Libor, UK banks and the Tory connections

[Count Bobulescu]

Geithner knew, and recommended changes for LIBOR to BOE in 2008.

While president of the Federal Reserve Bank of New York, Timothy F. Geithner pressed British regulators to reform the way it calculated a critical global benchmark called the London interbank offered rate, or Libor, according to a June 1, 2008 e-mail obtained by The Washington Post.

Writing to the head of the Bank of England, among others, Geithner made six recommendations, which included eliminating incentives that could encourage banks to manipulate the rate and to establish a “credible reporting procedure.”

“We would welcome a chance to discuss these and would be grateful if you would give us some sense of what changes are possible,” Geithner wrote.

http://www.washingtonpost.com/busine...y.html?hpid=z2

[barrym]

re Geithner -

Any thoughts on why nothing (appears to have) happened? Maybe he was persuaded that US banks could make money too??

I have referred elsewhere to a documentary - Inside Job - shows how Geithner was in the pocket of the banks, he was boss of the NY Fed when Lehmann went belly up....

[Count Bobulescu]

AS REGULATORS ramp up their global investigation into the manipulation of interest rates, the US Justice Department has identified potential criminal wrongdoing by big banks and individuals at the centre of the scandal.
The department's criminal division is building cases against several financial institutions and their employees, including traders at Barclays, according to government officials who spoke on the condition of anonymity because the investigation is continuing.
The authorities expected to file charges against at least one bank later this year, one official said.

Read more: http://www.smh.com.au/business/us-bu...#ixzz20i2ai0AP

[Ephilant]

Have these guys not read the script? Bankers don't get charged, they get bonuses...

[DCon]

Reuters have hired the man responsible for LIBOR at the BBA

There was a time when regulators caught red-handed abusing their privileges, aka, doing nothing in the face of glaring malfeasance, would quietly fade away only to even more quietly reappear, sans press release, as a third general counsel or some other C-grade menial role paying a minimum 6 figure compensation to the individual for years of doing nothing. This is no longer the case: it appears that the best such exposed "regulators" can hope for going forward is to get media positions. Such is the case with John Ewan. Who is John Ewan? None other than the director "responsible for the management of the setting of Libor" at the British Bankers' Association.

In other words, once the regulators are done with the BBA, a brief inquiry into Reuters may be next, which on top of being an instrumental part of the daily Libor fixing dissemination process, has just hired one of the most contentuous former BBA employees. This promises to be very amusing because if nothing else, the media turning on itself always yields the most theatric results. Naturally by hiring Ewan, Reuters is essentially inviting attacks on its own set of Libor-practices.

http://www.zerohedge.com/news/mr-lib...n-goes-reuters

[Count Bobulescu]

GEITHNER FACES LIBOR INTERROGATION. Treasury Secretary Timothy Geithner has emerged at the center of congressional inquiry into whether the Federal Reserve Bank of New York appropriately handled its detection that banks were rigging Libor, a benchmark interest rate, when he was running the agency in 2007. He faces a hostile Congress at back-to-back hearings before the House Financial Services and Senate Banking committees on Wednesday and Thursday respectively, which could be personally damaging and have ricocheting effects on the Obama administration. Republicans see a chance to blame a key Obama administration official for failing to hold the financial industry accountable while scoring populist points for being seen as going after the big banks. Read more

http://influencealley.nationaljourna...-take-a-be.php

[MPB]

I see were Tomothy Geithner is admitting that he knew about the risk to libor rate interference in 2008.

[DCon]

Will the UK sue itself I wonder?

Now, it is becoming clear that traders from at least two other banks - UK-based Royal Bank of Scotland and Switzerland's UBS - played a central role.

Among them, the three banks employed more than a dozen traders who sought to influence rates in either dollar, euro or yen rates.

http://www.irishtimes.com/newspaper/...reaking12.html

The UK Government became the majority shareholder of RBS in November 2008 and now own 67% of ordinary shares.

http://www.investors.rbs.com/equity_statistics

[DCon]

Will the UK sue itself I wonder?

Now, it is becoming clear that traders from at least two other banks - UK-based Royal Bank of Scotland and Switzerland's UBS - played a central role.

Among them, the three banks employed more than a dozen traders who sought to influence rates in either dollar, euro or yen rates.

http://www.irishtimes.com/newspaper/...reaking12.html

The UK Government became the majority shareholder of RBS in November 2008 and now own 67% of ordinary shares.

http://www.investors.rbs.com/equity_statistics

[Count Bobulescu]

The trickle of Libor lawsuits is about to become a deluge. “Lawsuits are mounting against some of the world's biggest banks over the ma-nipu-la-tion of the global interest rate known as Libor as smaller lenders, municipalities and investors take stock of losses tied to the widening scandal. The cases are believed to be a trickle before an oncoming deluge of civil litigation that will beset the world's largest banks for years. Yet the ultimate problem for the accused may not be the millions they pay in damages but rather the cloud of uncertainty looming over their business. Already there is talk of the government stepping in to oversee a global settlement, just as it did in the mortgage robo-signing scandal. But it took years for regulators to reach a nationwide mortgage settlement. And that settlement involved the cooperation only of states, not countries, which means the banking industry could be mired in legal action for a while.” Danielle Douglas in The Washington Post.

http://www.washingtonpost.com/busine...wpisrc=nl_wonk

A UK review of Libor will consider scrapping the current system. “Libor, the London Interbank Offered Rate, could be scrapped altogether and replaced with an interest rate that is set using actual trades, according to a review set up by the UK government. Ministers on Monday announced the remit for Martin Wheatley to investigate the Libor benchmark rate, which has been heavily criticised after it emerged that Barclays and several other leading banks manipulated it…The terms of reference for the Wheatley review include considering whether the rate should be set based on transactions made by traders, rather than the estimate of the rate at which their banks are borrowing at any given time.” Kiran Stacey and Caroline Binham in The Financial Times. Behind paywall.

