The NYTimes finally puts LIBOR on the frontpage

It took long enough.  This article even starts poking around the edges at the Federal Reserve Bank of NY:

As big banks face the fallout from a global investigation into interest rate manipulation, American and British lawmakers are scrutinizing regulators who failed to take action that might have prevented years of illegal activity.

Politicians in both London and Washington are questioning whether regulators allowed banks to report false rates in the run-up to the 2008 financial crisis and afterward. On Monday, Congress stepped into the fray, requesting information about the role of the Federal Reserve Bank of New York, according to people close to the matter.

 [...]

On Monday, the oversight panel of the House Financial Services Committee sent a letter to the New York Fed seeking transcripts from at least a dozen phone calls in 2007 and 2008 between central bank officials and executives at Barclays.

“Some news reports indicate that although Barclays raised concerns multiple times with American and British authorities about discrepancies over how Libor was set, the bank was not told to stop the practice,” Representative Randy Neugebauer, a Texas Republican and the head of the House oversight panel, said in the letter, which was reviewed by The New York Times.

Tim Geithner was the head of the Fed in NY during the time frame in question.  It is hard for me to imagine that he didn’t know that LIBOR was being manipulated.  We have already heard the panic defense, that if the true LIBOR rate was known, a financial apocalypse would have swiftly followed.  But it’s the aftermath of the manipulations when the panic had subsided that intrigue me.  Tim Geithner gave a lot of advice to Obama that was very friendly to bankers.  But he must have known that a couple of banks, like Citigroup, were insolvent.  Yet instead of nationalizing those failed banks, we merely stress tested them, bought their toxic assets and bailed them out.

Much of our current unemployment woes and struggling economy can be traced back to those early days of the Obama administration when we saved the bankers and ignored everyone else’s needs.  There were many smart people who were in favor of being more aggressive with the bankers and making a strong case for a bigger fiscal stimulus package.  They were ignored.  You can blame the Republicans, if you are so inclined.  But let’s remember that the Democrats were in charge in the first two years.  We can only speculate how they might have come together to push financial reforms and New Deal programs if we had only known how serious the situation was.

Hiding the true nature of the financial collapse from our elected officials amounts to a coverup, in my humble opinion.  It’s a coverup that cost many of us our houses, jobs and security.  Heads have got to roll for this one and THIS time, we have to demand that the parties responsible are held fully accountable.  There has to be real reform and perp walks or our present economic environment will never get better.

Yes, it sucks for the White House that it all comes to light in an election year.  What can I say? When you sell your soul to a bunch of people who have more money than God, they usually expect something significant in return. It looks like they got it.

Has someone found a smoking gun?  Reuters reports that Geithner had a “Fixing LIBOR” entry on his calendar in 2008.  Does that mean fix the rate or fix the problem with banks manipulating the rate?  Such ambiguity.

In early 2008, questions about whether Libor reflected banks’ true borrowing costs became more public. The Bank for International Settlements published a paper raising the issue in March of that year, and an April 16 story in the Wall Street Journal cast doubts on whether banks were reporting accurate rates. Barclays said it met with Fed officials twice in March-April 2008 to discuss Libor.

“FIXING LIBOR”

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a “Fixing LIBOR” meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

It doesn’t look like LIBOR got fixed.  But clearly, Geithner knew what was going on.  And if he didn’t have a come to Jesus meeting with politicians right after he took office to explain how dire the situation was, then what can we conclude except that he was operating in the bankers’ interests at the expense of ours?

This s^*( is serious.  It affects mortgages, credit card rates, student loans and economic health and every decision that has been made in the past 4 years.  The timing is even crucial.  These meetings were taking place in the middle of the primary season when money was pouring into Obama’s campaign coffers from Wall Street and crazy Obots were screaming for Hillary Clinton to quit the race even as she was still winning big state primaries.  We know from other sources that the meltdown started in 2007.  So, even our primaries might have been affected by the shaky bank situation.

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were “on the case reasonably quickly” after questions were raised in 2008.

“It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting,” Duffie said. “I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior.”

Surprise!

One last thing: If Geithner want to fix LIBOR in April of 2008, why did it take the CFTC to launch an investigation about it in March of 2011?  You’d think something as big and potentially litigious as a LIBOR scandal would have prompted swifter action. The fact that that didn’t happen suggests there is some bigger thing that is being covered up.  I can’t imagine what it is but it must be huge.

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23 Responses

  1. I wonder how much we can take? There’s The Lethal Presidency and this. I hope the scandal plays out fast — there IS still time for the Demcrats to change their minds.

