Read the Beforeitsnews.com story here. Advertise at Before It's News here.

By Intercept
Contributor profile | More stories

Story Views
Now:
Last hour:
Last 24 hours:
Total:

Why is Nobody Freaking Out About the LIBOR Banking Scandal?

Wednesday, July 18, 2012 5:05

% of readers think this story is Fact. Add your two cents.

Rolling Stone
Matt Taibbi

The LIBOR manipulation story has exploded into a major scandal overseas. The CEO of Barclays, Bob Diamond, has resigned in disgrace; his was the first of what will undoubtedly be many major banks to walk the regulatory plank for fixing the interbank exchange rate. The Labor party is demanding a sweeping criminal investigation. Mervyn King, Governor of the Bank of England, responded the way a real public official should (i.e. not like Ben Bernanke), blasting the banks:

It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.

The furor is over revelations that Barclays, the Royal Bank of Scotland, and other banks were monkeying with at least $10 trillion in loans (The Wall Street Journal is calculating that that LIBOR affects $800 trillion worth of contracts).

The banks gamed LIBOR for two semi-overlapping reasons. As noted here last week, there were instances of Barclays traders badgering the LIBOR submitters to “push down” rates in order to fatten their immediate bottom lines, depending on what they were trading or holding that day. They also apparently rigged LIBOR downward in order to produce a general appearance of better health, essentially tweaking their credit scores a few ticks upward.

Most intriguingly, or perhaps disturbingly, there were revelations last week that Bank of England deputy Governor Paul Tucker had a conversation with Diamond at the peak of the crisis in 2008. The conversation reportedly left Diamond, and subsequently his traders, with the impression that the bank had carte blanche to rig LIBOR downward in order to help allay spiraling public fears about the banks’ poor financial health.

British officials, and Tucker individually, deny that Tucker gave Diamond permission to rig rates. But a report by British regulators did conclude that the two were talking about Barclays LIBOR submissions on October 29, 2008, and that as a result of that conversation, Diamond came away with a “misunderstanding.” The Daily Mail quotes the Financial Services Authority report:

However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred.

This meant that Barclays’ submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays’ Libor submissions.

That is explosive stuff. Members of Parliament will be grilling Tucker tomorrow about those events in what is sure to be a far more combative and entertaining legislative inquiry than the Jamie Dimon dog-and-pony show we just went through here in the states in recent weeks.

The implications of that part of the story should be particularly chilling to Americans, who in recent years have been party to a number of revelations about strange and seemingly inappropriate contacts between senior regulatory officials and big bankers during the heat of the crisis.

We know that American officials in 2008-2009 were extremely concerned about the appearance of weakness in the financial markets, so much so that they may have resisted pursuing criminal prosecutions against big banks, and we also know that they spent a lot of time commiserating with Wall Street figures before and during the crisis.

If Bob Diamond and Paul Tucker were having these talks about LIBOR, is it fair to wonder what else Hank Paulson and Lloyd Blankfein were talking about in the 24 discussions they had in the six days following the AIG disaster? When Paulson had a secret meeting with the entire board of Goldman Sachs in, of all places, his hotel suite in Moscow, in June of 2008? Or what other material nonpublic information was exchanged when Paulson met with a gang of hedge fund chiefs at the offices of Eton Park management in July 2008, and laid out for them a possible scenario for putting Fannie and Freddie into receivership?

Anyway, the LIBOR story is leading the front pages of most of Britain’s dailies, it’s on TV, and it’s producing blistering editorials and howls of outrage amongst politicians and activists. But as compadre Yves Smith at Naked Capitalism put it, where’s the outrage here in America?

The big story on our shores in the last few weeks has been the health care ruling, which makes sense, but then after that… what? The heat? Tom and Katie? (There’s actually a story about how Katie can wear heels again, now that she’s not married to a short person). Joe Sandusky? Nightline’s big story tonight, which is already being hyped on the net, is about how fat Chris Christie is and why the hell he hasn’t done the bypass surgery yet:

New Jersey Gov. Chris Christie opened up about his weight problem in an interview with ABC News and stressed he is “trying” to lose weight, a battle he’s waged for 30 years, but said he’s never considered gastric bypass surgery because it’s “too risky.”

