Meet the Unseen Bullwhip of the New Slavemasters

[Octafish]

LIBOR

Their Profit is Our Loss

The Dark Heart of the Libor Scandal

by MARK VORPAHL
CounterPunch, August 07, 2012

Though, for most, the London Inter-Bank Offer Rate (Libor) interest rate fixing scandal appears to be distant and far too complex to understand, its potential consequences may be as economically devastating as a world war.

The Libor is used to set payments on $800 trillion worth of financial instruments. It sets the prices that people and corporations pay for loans and receive for savings. Given that the fraud impacted $10 trillion in consumer loans, the Libor scandal will likely leave a long list of previous financial scandals that contributed to the Great Recession look like child’s play.

It also pulls back the curtain on the mechanisms behind the world economy, its anti-social priorities, its willingness to gamble away the future of billions of people, and the government’s collusion in these operations. The Libor scandal reveals that the “invisible hand” Adam Smith spoke of in explaining how a capitalist economy regulates itself has been transformed into the trained hand of a swindler.

SNIP...

Barclays Bank is just the tip of the iceberg. In several countries, 20 big banks are under investigation, including such behemoths as Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, RBS and UBS.

Current Treasury Secretary Timothy Geithner and former president of the Federal Reserve Bank of New York, and Chairman Ben Bernanke have had to defend the Fed’s response when it first became aware of the fraud in 2008. While Geithner said he was “aggressive” in expressing his concerns, this on-going scandal did not come to light until four years later.

CONTINUED...

http://www.counterpunch.org/2012/08/07/the-dark-heart-of-the-libor-scandal/

Here in Detroit, since 2008, many of my friends have lost their homes. Almost always, their jobs went first.

[freshwest]

1. Depressions are so good for business, they are addicted to them. Consider that.

[socialist_n_TN]

3. And that is the key statement...........

IOW, recessions and depressions are built in to the system. Capitalism will NEVER get away from the busts because that's how wealth is concentrated.

[freshwest]

7. They bust the workers everyday of the week, once softened up, they go for the fruits of their labor.

The game is real assets. Land, resources, etc. and this is a pattern that existed prior to what we call capitalism. Or perhaps a form of capitalism, in its grossest terms, has always existed.

The social systems of the world have for the most part, been based on winners and losers, no matter what language or ideology is employed. Conquest or persuasion, slaughter or education.

We don't have walls for nothing, we don't have geographical borders, or barriers to human thought and creativity for nothing. The planet is divided by water and terrain, but we have subdivided it much further and in each equation, there isn't room for equality.

In some ways, we have all supported this. Because with concentratiing resources, land and labor, great things can be and have been, accomplished for the whole. Where a person sits in the whole is what determines one's satisfaction, comfort, life span and freedoms.

[patrice]

12. Well said!

[freshwest]

13. Rather depressing, too. But we have to look at the roots of our dilemma, not the symptoms. Thanks.

[patrice]

18. I have for months and months been telling everyone it's all nothing but binary code, 0s and 1s,

arbitrary ambiguities swapped back and forth by means of privately custom-designed accounting processes between privately owned computers. All private but the measure of ALL things public and everything about everyone in this country.

There is absolutely NOTHING closer to divine right monarchy, except that these are oligarchs, nothing closer to royalty. It troubles me a bit to say so, relative to anyone who experienced slavery and oppression directly or in their families, but we ARE slaves to financial kings. There's not the slightest bit of exaggeration in that statement.

[freshwest]

20. The only problem is, that this is not new. There is a thread in human society that wants someone to

Make decisions, fight our battles for us, take care of details we don't know how to do and work with people who would never talk to us. We say we don't like the heirarchical systems, yet we continue to join them.

The people we know near the top are used as straw dogs, the adored ones we can reach with our words. We cast our cares on them, love them when they give us what we want and hate when they do not do what we cannot do.

I think all these different elements, even these that we may fear and hate as ruling over us, are our creations on some level. Some may wonder why we do not have more people willing to stand up for us. even take that assassin's bullet. It seems a thankless task at times.

[HiPointDem]

5. expand money, get a bunch of people working to create new assets. pull back on money, a lot

go bankrupt, shut up shop, lose assets.

buy up new assets on the cheap.

[Octafish]

11. I very much agree with the socialist perspective on this

...which happens to be that of the TARP guy with integrity. Barofsky also sees the cyclical nature of things is no accident. It's opportunity.

Ex-TARP overseer denounces US government cover-up of Wall Street crimes

31 July 2012

In interviews prompted by the publication of his new book (Bailout) on the $700 billion US bank bailout scheme—the Troubled Asset Relief Program (TARP)—the former special inspector general for the program, Neil Barofsky, has denounced bank regulators and top officials in the Bush and Obama administrations for covering up Wall Street criminality both before and after the financial crash of September 2008.

