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LI(E)BOR

We have used the word “evil” to apply to bankers so often in the last four years that it’s become trite.  Nevertheless, the level of austerity imposed on us by the financial establishment in order for them to continue to seize money and power without accountability is so destructive that there’s really no other word that applies.  Once again, we have to go back to Hannah Arendt’s comment about the “banality of evil” to understand what we’re talking about here. It is the normalization of the unthinkable.  It’s not that these financiers are people who beat their wives or sell their children into sexual slavery.  I’m sure that some of these people are perfectly fine to socialize with.  You can play a few rounds of golf, have dinner, go sailing with them.  They seem like such nice, intelligent, clean-cut people, if a bit more ambitious than the average Joe.  OK, insanely more ambitious, but you know what I mean.  They don’t look like gun toting SS droogs in jackboots who will conduct you to the edge of the pit where they will shoot you in the back of the head for inconveniently living on land they had their eyes on.

And yet, isn’t that what they’re doing, in a so far non-violent way?  They’re leading hundreds of millions of people to the edge of the pit of financial instability and a lifetime of precarious existence and pushing them over with a swift kick to the back.  When you lose your job, your house, your marriage, everything but the clothes on your back and the student loans you will be paying off forever, and it’s all because some wealthy bankers need to preserve their bonuses, isn’t that evil?

Check out this unbelievable interview about LIBOR from the BBC with Harvard professor Niall Ferguson.  The second part is particularly outrageous.  Essentially, we are being pressured to turn generation against generation and Ferguson implies that Obama will sell us out at the end of this year:

Part 1:

Part 2:

(Roberto Unger’s call for the left to defeat Obama makes a lot more sense now.  Ahh, I see that Ferguson is one of the original Confidence Fairies that Krugman is always referring to.  What’s more, he’s married to Aayan Hirsi Ali, the Somali born former Dutch MP who works for the conservative American Enterprise Institute.  She has taken Christopher Hitchens’ place in the Four Horseman dialogues.  Man-o-man, no one is safe from the creepy thoughts of extreme right wing philosophy.  I can’t take the Four Horseman dialogues seriously now.  Not until she’s replaced.  She jumped from ultra religious conservatism to ultra right wing conservatism and is not a good ambassador for the New Atheist movement.  Sorry, Richard.  She’s going to damage your credibility.  You’ve got to be very careful about these people because in this country, the political right wing is inextricably tied to the religious right wing.)

The LIBOR scandal took me back to the fall of 2008 when Planet Money popped up on NPR.  At first, Planet Money was a good resource for non-financiers to get a grip on Credit Default Swaps and Collateralized Debt Obligations.  A few months later, that began to change subtly as the hosts of Planet Money got pulled into the realm of the serious people.  But in October 2008, they were on top of LIBOR.  I remember them talking about the TED spread and LIBOR and getting the sense that the LIBOR number, the interbank interest rate showing how willing banks were to lend to one another was an indicator of the global scale of the catastrophe.  No joke.  The higher the LIBOR number creeped, the more likely we were to spin off to a Depression that was bigger than the world had ever seen.  The thing is, according to the Commodities Futures Trading Commission (CFTC), the banks were manipulating LIBOR starting in 2005, affecting rates on adjustable rate mortgages.  And the downstream effect of LIBOR was felt in just about every interest rate on every act of borrowing by every individual in the world.  We are talking about hundreds of trillions of dollars.  In this Planet Money snippet, Adam Davidson discusses the effect of LIBOR and the TED spread and what it means for global markets around the world.  Throughout October, Planet Money followed TED and LIBOR and the effect of the bailout money.  For some reason, LIBOR numbers should have gone down a bit after the infusion of money but they didn’t, probably because the LIBOR rate, as high as it was, wasn’t real and wasn’t high enough to reflect reality.

But reality might have set off a global panic, triggering much more severe regulation of the finance industry so it had to stay hidden.  In the meantime, we’ve been carrying the weight of these behemoth zombies for four years and if we don’t do something now, we will be carrying them for years to come- at our expense.  And they’ve gotten off with minor slaps on the wrist.  The CFTC fined British banks a paltry $450 million for their manipulations.  That’s an insult to American taxpayers and totally inadequate.  Democratic lawmakers should be outraged and demanding accountability.  Where are they??

In another Planet Money episode from October 2008, we find out what LIBOR meant to the little people:

Justin asks us today:

“I saw you mentioned student loan availability, but what about existing loans? Since many student loans have their interest rates tied to LIBOR or Prime, what does LIBOR hitting all-time highs this week mean for students? And, perhaps more ominously, graduates who are in repayment? How long can this go on before they start to see some effect on their loans?”

