious winners or losers here among them.
And note that I have said attempted manipulation. I’ve read several stories about this and I haven’t seen any details about how successful these attempts actually were, or how much the average LIBOR rate was actually moved. Recall, as I explained some time ago, that the daily LIBOR setting is calculated as the average rate reported by a panel of 20 banks, with the highest 4 and lowest 4 being left out of the average. This process actually makes it difficult to significantly move the rate without the active cooperation of most panel members, because if any one or even a few banks move too far in one direction or the other, they get dropped from the average. Now it has been reported that a great number of banks were trying to manipulate the rate, but I have not see any reporting that they were all acting in concert, and it seems likely to me that in large part precisely the opposite was happening.
Again, recall that in the fixed income derivatives market, banks do a huge number of trades with each other in the interbank market, meaning that a lot of the risk to rate sets (exposure to LIBOR settings) that one dealer has will actually be offset by rate sets held by other dealers. In fact, as an aside, swaps brokers have created a very lucrative business setting up monthly “runs” in which everyone in the dealer market submits their upcoming rate set dates and sizes, say for the next 3 months, to the broker, and he will match them off against each other, eliminating the risk at mid-market prices.
Anyway, because of this interbank dealing and offsetting risk, it is likely that when, say, Barclays had huge rate set risk such that it wanted to lower the rate, another bank or banks had risk such that they would want a higher rate. If they were all trying to manipulate the rate marginally in their favor, the effect, again because of the averaging, was likely to be even more marginal, if any at all.
This is not to say that this isn’t a scandal. But it is largely just inside baseball. To frame this in the populist rhetoric of main street yet again getting “cheated” by nasty bankers is wrong, and if Taibbi is as knowledgeable as he portrays himself, he knows it.
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“The fact is that so-called main street was just as likely to have benefitted from attempted manipulation as to have suffered from it. Sometimes Barclays tried to manipulate the rate higher, sometimes lower. Investors like high rates, borrowers like low rates. There are no obvious winners or losers here among them. ”
Yes there is. The obvious winner is Barclays internal trading desk as they were the ones for which the rate was manipulated. I agree that you can’t really characterize the external effects as “screwing everyone else to benefit the banks”, but this system was set up to give the banks internal traders a specific advantage and as such is corrupt (and incidentally illegal).
This goes back to the question to Dimon about the difference between Wall Street and gambling. This sort of thing is clearly designed to give the “house” an edge.
I return to my question from the original post:
“My overarching question would be at what point do repeated patterns of criminal misconduct from the same organizations cease to be isolated incidents of specific bad actors and instead become a systemic problem with the organization itself?”
To my way of thinking, we are well past the time to undertake an antitrust investigation with the end goal of breaking up the largest Wall Street Banks.
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jnc:
Yes there is. The obvious winner is Barclays internal trading desk as they were the ones for which the rate was manipulated.
Well, by “among them” I was referring to main street investors and borrowers that ostensibly frame Taibbi’s outrage. Obviously if Barclays trading desk was able to manipulate it to benefit their book, they would be winners, but at whose expense? Well, for one Barclays mortgage writers if the rate was too low, or Barclays short term funding desk if it was too high, to name a couple. And of course the losers would also be all of Barclays’ interbank counterparties against whom they had all the big sets which drove them to want a lower or higher rate. But naturally if those counterparties were themselves trying to manipulate the rate in their favor, it’s not even clear that Barclays trading desk will have made out as winners at any particular time.
Again, I am not saying this isn’t a scandal. I’m just saying that I haven’t seen any indication 1) that this “attempted” manipulation actually succeeded, 2) that if it did succeed, how much the rate was actually moved in any given instance, 3) who was on the losing end of any successful manipulation. My suspicion is that 1) it was rarely very successful (except, perhaps, during the ’08 crisis), 2) if it was successful, it moved the rate by fractions of a basis point, and 3) any manipulations primarily effected other banks trying to do the same thing.
This sort of thing is clearly designed to give the “house” an edge.
Over who?
To my way of thinking, we are well past the time to undertake an antitrust investigation with the end goal of breaking up the largest Wall Street Banks.
As a libertarian, are you really a fan of antitrust laws?
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Not trying to intrude but here’s a piece you guys might be interested in. It’s about financial journalism and coverage of the various aspects of banking fraud and how it might be changing, for the worse I guess if you’re in the industry.
Yet to read the pained commentary the past couple of days from some of London’s veteran journalists after Barclays agreed to $451 million of fines with U.S. and U.K. regulators, there’s something different in the air. The consistent theme in the British press has been shock, disappointment and betrayal. Here are a few snippets:
From the Financial Times editorial page:
“This newspaper does not endorse banker-bashing for its own sake. But if the bashing is to stop, the banks themselves must change.”
William Wright, columnist for Financial News:
“In more than 15 years of writing about the financial markets, I have regularly tried to defend the industry against often ill-informed banker-bashing. Attacks on bonuses have deliberately inflated the numbers and neglected the fact that pay is coming down faster than it looks. Synthetic outrage from politicians has sought to disguise their own failings. And wilder claims that the banks are uniquely responsible for the crisis ignore the willing role played by everyone from investors and regulators to governments and individuals who were swept up in a collective debt-fueled euphoria.”
“But in this instance, it is impossible to defend the indefensible. This breach too far will have devastating consequences not only for Barclays, but for the rest of the industry and its increasingly eroded relations with regulators and politicians as they rewrite the rules of the global financial system.”
George Parker, Financial Times political editor:
“The anger at Westminster is raw. In what may come to be seen as a defining moment in relations between the British parliament and the City, Barclays’s attempt to rig interest rates has tipped the political mood from resentment to outright contempt.
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“ScottC, on July 1, 2012 at 4:15 am said:
jnc:
Yes there is. The obvious winner is Barclays internal trading desk as they were the ones for which the rate was manipulated.
Well, by “among them” I was referring to main street investors and borrowers that ostensibly frame Taibbi’s outrage. Obviously if Barclays trading desk was able to manipulate it to benefit their book, they would be winners, but at whose expense? ”
Whomever was on the other side on any given day. I.e. one day it could be mortgage holders benefiting and municipalities being disadvantaged as you pointed out and on the next vice versa depending on how the rate was being manipulated at any given time.
“To my way of thinking, we are well past the time to undertake an antitrust investigation with the end goal of breaking up the largest Wall Street Banks.
As a libertarian, are you really a fan of antitrust laws?”
Actually yes. Once corporations get that large, they can successfully execute regulatory capture to errect barriers to entry and other market distorting regulations to enable rent seeking. My main point though is not necessarily to break them up for the crime of just being big, but at this point, the repeated abuses and violations necessitate a response more robust than just fines that are less than one quarter’s profit and another consent decree with the SEC. I believe we’ve crossed the threshold where it’s not just a few bad apples or rogue traders, but a systematic, cultural problem with the organization itself. The two remedies are to break up the larger banks, or dramatically more intrusive regulation turning them in effect into public utilities. I’d prefer the antitrust remedy to micromanagement by regulator.
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“lmsinca, on July 1, 2012 at 7:10 am said:
Not trying to intrude ”
You aren’t intruding. I’m actually interested in your take on this. I suspect that the banks have gotten such a bunker mentality in the past few years that they really don’t appreciate the cumulative effect of scandal after scandal. You can’t argue in favor of the free market and capitalism, and then systematically work to undermine the markets themselves.
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