In an interview last Thursday with the Daily Ticker blog, Barofsky accused Treasury Secretary Timothy Geithner of facilitating the banks’ manipulation of Libor, the global benchmark interest rate, when he was president of the Federal Reserve Bank of New York in 2007-2008, prior to his joining the Obama administration. Recently published documents show that as early as 2007, Geithner knew that London-based Barclays Bank was submitting false information to the Libor board to conceal its financial weakness.

Geithner merely wrote to the Bank of England suggesting certain changes in the Libor rate-setting mechanism, but made no public statement and failed to notify regulators at the US Justice Department, the Commodity Futures Trading Commission and the Securities and Exchange Commission, even though major US banks were alleged to be involved in the rate-rigging fraud.

In his interview, Barofsky rejected Geithner’s claims to have acted appropriately. Calling the Libor scandal a “global conspiracy to fix one of the most important interest rates in the world,” the former TARP inspector general said, “[Geithner] heard this information and looked the other way. Geithner and other regulators should be held accountable, they should be fired across the board. If they knew about an ongoing fraud, and they didn’t do anything about it, they don’t deserve to have their jobs. I hope to see people in handcuffs.”

CONTINUED...

http://www.wsws.org/articles/2012/jul2012/pers-j31.shtml

My feelings, exactly.

[freshwest]

16. I don't demonize Geithner, though. Forest - Trees analogy. These people are specialists in the hive.

I've seen his statements and arguments trying to hold accountable these people, but he is just a cog. We can't forget, either, that these are the people who come face to face with the unyielding oligarch of our day. They do not respect our government any more, as they are global and we are just a branch of their operation.

I do not believe, even though I have read the 'smoking gun' threads with the 'ah, ha, gotcha theme' on him that he commited a crime. We are so eager to find someone to blame. Even though men such as Geithner live better, they are isolated by their education, associations and social class.

They are like the idealized mistresses of fiction, living well, for the pleasure of someone, but not in charge. They have their place, and have worked hard to get it and their position may seem carefree to us here, but they are not. They may have been fooled like all the rest of us.

I believe changes come from the ground up, and that has to come from solidarity. There is little of that around. Likewise, I don't fault Obama for what some of us complain bitterly about in this milieu. He is like the mythical Dutch boy with his finger in the dike, trying to hold back the flood. We are treading close to a collapse that does not need to happen.

I do not call for rioting in the streets or a collapse, and for that Paulistas would call me a 'statist' lackey. Many that scream loudest for revolt do not want to consider that in such events, the very people they claim they want to save from suffering, those that Obama is trying to save, the young, old, poor and feeble, who do not fit into a rough and tumble existence but have kept our society humane, will die in droves. That's almost always been so, and in chaos it is not equality and peace that erupts like rainbows, but dictatorship.

So we have an economic and banking system that is corrupt; so it was when FDR inherited the mess; and it took him twice as long as Obama will legally be allowed to serve in office to put into practice what kept the USA regulated and moving forward for decades.

That level of unity and solidarity among many people does not exist now and the reforms he put in place to prevent a fascist takeover have almost all been stripped away. A new generation will have to remake this place, or the world and find our way out of this carefully, or be swept up by the same forces we hate.

[Octafish]

22. Geithner made certain AIG's losses were covered -- to the penny -- by the US taxpayer.

It's not a question of demonization. It's a matter of making those responsible held accountable.

Geithner's New York Fed Pushed AIG to Keep Sweetheart Deals Secret

by Shahien Nasiripour
Published on Thursday, January 7, 2010 by The Huffington Post

EXCERPT...

After the firm was given a taxpayer-funded backstop, one of its most controversial acts was to repay banks at 100 cents on the dollar for what was by that point nearly worthless insurance the banks had bought from AIG, known as credit-default swaps.

A brutal report issued in November by a government watchdog disclosed that AIG had actually been trying to negotiate better terms with the banks until - guess what? -- the New York Fed stepped in. The report held Geithner personally responsible, and led to renewed questions about his fitness for the job.

Now it turns out Geithner's people told AIG to delete references on draft regulatory filings to the sweetheart deals. And AIG then excluded any mention of them in its December 2008 filing with the Securities and Exchange Commission, keeping the information hidden from investors and the public.

SNIP...

Instead of bargaining with AIG's numerous counterparties to resolve its billions of dollars in souring derivatives contracts, Geithner's team ended up having AIG pay top dollar for toxic assets -- "an amount far above their market value at the time," the November report noted. It described how the team led by Geithner failed nearly every step of the way.

