BARCLAYS GETS A FINGER WAGGING FOR MASSIVE FRAUD
By Pete Moore On June 27th, 2012
It’s good to have friends.
Three years after Zero Hedge busted Barclays for interest rate manipulations, the bank has been formally found guilty. The US Commodity Futures Trading Commission (CFTC) found that “Barclays attempted to manipulate and made false reports concerning two global benchmark interest rates, Libor and Euribor, on numerous occasions and sometimes on a daily basis over a four-year period, commencing as early as 2005″.
LIBOR and Euribor are benchmark rates used to price hundreds of trillions of dollars of securities globally and, it bears repeating, Barclays deceitfully manipulated them “on numerous occasions and sometimes on a daily basis over a four-year period”. The CFTC Order also found Barclays, acting at the direction of senior management, engaged in other serious unlawful conduct concerning LIBOR.
For these ultra-serious crimes, the CFTC handed the bank a $200m (£128m) penalty for “attempted manipulation of and false reporting concerning Libor and Euribor benchmark interest rates”, while Barclays has agreed to pay a $160m penalty as part of an agreement with the US Justice Department. The UK’s Financial Services Authority has imposed a penalty of £59.5m.
Oh, and head honcho Bob Diamond has agreed to forego his bonus.
This is mega-fraud. It is the theft of enormous sums of money from other people, yet no-one does the perp walk because that’s for people without friends and political connections. For everyone else it’s the rule of law and a long stretch for financial crimes. For the politically-connected banksters there is no rule of law.
Three years after Zero Hedge busted Barclays
There is no specific mention of Barclays in the link, other than the list of submitted interest rates. ZH highlights the outliers, the banks that are well away from the average, either too high or too low and suggest that something is not quite right but do not say anything about Barclays.
“We can finally close the case on the massive Libor manipulation issue that we first brough to the world’s attention back in January 2009 when we penned: “This Makes No Sense: Libor By Bank.” ” (January 22, 2009)
Well no. WSJ was talking about it before that. (May 29, 2008)
http://online.wsj.com/article/SB121200703762027135.html
The WSJ is a superb newspaper that is pretty fearless about reporting financial crime. I’m not surprised that they reported this story earlier, or perhaps, first.
Blogs don’t usually report big stories first. They generally take what is reported first in the ” main stream media ” and then repeat it, or express their own opinions about it.
The ” main stream media ” is as important as ever.
( from the wiki site on the WSJ )
The WSJ has in the recent past written major Pulitzer winning articles
on insider trading
on backdating of stock options
and they broke the Enron fraud story.
They’re very important.
Niall Ferguson nailed this in his second Reith Lecture last week. His basic argument is that simple regulations backed up by draconian sanctions (lengthy jail sentences) would work much better than vastly complicated regulations backed up by slaps on wrists. In Iceland the banksters were jailed, in the US and UK none have even been charged with fraud, and when massive sustained fraud is discovered (as in this scandal) they get paltry fines. There is no deterrent to repeat offending and of course they are still Too Big To Fail so they can continue gambling and defrauding and gorging themselves on bonuses without fear.
The lecture lasts 30 minutes, followed by 15 minutes of questions. Listen and learn.
I was about to recommend Niall Ferguson’s Reith Lecture as well. Well worth listening too.
I will try to listen to that.
I hope that we never get to a stage where people are prosecuted for making errors or for taking risks. Risk taking is a really good thing.
And from what I can see, things like what laid AIG low were NOT illegal under UK law ( where they happened ) or in the US ( where the company is based )
But yes, where law and regulations are evaded, there should be penalties, with teeth.
Risk taking is a really good thing.
It depends whose money is being risked, if they have consented to it being risked and if the risker has any skin in the game. Far too many banksters are still in the heads they win, tails we lose position. If the bet (and that’s what it is) comes off they get fat bonuses, if it fails the client is the one who loses and they get to keep their jobs.
This scandal should have led to criminal prosecutions, and not just of those directly involved. It should have been right up to board level, with jail sentences if proved guilty. These fines are laughable, and be sure that the banksters are laughing in private and will continue with their embezzlements with their (justified) sense of impunity intact.
Some of these senior executives simply did not understand that risks that they were taking. That’s not an excuse, that is simply a fact. I am not sure you can make stupidity a crime.
Anyone who buys a share of stock places every penny of it at risk. I’ve had two of my small holdings go bust over the years. Both were financial companies, and both had value of zero at the end of the day. That’s life.
Some of the populist dummy Tea / Occupy types think that bailouts mean that everyone continues to party, but I assure you that the shareholders of AIG and Lehman and Bear Stearns took a horrific financial bath, with many ruined. I know some of these people.
Well spoken, Pete.
It is now becoming clearer to me, how the main banking companies are in league with the political parties in perpetrating this massive fraud, this massive theft of our wealth. What a disgraceful thing it is.