“I mean, see, listen, I think there’s a fundamental misunderstanding among people regarding weight and regarding all those things that go into, to people being overweight,” Christie said in an interview that will air Tuesday on “Nightline.”

Glad to be informed! The New York Times, meanwhile, did chime in with a house editorial yesterday, and it was appropriately somber. And there has been some coverage in the financial press.

But to me what’s missing from all of this is the “Holy Fucking Shit!” factor. This story is so outrageous that it shocks even the most cynical Wall Street observers. I have a friend who works on Wall Street who for years has been trolling through the stream of financial corruption stories with bemusement, darkly enjoying the spectacle as though the whole post-crisis news arc has been like one long, beautifully-acted, intensely believable sequel to Goodfellas. But even he is just stunned to the point of near-speechlessness by the LIBOR thing. “It’s like finding out that the whole world is on quicksand,” he says.

So as far as the stateside press goes, I’ve got to assume the cavalry is coming soon. But when?

Help Us Transmit This Story

Add to Your Blogger Account

Put it On Facebook

Tweet this post

Print it from your printer

Email and a collection of other outlets

Try even more services

The
Intercept is a collection and transmission of data that offers
substantive contradictions, challenges and enlightenment over the
conventional drivel brought to us by corporate media.

Comments

Total 10 comments

Maggie

No offense anyone, but if the LIBOR scandal does not seep through your consciousness as an outrageous criminal act that will have an impact on YOU, then consider yourselves brain washed by the crap you expose yourselves to on the evening ‘news’.

Jul 18, 2012, 3:15 am 0 Reply
anyoneamongUS

i’m afraid we’re already so brainwashed that it’s going to take a disaster of BIBLICAL PROPORTION to shake us back into reality

Jul 18, 2012, 4:47 am 0 Reply
Anonymous

Most people have never heard of Libor, which is why they’re not ‘freaking out’. Moreover, people care about sports and entertainments, not freedom and justice. Gurdjieff explained that knowledge is like gold: if it is spread too thinly, it wears away and becomes lost. Most people reject knowledge, allowing the rest to obtain a good amount.

Jul 18, 2012, 8:30 am 0 Reply
Pix

Ever seen a rabit freeze because it’s been caught in your headlights. That’s why nobody is reacting. Gobsmacked I think is the right description.

Jul 18, 2012, 8:42 am 0 Reply
Quantum Kev

To antodd2 – you NAILED it. Until something truly Biblical happens, something that directly affects every single person living in the US, nothing, and I mean NOTHING is going to happen or change. People are just completely apathetic and hypnotized and unless it directly affects them, they just don’t care.

Jul 18, 2012, 9:08 am 0 Reply
Anonymous

I think everybody is just too use to banks being crooks any more. Its just accepted by the sheeple. We’re just too lazy and greedy of a culture to care about things any more. It happens in declining civilizations.

Jul 18, 2012, 9:26 am 0 Reply
Here We Go

Because their T.V. didn’t tell them be mad.

Jul 18, 2012, 10:47 am 0 Reply
hostile177

Just scandal weary.

Jul 18, 2012, 11:56 am 0 Reply
Maggie

@ Anonymous on Wed Jul 18 12:26 – “I think everybody is just too use to banks being crooks any more.”

I think that is a good part of it. We are exposed to revelations of corruption on every turn that we are have become used to it. The outrage first felt and expressed when these scandals began to surface did not change anything. The magnitude of corruption that appears to have become the ‘norm’ in politics, banking and corporations is just outrageous. Maybe we simply shut-down because we have no viable way to bring well connected and funded white collar criminals to justice?

Jul 19, 2012, 3:21 am 0 Reply
Anonymous

hi

Jul 20, 2012, 8:10 am 0 Reply

Online:
Visits:	1,607,172,354
Stories:	8,161,192