Even if Congress passes the bailout, many students across the nation will begin to see higher costs for loans in the coming months or could be turned away by banks altogether as the credit crisis intensifies.

The goes the same for graduates. The big issue is what kind of loans you have.

Most direct government-backed loans such as Federal Stafford and PLUS loans have fixed interest rates. This means the interest rate will remain constant for the life of the loan.

If you took out private loans, which have become increasingly common as students look for new sources to finance the soaring costs of college, they typically have variable rates and are projected to jump this year. Sorry.

Sorry, student.  Sucks to be you.  In the light of the LIBOR manipulation details, that seems particularly callous, along with Davidson’s subsequent attack on Elizabeth Warren for caring about homeowners and consumers and not being “serious”.  It was the influence of the serious people on Davidson (by the way, who was he referring to as his serious sources anyway?  Her colleague Niall Ferguson at Harvard, perhaps? And do “penis years” have something to do with why his word may have carried more weight than hers?) and on our elected officials that lead to the gouging of the taxpayers to pay the bankers’ unconscionable debts on bad bets.  We are talking about trillions of dollars of OUR money, OUR retirements, so that the weekend sailors and golf buddies would not feel inconvenienced.

I used to think my outrage meter was pegged but I have never seen such corruption go unchecked in my lifetime.  What we have here is a bunch of extremely irresponsible and unethical people playing with people’s livelihoods like it wasn’t real money to them.  And it isn’t real money to them.  The tens of thousands of dollars we’ll be collecting each year in measly pensions and social security, that’s nothing.  They can burn through that in a matter of minutes.  If it were several million dollars in Social Security payouts affecting their retirement packages, that might get their attention and they’d be furiously lobbying Congress to save Social Security at all costs.  Social Security and pensions would become holy sacraments. But because we are talking about such piddling amounts that amount to pocket change to the wealthy, it has no real meaning to them.  We might as well be flood victims in Bangladesh, clinging to a few square meters of dry land while the water rises all about us.  Those poor people.  Well, that’ll learn them to farm in a flood zone.

The careers we have lost? Not their problem.  Our children’s college funds, the roofs they have over their heads, the food we put in their mouths, barely registers.  On an individual basis, none of us make enough money to get their attention.  The significance of the figures of our incomes does not arouse their concern.  They are so caught up and preoccupied with making their numbers that they don’t have the time to care about your little problems.  They have jumped to a new level in the game where the sheer volume of money being swapped is intoxicating.  They’re not playing in the real world anymore.

It’s got to stop.  The manipulation of LIBOR was uncovered by the US CFTC.  That means, we’ve been aware of it for some time.  We probably knew about it when Occupy Wall Street was protesting last fall and we probably knew about it when their camps were broken up and they were hauled off to jail and when the DHS sent in their riot troops.  Yep, the Obama administration has known.  And so far, not one banker has been hauled off to jail.  No one has been penalized.

Think about that.  The scope of the LIBOR scandal affects every person who has ever dealt with a bank in the past 7 years.  It’s so outrageously immoral and has caused so much destruction and continues to wreck havoc in Spain, Ireland, Britain, the US, everywhere that if it isn’t prosecuted as a the criminal enterprise that it is, then I can only conclude that our elected officials are complicit.  They had to have known that the banks that are now too big to fail were in fact failing and were disguising the scale of the catastrophe from the public.  Those banks are still in business, thanks to our largess, and no one in the Obama administration, particularly Tim Geithner, has dared to declare them insolvent and break them up as Sheila Bair suggested in 2009. They are now bigger and more dangerous than ever and they are calling the shots about our jobs, retirements and money supply around the world.

Our money went into their bottomless gullets and continues to go in, and yet, they and their political arms have the outrageous gall to insist that we, the hardworking taxpayers who paid in advance for our social security benefits, WE have to take a haircut.  That is what the so-called Grand Bargain is all about, ladies and gentlemen. That’s why we must lose our jobs.  We cost too much.  They think they can dump the blame on us for having to eat and getting old and needy.

We are living in a world that is run by criminals.  You may think that’s they way it’s always been but this is now institutionalized criminality.  No one can be trusted.  And when no one can be trusted, all hell breaks loose.

More on LIBOR:

Boston Globe- How a LIBOR scheme works and what it means to consumers

Joe Nocera- LIBOR’s Dirty Laundry

Yves Smith- Yes, Virginia, the real action in the LIBOR scanda was in the derivatives

Here’s an interesting take on LIBOR from 2007 when banks were manipulating the rate up: Why LIBOR won’t hurt that much.

