to the whole deal, showing how bankers
are now, in this regulatory vacuum,
destroying whole countries, because
countries don't dare to get them
under control.
IT’S A SMALL STEP FROM BANKING
CORRUPTION/COLLUSION TO INVASION
OF THE PENCIL NECKS. coming to a
country near you
checkit: Rolling stone
Everything
Is Rigged: The Biggest Price-Fixing Scandal Ever
The
Illuminati were amateurs. The second huge financial scandal of the year reveals
the real international conspiracy: There's no price the big banks can't fix
By
Matt Taibbi
April
25, 2013 1:00 PM ET
Conspiracy
theorists of the world, believers in the hidden hands of the Rothschilds and
the Masons and the Illuminati, we
skeptics owe you an apology. You were right. The players may be a little
different, but your basic premise is correct: The world is a rigged game. We found this out in
recent months, when a series of related corruption stories spilled out of the
financial sector, suggesting the world's largest banks may be fixing the prices
of, well, just about everything.
You
may have heard of the Libor scandal, in which at least three – and perhaps as
many as 16 – of the name-brand too-big-to-fail banks have been manipulating
global interest rates, in the process
messing around with the prices of upward of $500 trillion (that's trillion,
with a "t") worth of financial instruments. When that sprawling
con burst into public view last year, it was easily the biggest financial
scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial
scam in the history of markets."
That
was bad enough, but now Libor may have a twin brother. Word has leaked out that
the London-based firm ICAP, the world's
largest broker of interest-rate swaps, is being investigated by American
authorities for behavior that sounds eerily reminiscent of the Libor mess.
Regulators are looking into whether or not a small group of brokers at ICAP may
have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to
calculate the prices of interest-rate swaps.
Interest-rate
swaps are a tool used by big cities, major corporations and sovereign
governments to manage their debt, and the scale of their use is almost
unimaginably massive. It's about a $379
trillion market, meaning that any manipulation would affect a pile of
assets about 100 times the size of the United States federal budget.
It
should surprise no one that among the players implicated in this scheme to fix
the prices of interest-rate swaps are the
same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and
the Royal Bank of Scotland – that serve on the Libor panel that sets global
interest rates. In fact, in recent years many of these banks have already paid
multimillion-dollar settlements for anti-competitive manipulation of one form
or another (in addition to Libor, some were caught up in an anti-competitive
scheme, detailed in Rolling Stone last year, to rig municipal-debt service
auctions). Though the jumble of financial acronyms sounds like gibberish to the
layperson, the fact that there may now be price-fixing scandals involving both
Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion
and price-fixing hovering under the ostensibly competitive veneer of Wall
Street culture.
The
Scam Wall Street Learned From the Mafia
Why?
Because Libor already affects the prices
of interest-rate swaps, making this a manipulation-on-manipulation situation.
If the allegations prove to be right, that will mean that swap customers have been paying
for two different layers of price-fixing corruption. If you can imagine
paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness
companies colluded to fix the prices of both peanuts and peanut butter, you
come close to grasping the lunacy of financial markets where both interest rates
and interest-rate swaps are being manipulated at the same time, often by the
same banks.
"It's
a double conspiracy," says an amazed Michael Greenberger, a former
director of the trading and markets division at the Commodity Futures Trading
Commission and now a professor at the University of Maryland. "It's the
height of criminality."
The
bad news didn't stop with swaps and interest rates. In March, it also came out
that two regulators – the CFTC here in the U.S. and the Madrid-based
International Organization of Securities Commissions – were spurred by the
Libor revelations to investigate the possibility of collusive manipulation of
gold and silver prices. "Given the clubby manipulation efforts we saw in
Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit
areas of inquiry," CFTC Commissioner Bart Chilton said.
But
the biggest shock came out of a federal courtroom at the end of March – though
if you follow these matters closely, it may not have been so shocking at all –
when a landmark class-action civil lawsuit against the banks for Libor-related
offenses was dismissed. In that case, a federal judge accepted the
banker-defendants' incredible argument: If cities and towns and other investors
lost money because of Libor manipulation, that was their own fault for ever
thinking the banks were competing in the first place.
"A
farce," was one antitrust lawyer's response to the eyebrow-raising
dismissal.
"Incredible,"
says Sylvia Sokol, an attorney for Constantine
Cannon, a firm that specializes in antitrust cases.
… Yet
despite so many instances of at least attempted manipulation, the banks mostly
skated. Barclays got off with a relatively minor fine in the $450 million
range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give
up $615 million. Apart from a few low-level flunkies overseas, no individual
involved in this scam that impacted nearly everyone in the industrialized world
was even threatened with criminal prosecution.
Two
of America's top law-enforcement officials, Attorney General Eric Holder and
former Justice Department Criminal Division chief Lanny Breuer, confessed that
it's dangerous to prosecute offending banks because they are simply too big.
Making arrests, they say, might lead to "collateral consequences" in the economy.
.. In
practice, it might be a country like
Greece or a regional government like Jefferson County, Alabama, that
borrows money at a variable rate of interest, then later goes to a bank to
"swap" that loan to a more predictable fixed rate. In its simplest
form, the customer in a swap deal is usually paying a premium for the safety
and security of fixed interest rates, while the firm selling the swap is
usually betting that it knows more about future movements in interest rates
than its customers.
… All
of these benchmarks based on voluntary reporting are now being looked at by
regulators around the world, and God knows what they'll find. The European
Federation of Financial Services Users wrote in an official EU survey last
summer that all of these systems are ripe targets for manipulation. "In
general," it wrote, "those markets which are based on non-attested,
voluntary submission of data from agents whose benefits depend on such
benchmarks are especially vulnerable of market abuse and distortion."
Translation:
When prices are set by companies that can profit by manipulating them, we're
fucked.
"You
name it," says Frenk. "Any of these benchmarks is a possibility for
corruption."