[C. Flower]

GEITHNER FACES LIBOR INTERROGATION. Treasury Secretary Timothy Geithner has emerged at the center of congressional inquiry into whether the Federal Reserve Bank of New York appropriately handled its detection that banks were rigging Libor, a benchmark interest rate, when he was running the agency in 2007. He faces a hostile Congress at back-to-back hearings before the House Financial Services and Senate Banking committees on Wednesday and Thursday respectively, which could be personally damaging and have ricocheting effects on the Obama administration. Republicans see a chance to blame a key Obama administration official for failing to hold the financial industry accountable while scoring populist points for being seen as going after the big banks. Read more

http://influencealley.nationaljourna...-take-a-be.php

Nice user-friendly reporting here on why the Libor interest rates fixing matters - and that many trillions are involved.

http://finance.yahoo.com/blogs/daily...131709068.html

[rebellin]

Geithner Helped Write the Rules for LIBOR

E-mails released by the Bank of England confirm that the Bank and the New York Fed—then headed by Tim Geithner—were very much involved in the cosmetic revision of the LIBOR rules enacted by the British Bankers Association (BBA) in December 2008. So much so, in fact, that they ordered that their fingerprints be erased before publication!

Referring to the BBA’s proposal on July 2, 2008, Bank of England Governor Mervyn King states: “I am broadly content with the approach described here.” He asked to be kept informed of future discussion on the subject. This statement was handwritten on a copy of the BBA proposal dated June 26, 2008.

A message on June 4, 2008, from Michael Cross, private secretary to Mervyn King, states: “I spoke to Bill Dudley of the Fed this afternoon. They are broadly content with the draft in that it addresses the specific points made in President Geithner’s memo.” In the same memo, Cross notes that “we might want to have direct and indirect references to the Bank (and the Fed) removed” from the BBA proposal. In an e-mail later that day, Cross says that King “agrees the BoE references should be removed, and replaced with ‘all interested parties.’” In an e-mail two days later to the BBA, Cross states: “Thank you also for removing the references to the Bank of England,” and suggests two minor changes to the wording of the proposal to further distance the central banks.

These e-mails clearly show the collusion between the Bank of England and Tim Geithner’s New York Fed, on the LIBOR scam. The language is politically correct, but their actions give them away. The deed’s the thing that catches this King, and Geithner as well.

Elements of this story were reported by the Independent July 21 (“Bank of England and U.S. regulators approved inadequate Libor rules”) and the Guardian (“Libor-fixing problems known at height of financial crisis”).

http://laroucheirishbrigade.wordpres...les-for-libor/

[DCon]

Banks are being helpful in the hope they will be punished less

Several banks under investigation for suspected rigging of euro interest rates are cooperating with EU antitrust regulators in the hope of lower fines, two people familiar with the matter said on Monday, a move which puts the lenders at a higher risk of lawsuits.

The decision by the banks to disclose more about their knowledge of possible manipulation of the Euro Interbank Offered Rate (Euribor) is effectively an admission of wrongdoing and illustrates growing nervousness that they face a heavy penalty.

http://www.reuters.com/article/2012/...8IU92P20120730

[Count Bobulescu]

Bye bye Libor, hello Blibor.

-

Daniel L. Doctoroff, CEO and president of Bloomberg LP, has an opinion piece in today's Wall Street Journal, "A Market Alternative to Libor: How the private sector can build a more accurate, transparent and impartial interest-rate benchmark ": "We know the preferred attributes: accuracy, transparency, impartiality and data-based objectivity. The questions are how these goals can be realized: What would the inputs be, and which institutions would be surveyed? Answering those questions will take technical and logistical expertise, as well as a significant investment by the manager of the new index. Bloomberg is researching various solutions to meet this market challenge. The company's prescription-let's call it 'Blibor,' the Bloomberg interbank offered rate-isn't revolutionary. It simply applies the principles of data-based analysis and transparency. ...

"[The] proposed Blibor will achieve accuracy and independence without recourse to potentially stultifying government regulations. Libor is a creature of the private sector, and we feel it is incumbent on the private sector to provide its alternative. That is why Bloomberg is offering to carry out this work on a pro bono basis. We are willing to work with the interested parties-the British Bankers' Association, the Bank of England and others-to implement a method of determining interbank lending rates in which market participants can have faith, and which is based on realities more than assumptions."

[DCon]

Another UK bank caught in a scandal (non LIBOR related)

The market value of Standard Chartered Plc tumbled as much as $17 billion on Tuesday after New York's bank regulator threatened to tear up its state banking license for allegedly hiding $250 billion in transactions tied to Iran.

The New York State Department of Financial Services (DFS) slammed the London-based but Asia-focused bank as a "rogue institution" that "schemed" with the Iranian government, which is subject to U.S. sanctions over its nuclear program, and hid 60,000 secret transactions to generate hundreds of millions of dollars in fees over nearly 10 years.

In October 2006, the top official for business in the Americas, whom the regulator did not name, warned in a "panicked message" that the Iranian dealings could cause "catastrophic reputational damage" and "serious criminal liability".

A group executive director in London shot back, according to a New York branch officer: "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."

The reply showed "obvious contempt for U.S. banking regulations", the regulator said.

http://www.reuters.com/article/2012/...8750VM20120807