Also, this Fresh Air interview with Paul Krugman in Oct 2008 is very revealing.  He was right about almost everything except the unemployment rate. (his prediction was too low).  But even more striking is the last 5 minutes of the interview when he talks about the two presidential candidates and why Ben Bernanke was struggling to get a handle on this.  Could it be that the measures were inadequate because the LIBOR rates had been artificially lowered?

Matt Taibbi’s most recent posts in the Rolling Stone:

A Huge Break in the LIBOR Banking Investigation (6/28/2012)

Another Domino Falls in the LIBOR Banking Scam: Royal Bank of Scotland (6/29)

Why is Nobody Freaking out about the LIBOR Banking Scandal? (7/3)

LIBOR Banking Scandal Deepens: Barclays releases damning email, Implicates    British Government (7/4)

Matt Taibbi discusses the LIBOR scandal with Eliot Spitzer:

16 Responses

  1. I still don’t get it.

    Does this LIBOR thing mean we’re still in trouble?

    • This LIBOR thing means we’ve been living a lie going back to about 2001.
      Yes, we are in trouble. Deep, deep trouble. Nobody’s money is safe. They’re either going to take it or bring the system down. Heads *must* roll for this or very bad things are going to happen to us.

    • Let’s put it this way: Back in October 2008, Krugman et al were watching these numbers because LIBOR was a leading indicator of the health of the banking system. If the LIBOR rate went up, that meant that banks didn’t trust each other and were going to be unwilling to lend to each other. And that was going to have effects on the commercial paper market because then businesses couldn’t borrow in order to pay their vendors, make payroll etc. The fact that the banks wouldn’t lend to each other except at ridiculously high interest rates had the possibility of seizing credit around the world. And that could have triggered Depression style behavior and bank runs and all kinds of nasty stuff.
      So, TARP was passed quickly in order to fund the banks because LIBOR was getting to be too high. But what this scandal is saying is that the banks lied about their interest rates and that the actual rates were much higher than they reported. That’s why the Planet Money episode about the after effects of TARP on LIBOR was so unexpected. Planet Money expected LIBOR to go down because the banks were being shored up with all this cash so they should have been able to lend it out and kept the paper market going. But the rates were stubbornly staying high. And that, I suspect, is because at the time TARP was passed, the rates were much higher than were being reported. So the money that TARP dumped into the system was not enough to put the banks on sound financial footing and the other banks knew it and so the rates stayed high.
      Remember that song about the Zombie Banks? All true. And it didn’t get better when Obama took over because he appointed financial industry patsies who looked after the banks’ interests and were more concerned with image than stability. It’s highly likely that Citigroup and a couple of other banks were insolvent and should have gone to FDIC resolution. That’s what Sheila Bair pressed for but Geithner wouldn’t do it. And he wouldn’t do it because Bair would have gone in there with a chainsaw and forced the shareholders to take a severe haircut. She would have broken up the banks and sold off pieces and assets. She would have given shareholders pennies on the dollar. But that’s what investors should have expected. Investing in risky schemes means that sometimes, you lose and she would have been fairly unsentimental about it. Then she would have sued the bank officers for everything they were worth. That’s what the FDIC does.
      Apparently, it was more important to save the bankers and the shareholders. But let us also remember that those of us with 401Ks and pensions were among those shareholders and we could have lost much more than we actually did. Nevertheless, we might have been on better footing if she’d been allowed to do what she had to do. At least the integrity of the system would have been shored up somewhat. Now, there is no guarantee of anything. And we all know that Wall Street operates on the Strategy of No Strategy and “I’ll be gone, you’ll be gone”. They don’t really give a fuck what happens to the rest of us. So, yeah, we are in big trouble. But it’s not just the US. The whole world is involved.

      • I guess I’m wondering why it matters if 5 years later it hasn’t exploded. What would trigger a collapse? Maybe as long as no one looks too closely, it doesn’t matter? … I’m not kidding. Why is it starting to be an issue again when no one has mentioned it for 4 years?