    • But Tom Junod and Charles Pierce will vote for Obama anyway because they have no intention of raising their voices before the nomination to call for him to step down.
      So far, this election year has been about Democrats vs Democrats, the Republicans just being a freaky sideshow. But once the nomination is made, it’s just going to be all freaky sideshow with an element of menace from the Democrats.

      • It’s so frustrating. We ask, Please Democrats give us another nominee. And we’re met with complete silence.

        • Would “another choice” serve Wall Street so well and faithfully as Obama has , and as Obama may be replied upon to do for another 4 years if elected? If “another choice” would not serve Wall Street so well if elected, then the Rubinite Shitobamacrat Party will not permit “another choice”. If the OPOOP’s interest (OPOOP being the One Percent Of One Percent) is equally well served by a President Obama or a President Romney, why would the OPOOP permit its Democratic Party decoy-front-organization to nominate “another choice” which might serve the OPOOP less well than their pet Obama or their Class Comrade Romney? They wouldn’t, and they won’t.

          I hope this election becomes about exterminating the “Rubinite Shitobamacrat” faction from existence and wiping it off the face of the earth. Towards that end, I will definitely be voting for Romney and voting for Stabenow and Dingell to lock Romney’s grid. Defeating Obama is Job One for me now, and electing Romney is an acceptable trade-off for de-electing Obama.

        • I left a reply but it vaporised. Maybe it will re-emerge.

    • Did you see that Obama and Mitt are tied? How could that be? All we’ve heard for the last month is how many rich friends Mitt has. The Obama campaign’s attempt at misdirection is actually laughable. For four solid years, the public has watched the White House give the bankers everything they ever asked for and more and we’re supposed to believe that Mitt is more awful?
      Well, it’s not working. I think I see a Jon Corzine repeat coming up. It’s not that so many people liked Christie. There wasn’t an excess of Republican voters here. NJ has a history of electing moderate Republican governors like Tom Kean and Christie Whitman. What happened to Corzine is that Democrats failed to show up, or like me chose the third party guy, Chris Daggett. This is what is going to happen to Obama if he fails to rally his base convincingly and with sincerity.
      I don’t think he can do it.
      Here’s the graphic:

      • Two horrible candidates, each worse than the other (although only one is proven to be evil) and yet it will be the fault of the 3rd party or non voters if one or the other wins.

        It has nothing at all to do with the Democratic Party nominating a Banker-colluding/war-criminal.

  2. I know you’re not into voting Green, RD, but Jill Stein has qualified to be on the ballot in enough states to achieve an electoral victory. (She has also become the first Green candidate to qualify for federal matching funds…)

    I’m NOT suggesting that she will win – but she has the potential to do serious Obama damage.

    I plan to vote for her for that reason alone.

    • I can’t get into Jill Stein because of her promotion of the idea that toxins lurk around every corner. The Green party and Ralph Nader is partially responsible for the crazy litigiousness in our country that makes everyone scared to let their kids out of their sight and sues the heck out of the people perceived to have the deepest pockets, whether they were responsible or not. (“I didn’t say it was your fault, I said we’re going to blame you”) Not my cup of chai.
      I still contend that what we really need is a bigger than life, unibrowed Ghenghis Khan style of Democrat who will be boldly FDR in his/her approach. That person would have wide appeal without being an effing centrist or a crunchy granola uber lefty.
      I’m not seeing that person in the race yet and don’t want to vote for a proxy.

  3. Did you guys notice that the post about Females and alpha males is at the top of our hit list ? I think Bostonboomer or Cinie or someone must have written it. It’s pretty interesting and suggests that the aggressive alpha males may eventually do themselves in by gorging on the wrong things.
    But I disagree with the conclusions about women. We don’t really know how women would behave if they were given permission to act like alpha males. I can’t think of an instance where the experiment gets far enough where women can overcome their social conditioning.
    Iceland comes to mind as a place where the behavior that was observed with chimps has been replicated among humans. The aggressive currrency traders in Iceland were sent down while the more pragmatic women were put in charge. Iceland had nerve when they told the world to bugger off and now they’re climbing their way out of the hole they dug. But what will happen when they are solvent again and have disposable income? Will women continue to keep a check on the Viking male’s marauding tendencies or will they be able to dabble in risk themselves? We just don’t know yet. Nor do we know what would happen if they decided to go alpha.
    Scandanavia provides more than one example of women on top but there just hasn’t been enough time or permission to take a lot of risks to prove the post’s writer right.

    • From the comments, it was StateOfDisbelief. It is good (and I miss her)

    • Speaking of women vs ‘the Viking male’s marauding tendencies’ :twisted: here’s a list of women in the Nordic countries who’ve made it to the top. The first two countries are republics, hence both a President and a PM; the three Scandinavian countries are monarchies with kings and queens … and PMs.

