[Vision2020] More Whores At Work

[Art Deco]

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July 2, 2012
Rigged Rates, Rigged Markets

*Update:** After this editorial went to press, Barclays announced that its
chief executive, Robert Diamond Jr. had resigned, effective immediately,
and that Marcus Agius, who had resigned as chairman of Barclays on Monday,
would become chairman again and lead the search for a new chief executive.*

Marcus Agius, the chairman of Barclays, resigned on
Monday<http://dealbook.nytimes.com/2012/07/01/chairman-of-barclays-is-expected-to-resign/>,
saying “the buck stops with me.” His was the first departure since the
British bank agreed last week to pay $450 million to
settle<http://dealbook.nytimes.com/2012/06/27/barclays-said-to-settle-regulatory-claims-over-benchmark-manipulation/>findings
that, from 2005 to 2009, it had tried to rig benchmark interest
rates to benefit its own bottom line.

Mr. Agius was right to go and the bank’s chief executive, Robert Diamond
Jr., should follow him out the door. But the investigations cannot stop
there.

The rates in question — the London interbank offered rate, or Libor, and
the Euro interbank offered rate, or Euribor — are used to determine the
borrowing rates for consumers and companies, including some $10 trillion in
mortgages, student loans and credit cards. The rates are also linked to an
estimated $700 trillion market in derivatives, which banks buy and sell on
a daily basis. If these rates are rigged, markets are rigged — against bank
customers, like everyday borrowers, and against parties on the other side
of a bank’s derivatives deals, like pension funds.

Barclays is only one of more than a dozen big banks that provide
information used to set the daily rate for Libor and Euribor. The
settlement, struck with regulators in Washington and London and with the
Department of Justice, indicates that the bank did not act alone. It shows
that unnamed managers and traders of Barclays in London, New York and Tokyo
colluded with or prevailed upon bank employees who provide the benchmark
data to make false reports. The aim was to bolster Barclays’s trading
positions and to aid or counteract other banks’ attempts at manipulation.

The evidence, cited by the Justice
Department<http://www.corporatecrimereporter.com/documents/Barclaysstatementoffacts.pdf>—
which Barclays agreed is “true and accurate” — is damning. “Always
happy
to help,” one employee wrote in an e-mail after being asked to submit false
information. “If you know how to keep a secret, I’ll bring you in on it,”
wrote a Barclays trader to a trader at another bank, referring to an
attempt to align their strategies for mutual gain.

If that’s not conspiracy and price-fixing, what is?

The Justice Department has left open the possibility of prosecuting
officers or employees of Barclays. But it has agreed not to prosecute the
bank itself, in part because Barclays was the first to cooperate in the
investigation and has agreed to keep cooperating. Such an agreement makes
sense only if that cooperation will allow prosecutors to nail other banks
that have been involved in setting the rates, including potential cases
against Citigroup, JPMorgan Chase and HSBC, and people who work there.

To date, the Justice Department has not distinguished itself in prosecuting
major banks or their executives for conduct leading up to and during the
financial crisis. But with Barclays now cooperating, the “Libor scandal” is
another chance for government prosecutors to unmask and punish financial
wrongdoing.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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