        • Because we never fixed it. We never imposed new regulations in the banks so they won’t even think about doing it again. The fact that they got away with it only encourages them to be even more daring. Because of MF Global and JP Morgan’s incredible losses of depositors’ money.
          Because innocent homeowners had no idea that their adjustable rate mortgages were being set to make them pay more. Futzing with the rates might have accelerated the popping of the bubble.
          Because there’s no restraint on them.
          Because the banks at not ad solvent as we think and we will have to bail them out again.
          Because we can never trust the banking system again,
          Because the British government *encouraged* Barclay’s to lie during the 2008 meltdown.
          Btw, once Obama is out of office, are you going to forget about the kill list? I mean, what does it matter 5 years later?
          Supposedly, this is catching politicians off guard. Supposedly, Obama knew nothing about it. Bullshit. I’m betting Geithner knew all about it. In fact his actions make a lot of sense now. The last thing he wanted was for Sheila Bair or an independent auditor to go poking around in these banks’ accounts. Who knows what evil lurks in there? So to prevent all of that digging around, he did insufficient stress tests and let them off relatively easily.
          This is a big deal, Katiebird. 16 banks collaborated on the rates and spthat affects what you paid for your car loan, mortgage, home equity loan, student loan, credit card interest rates. During the good times, they raised rates to skim profits off the top or to make good on a derivative’s bet for a friend, in bad times, they lowered them so the seriousness of the banking catastrophe was kept from the public.
          You and I have no idea that they are doing this. It’s not transparent. It’s like Enron ripping granny off and triggering rolling blackouts by manipulating the energy supply.
          Honestly, I can’t think of any thing worse than setting interest rates to game the market but leave it to the bankers to surprise us everytime.

          • I actually agree that it’s important. I remember when we were still doing those radio shows (which I would like to do again) and we talked about it then.

            But, remember – I’m thinking around a dead space in my brain (it got up to 108.2 for a while today but, it’s down to 105) and so I’m trying to understand … why now. What makes today different from last January or LAST June.

            If it’s the illegality — I get it. But, I am also trying to understand if there’s a crash coming because of all this. And is the crash going to be worse for putting it off so long?

            I’ve learned a lot these past few years. But, I have a lot more to learn.

          • Ugh, the heat in Kansas must be awful. Dud you get some Gatorade?

  2. If Obama manages to win a second term he won’t need his voters for anything anymore. What he will bell looking at is life after 2016 and who can make him comfortable. What better way to continue the good life than nominating corporate friendly judges for the Supreme Court?

    Citizens United is just the beginning of stripping the American way of life from Joe and Jane Sixpack.

    Thanks, kossholes for what you have wrought.

    • The Kossholes had help, surely. Actually, if the Reid Pelosi elite rulers of the Party hadn’t found some handy Kossholes, they would have fabricated another group to do the same thing. It becomes ever more clear with passing time.

      A Bormann Democrat like Pelosi wouldn’t have been stopped by a small think like “lack of Kossholes”. She and Reid and the whole CheneyBush Democrat elite would have created whatever Kossholes they needed to achieve their mission.

  3. I don’t know if I can even make it to the second part of the Ferguson video. If that guy were any more piggy, he’d have a spiral wee-wee. He didn’t used to be this bad — I rather liked his book on the Rothschilds — but he has turned into the British Cheney.

    The financial crisis of 2008 was caused by TOO MUCH regulation…? Is he really saying that, since there is no way to write regulation to prevent LIBOR lying, let’s just shrug and say “Whattaya gonna do?”…?

    The guy also calls for an attack on Iran. He called the insufficient stimulus “the Soviet model.” He has argued that Democrats shouldn’t alienate racists. And — this may bother you more than it does me — he disparaged Hillary as a “second rate” adviser.

  4. And now for something completely off topic:

    A few days ago, I received a spam e-mail offering me “a new Pocono home”. When I first glanced at it, I thought for a second it said “a new Porno home”. :mrgreen:

    • same thing……
      Just kidding, but no one should buy a home in the poconos IMO, it is a big mess and crime ridden.

  5. [...] Bargain™-brand Catfood Watch. Righteous rant watch, Riverdaughter: “WE have to take a haircut.  That is what the so-called Grand Bargain is all about, ladies and [...]

  6. Good explanation of how LIBOR mess affects us… The sad reality is that most of us… say 99% of us… are getting a haircut right now but no one in the mainstream media wants to hold the mirror up to show us… and for sure no mainstream politician will acknowledge this because they aren’t part of the group sitting in the barber’s chair

  7. You really shouldn’t take Niall Ferguson too seriously or get too angry about what he says; he’s been the 1%’s Coco-the-clown for some time now and he just says what will play well with the super-rich and what will get him on TV.

    There’s a great video of him telling a Brookings Institution audience back in 2006(?) what a great president he thinks John McCain would make, which is one of the funniest unintentional stand-up acts in recorded history. Following that he abandoned McCain and ‘discovered’ what a marvellous candidate Obama was when he though there was a Kissingeresque position at the White House in it for him, and now he’s doing his Steppin Fetchit for the swivel-eyed moon howlers of the Goldman-Owned Party (the Republicrats).

    The point about Ferguson is that what he really does is purvey sarcastic, white, populist conservatism to the masses and make a lot of money doing it – he neither knows nor cares what he’s talking about. And if he sells lots of books doing it, well so did Adolf Hitler and Milton Friedman, and look what damage they did peddling bullshit…

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