      Finland:
      First female President: Tarja Halonen, Social Democrat
      March 2000 – March 2012

      First female PM: Anneli Jäätteenmäki, The Center Party
      April – June 2003

      Second female PM: Mari Kiviniemi, The Center Party
      June 2010 – April 2011

      Iceland:
      First female President – and the first woman in the world to be elected head of state in a democratic election – Vigdís Finnbogadóttir (dóttir=daughter)
      1980 – 1996

      First female PM: Jóhanna Sigurðardóttir, Social Democrat
      January 2009 –

      (The Icelandic Presidency is a politically neutral post, though with the current president, Ólafur Ragnar Grímsson, who was recently re-elected to his fifth 4-year term, this seems to be changing.)

      Norway:
      First female PM: Gro Harlem Brundtland, Social Democrat
      February – October 1981, May 1986 – October 1989, November 1990 – October 1996

      Denmark:
      First female PM: Helle Thorning-Schmidt, Social Democrat
      September 2011 –

      Sweden:
      Anna Lindh, Social Democrat and the party’s designated “crown princess”, would no doubt have been Sweden’s first female PM hadn’t she so tragically been killed in 2003

      • And for a little laugh … or headshaking maybe, at the celebration of the Danish Queen’s 40 year reign this episode occurred involving the husband of the then PM of Finland and the Danish crown princess. :lol:

        • Lol! That’ll learn’im.
          I’ll bet he got an earful after that eyeful. Btw, she is gorgeous.

          • She really is. And admirable in so many ways – even to a non-monarchist as myself. Actually I’d take Monarchy over a Presidency any old time. Much more – and more fun – to watch. So many more weddings, baptisms, jubilees and state dinners to attend (to). ;)

            When she met and married the crown prince, she was ‘just’ an ‘ordinary’ young woman from Tasmania. But in record time she not only learned to speak Danish (phew! that in itself is impressive), but also the etiquette and behaviour of royalty. And she does everything with grace and what always seems like a genuine smile.

            On top of everything else that is expected of her, and having 4 young children, among other things she’s founded ‘Mary Fonden’, a foundation that focuses on bullying and lonelyness among children.

            So even with the many restrictions coming from being ‘royalty’ she’s managed to sort of carve a niche for herself, making a difference. Actually this goes for most of the European crownprincesses. They have mockingly been called the ‘prol-princesses’ but the monarchies should count their blessings in having these smart young women help promoting ‘the firm’. And keeping it if not exactly relevant then at least alive.

            And I bet they do. ;)

        • I am no expert on Nordic history to be sure, but in the most simplistic terms possible . . . didn’t Christianity turn a pack of blood-hungry Vikings into a Caucus of Social Democrats? If so, that is certainly a positive historical achievement for Christianity.

  4. The Democrats missed the sea change in the public’s attitude resulting from the house Banking Scandal and the republicans got the majority. I see the same blinkered thinking in keeping Obama on the ticket for 2012. To paraphrase the Joker,”This party needs an enema!”

  5. The timing of the LIBOR scandal reminds me so much of the Iranian hostage situation during Reagan’s first election campaign. Like much that was shockingly illegal but caused barely a media ripple at the time, acknowledgment of the possibility that the Reagan campaign negotiated a well-timed later release was much stronger when it first came to light than after years of media efforts to bury it.

    This quote is especially ironic, given the Iran/Contra lawbreaking that followed:
    “All those involved in the Reagan campaign, including President Bush, have vehemently denied any effort to delay the return, saying they would neither violate the law by operating outside established Government diplomatic channels nor contemplate anything that would have prolonged the captivity of the American hostages.”
    [http://www.nytimes.com/1991/04/15/world/new-reports-say-1980-reagan-campaign-tried-to-delay-hostage-release.html?src=pm]
    More here: [http://consortiumnews.com/2011/12/01/the-lost-opportunity-of-iran-contra/]

    The media in this country has to be fixed first. Wasn’t there a town hall meeting where Hillary Clinton promised restoration of the Fairness Doctrine as one of her administration’s first priorities?

  6. It’s pretty striking that you can find Tim Geithner at the bottom of or at least near every economic clusterf*** of the last 5 years. It’s like the guy has the reverse Midas touch. I’ve read a lot about Vietnam, and my wife is reading a lot about it now, so the dynamic is all coming back to me – the so-called Best and Brightest leading the nation based on their own misplaced arrogance and willful ignorance down a costly and bloody path that harmed millions of people here and around the world. When did we forget these lessons about trusting guys with the right degrees or the right suits and not asking whether or not they actually knew what they were doing?

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