Thankfully, some of the main newspapers (including the Daily Mail) have recently begun to publish articles highlighting the rise of several new “loans and savings companies” such as the “Bank of Dave” – companies which offer private banking services NOT based upon fractional reserve banking, but based upon the principles which banking was always supposed to be about.
Note, these companies are not allowed to call themselves “banks”. I would regard that as a compliment. I’m seriously thinking of investing in some of these new, “real” banks.
Some of these senior executives simply did not understand that risks that they were taking.
Then they were criminally negligent. They understood how their bonuses worked, that’s for sure.
I can’t say that they were ” criminally negligent ” They were stupid, and wrong.
There were very few executives who saw the danger of derivatives – Warren Buffett and Jamie Dimon are two. Can you name a third? Me neither.
There were very few regulators or politicians who saw the danger of derivatives. I can’t think of one who spoke out against them.
So if nearly nobody could see the danger, I’m not sure that I see any criminal negligence. I see greed and the madness of crowds and a great deal of ignorance. That’s not a crime.
Phantom
I don’t buy that excuse. These guys were paid tens of milions a year. They should have insisted on being properly briefed on the risks in their own balance sheets, but instead they were blinded by the bonus gravy train and didn’t ask.
Well, we differ. I think that some should have been prosecuted – the guy who ran AIG Financial Products in London does come to mind – but most were ignorant, and not malicious.
Its a fact that some of these companies are almost too complex and too large for anyone to manage. It is a real problem and not an easy one to fix.
but most were ignorant
When you are being paid $10 million a year, ignorance is no defence.
some of these companies are almost too complex and too large for anyone to manage. It is a real problem and not an easy one to fix.
Break them up so they aren’t too complex and more importantly, aren’t Too Big To Fail next time. And there will be a next time.
Yes but there should be ” no regulation ” and government action is always bad so we can’t break them up
No, as Niall Ferguson argues, regulation should be simple with draconian penalties.
Standard Oil and Ma Bell were broken up, so it can happen again.
Phantom -
But there was regulation, which was ineffective and ignored, and the government protects the TBTF banksters.
We don’t need potemkin regulation when fraud is sure to lead to stern punishment under the common law. We don’t need government to break up any banks. That would be a disaster and lead to massive corruption anyway. Free markets and competition will break up the banks into many smaller entities, turning them into much more efficient units instead of being the huge, quasi-government behemoths of crony capitalism that they are now.
We don’t need potemkin regulation when fraud is sure to lead to stern punishment under the common law.
Pete
The scandal exposed today should have resulted in criminal prosecutions, not a slap on the wrist fine.
But yes, I hope that civil lawsuits by those ripped off by these fraudsters will lead to settlements many times greater than the “fines” announced today.
Yes, that is very much the crux of things.
State Regulation is a fine thing in principle, but what happens when the State itself turns bad, and is in league with the very bent corporations it aspires to protect? The answer: a thoroughly rotten state of affairs ensues.
Well-meaning entities such as “Occupy” berate and pour scorn upon “the banks”, and deservedly so. Yet they do not grasp that the main political parties and the banks are in each others’ pockets. The State is just as much to blame as are “the bankers” for this current mess we are all in.
There was -no- regulation of derivatives. The US states did not regulate them, the SEC did not regulate them, and the FSA in London did not regulate them.
And the US Banking regulations that had existed for decades were gutted by President Clinton and the Republicans of the House.
We can’t blame a regulation that did not exist
Much of the regulation that existed actually did exist ( FDIC, Insurance Company regulation ) worked damned well. If AIG had gone bust, the fifty state regulations of the insurance company subsidiaries would have protected policyholders, even then – since there were protected reserves that were not frittered away on credit default swaps etc.
Tom
I don’t think that the Occupy movement is well meaning. It is a coalition of the messed up and the bad.
Phantom -
We’re talking about interest rate manipulation here, not derivatives. There’s no need for that red herring, though since you mention it, any firm which went bust through derivative trading should have been allowed to go bust.
One primary reason why our economies continue to decline, and I’ve said this many times before, is because States will not allow debts to be liquidated. It is necessary.
Phantom, I’m turning this over in my mind.
I think that someone can certainly “mean well”, even if they are totally mistaken and ill-educated about the purpose of their cause. Therefore, I’ll allow “Occupy” the benefit of the doubt and say that their hearts were probably in the right place, even though their political understanding was limited.
It would be mean of me to sneer at someone who “means well”, irrespective of their supposed understanding of things.
One primary reason why our economies continue to decline, and I’ve said this many times before, is because States will not allow debts to be liquidated.
Yes, Ferguson deals with this in his lecture. Darwinism should be allowed to prevail. Instead we have “intelligent design” with the state as as the designer. What could go wrong?
All I know is that taxpayers and investors got royally fucked.
Peter -
What could go wrong indeed if we leave the management and control of our entire economy to a castly few?
The Reith Lecture is certainly worth anyone’s time. Harvard will be reviewing Ferguson’s tenure after that outburst.