LIBOR fraud could bankrupt Cities
Louisville, KY – For those of you unfamiliar with the term LIBOR, LIBOR is the London Interbank Offered Rate. It is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. It is the primary benchmark, along with the Euribor, for short-term interest rates around the world.
Libor rates are calculated for ten different currencies and 15 borrowing periods ranging from overnight to one year and are published daily after 11 am (London time) by Thomson Reuters. Many financial institutions, mortgage lenders and credit card agencies set their own rates relative to it. At least $350 trillion in derivatives and other financial products are tied to the Libor.
It also is used as the basis for trading in an estimated $350 trillion in derivatives worldwide by major banks, so the manipulations may have cost pension funds and local governments that were trying to protect themselves against changes in interest rates by buying the derivatives.
In short, they provide the basis for some of the world’s most liquid and active interest-rate markets. Short-term-interest-rates, interest rate swaps, inflation swaps, floating rate notes, syndicated loans, variable rate mortgages, and the US Dollar currency.
And therein is the problem.
The former CEO of Barclay’s said that banks across the world were fixing interest rates in the run-up to the financial crisis. Barclay’s admitted its employees conspired with other banks to manipulate the rate.
The banks are the fox guarding their own hen-house.
The LIBOR index is of interest to investors and borrowers alike, especially those who have mortgages or business loans tied to these indexes.
Why is this important?
Multiple criminal settlements by Barclay’s Bank revealed significant fraud and collusion by member banks connected to the rate submissions, leading to the Libor scandal. Barclay’s last week has agreed to pay $453 million to U.S. and U.K. regulators.
And why not?
If you make billions in illegal manipulation of the banking interest rates, and you will not be held criminally liable by going to jail, a few million is chump change for a “fine” when billions were lost to consumers because of it and millions forced out of their homes as well.
What is more alarming is that the Federal Government KNEW the banks were lying about LIBOR as early as 2008.
Treasury Secretary Tim Geithner suggested ways to prevent banks from manipulating the Libor interest rate in a memo to the Bank of England back in 2008, when he was president of the New York Federal Reserve.
There are many other ways banks commit fraud as well, among them:
Charging unlawful mortgage fees to veterans, fraud against local governments, bullying rating agencies to inflate their ratings, and the list goes on.
Think banks are in business to lend money? Think again.
Most of their business is from financial speculation. For example, less than 10% of Bank of America’s assets come from traditional banking deposits. Instead, they are mainly engaged in financial speculation and derivatives.
How do you squeeze the middle class out of existence? By choking small business who cannot get loans to operate from big banks who take our tax money to do the same.
We continue talking about welfare and subsidies costing us billions?
Bank profits largely come from taxpayer bailouts with 77% of JP Morgan profits coming from taxpayer subsidies.
So who is really killing the American way of life?
The banks and our own government who continue aiding them.
American cities going bankrupt
Over the last couple of years we are beginning to see many municipalities going bankrupt due to lack of tax revenue, thanks to a miserable working economy due in part to banks non willingness to lend money to business, but also in large part to the manipulated LIBOR and its faulty interest rate swaps.
One of the largest stories at the time was the municipal bankruptcy filed in Birmingham, Alabama, thanks in large part to an interest rate swap agreements entered into on behalf of their Metropolitan Sewer District and their EPA consent decree.
Jefferson County Alabama got in major financial trouble due to a series of financing gimmicks such as debt swaps, interest rate swaps etc. No one knew the costs of such a project associated with the consent decree in the beginning.
Startling enough according to the New York Times, Birmingham’s troubles began “…after a series of exotic bond deals that the bankers concocted went wrong, and the interest on its debts, rather than shrinking as the bankers had promised, has ballooned like a bad subprime mortgage.”
Initiated by the banks under fraudulent terms, created a knowingly fraudulent transaction that helped put Jefferson County (Birmingham), Alabama into bankruptcy.
In short, these agreements were illegal in nature due to known fraudulent behavior manipulating interest rates.
We have many stories of other municipalities in the process of, or considering, bankruptcy as the only option available to them due to lack of resources or an ability to create them.
All thanks to an industry controlled at a federal level, with leadership complicit, in the biggest fraud on the US economy.
Can anything be done
Many keep asking the same thing. can anything be done, if so, what?
In order to accomplish the changes necessary there will be great risk to the challenger. The real question is will anyone with the resources available rise to the challenge?
Take the case of Birmingham, Alabama listed above as an example.
While there were other circumstances involved in their failure, the largest reason they failed was due to lies by the banking industry itself resulting in an unsustainable, and unaffordable, debt. The writing was on the wall but the banks set the stage.
If I individually entered into an agreement with you that was knowingly fraudulent, the agreement is null and void and you have legal recourse against me. Sue me and the likelihood is you win and I go to jail.
The problem is that big business always hides behind the so-called “Corporate” umbrella and in most cases no one is charged as an individual of that corporation, though they can be believe it or not, and they essentially can get away with murder.
Here is the twist I offer to Birmingham and any other municipality in the same situation.
I contend that the US Supreme Court has paved the way for lawsuits from any municipality or local government that has entered into any agreement with any lender under fraudulent circumstances.
Citizens United. The ruling on Citizens United essentially gave corporations first amendment rights to free speech. The Bill of Rights applies to people not entities, in the opinion of many, but since the US Supreme Court ruled Corporations are essentially people in the rights of free speech then we can take the argument a step further.
In his dissent, Justice Stevens wrote, Legal entities are not “We the People” for whom our Constitution was established, therefore they should not be given speech protections under the First Amendment. The First Amendment, he argued, protects individual self-expression, self-realization and the communication of ideas.
While that was the minority opinion it raised relevant questions to how far one can go as a corporate “person.”
And that is where the argument should begin.
With this ruling the Courts equated Corporations to people thereby granting them the right to free speech through political contributions.
IF indeed corporations can now be considered a “person” by Supreme Court authority in one aspect then that Corporation must also be considered a “person” in other aspects as well.
IF a person defrauded you then you have legal recourse against the perpetrator.
If we are to define a generic “persona” to a corporate entity then a “person” must also be defined by having a face attached to it.
In this case the CEO of the corporation is the face of the person and should be able to be held accountable through legal means including prison as we would be accordingly.
We cannot continue allowing minimal fines to be paid against what are maximum fraudulent dollars being given. As a business model, knowingly taking in billions of dollars fraudulently and paying a pittance of millions in “fines” in return works great for corporate profit.
Not so good for we the people.
We should also force Congress to eliminate fines that are lesser than the money involved. If they want to continue allowing the use of these of minimal fines for fraudulent behavior, that they themselves have known about without taking any action, then they must themselves be accused of aiding and abetting and charges with being an accomplice.
No one really expects that to happen do they?
They can however, protect themselves by doing their job to protect us.
First, by making the fines equal to the fraud. No business should ever be able to make a profit by illegal behavior.
Second, denying them the right to obtain any government money for a minimum of ten years when proven that the fraud was knowing and intentional.
Birmingham and many others should file a lawsuit against the banks that defrauded them, as well as the CEO’s, who run the bank.
It is time to seek accountability and see if the courts will uphold what they have already attempted to do in making a corporation a legal person.
Doing so should force the politicians into adopting stricter laws regulating the industry and give us an accountability for the fraudsters running the banks by putting them in jail where they belong. It should also allow we the people the opportunity to sue the lawmakers who knowingly knew about this and refused to do anything to stop it.
We have recourse available but it won’t be easy.
The real question is, will anyone take on the challenge?
We shall see………LIBOR and TED Gap DefinedEpisode 384_ The Little Lie That Roc