And consider the timing of the newly discovered action. Reports first emerged that Geithner was being tapped for the Treasury secretary post on Nov. 21, 2008; the Senate confirmed his nomination on Jan. 26. Details of AIG's 100-cents-on-the-dollar payments to various banks with taxpayer-supported funds totaling in the billions, which would otherwise have become public no later than December, weren't disclosed to the public until March, when Geithner was already in office.

CONTINUED...

http://www.commondreams.org/headline/2010/01/07-5

Somebody else must agree with another perspective, as that image above shows the last time I remember Code Pink getting to display their opinion in a Congressional hearing. Granted, the spirit of change which filled the halls after 2008 has been replaced by the protectors of the status quo, that doesn't change the truth or the fact We the People got fleeced, Big Time.

[freshwest]

24. He's another goldfish in a tiny bowl. I remember the first TARP with the sky is falling crowd.

They don't see any future without the system they have worked in all their lives. They hold things back to not cause panic, not just for their own protection, but then, maybe they are out of fear. Their education, their training, their work has been in that milieu. The problem of wealth and control of resources is harder to change than these people, and they are merely the paper shufflers of the kingdom. Just as some might argue what is proper medical care and get scorched by those who are true believers in the system, they defend to the death what they were taught. And I have a splitting headache no doctor can cure, am going for something more basic here, which I understand is not what you are putting these details about. See you later, thanks for the thread.

[Octafish]

27. True: The fish-can't-grok-the-water-they're-in thing. The point is these sharks DO.

...and they game US plenty. Here's another leading clerk from the mega-rich's well-paid errand boys:

Who is Henry Paulson?

By Tom Eley
23 September 2008
WSWS.org

EXCERPT…

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

In the months leading up to his proposed $700 billion bailout of the financial industry, Paulson had already used his office to dole out hundreds of billions of dollars. After his July 2008 proposal for $70 billion to resolve the insolvency of Fannie Mae and Freddie Mac failed, Paulson organized the government takeover of the two mortgage-lending giants for an immediate $200 billion price tag, while making the government potentially liable for hundreds of billions more in bad debt. He then organized a federal purchase of an 80 percent stake in the giant insurer American International Group (AIG) at a cost of $85 billion.

SNIP…

Paulson bears a considerable amount of personal responsibility for the crisis.

Paulson, according to a celebratory 2006 BusinessWeek article entitled “Mr. Risk Goes to Washington,” was “one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits.” Under Paulson’s watch, that meant “taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999. It means placing big bets on all sorts of exotic derivatives and other securities.”

[font color="green"]According to the International Herald Tribune, Paulson “was one of the first Wall Street leaders to recognize how drastically investment banks could enhance their profitability by betting with their own capital instead of acting as mere intermediaries.” Paulson “stubbornly assert Goldman’s right to invest in, advise on and finance deals, regardless of potential conflicts.”[/font color]

CONTINUED...

http://www.wsws.org/articles/2008/sep2008/paul-s23.shtml

At one time, Paulson's bosses malefactors of wealth feared the government of the United States. Today, they're so well-off they employ billionaires and leading politicians, even "presidents."

[nc4bo]

2. Amazing how the same names from '07/'08 are back again causing mayhem.

More predators.

[Octafish]

10. Predator Class

Swiss bank UBS hired Sen. Phil Gramm as Vice Chairman...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4055207

The fellow helped change the law that protected taxpayers from bank fraud. Then, after the looting, helped his cronies move it safely offshore.

[HiPointDem]

4. kr

[Octafish]

26. Speaking of Old Slavemasters...

News to the rest of us:



Baron de Rothschild and Prescott Bush, sharing a moment and a bit o' information in this small world.

Rothschild and Freshfields founders’ had links to slavery, papers reveal

By Carola Hoyos
Financial Times

Two of the biggest names in the City of London had previously undisclosed links to slavery in the British colonies, documents seen by the Financial Times have revealed.

Nathan Mayer Rothschild, the banking family’s 19th-century patriarch, and James William Freshfield, founder of Freshfields, the top City law firm, benefited financially from slavery, records from the National Archives show, even though both have often been portrayed as opponents of slavery.

Far from being a matter of distant history, slavery remains a highly contentious issue in the US, where Rothschild and Freshfields are both active.

Companies alleged to have links to past slave injustices have come under pressure to make restitution.

JPMorgan, the investment bank, set up a $5m scholarship fund for black students studying in Louisiana after apologising in 2005 for the company’s historic links to slavery.

CONTINUED (with registration, etc) ...

http://www.ft.com/cms/s/0/7c0f5014-628c-11de-b1c9-00144feabdc0.html

What used to be "back story" is now "the way it is."

[socialist_n_TN]

6. I just read the entire article.........

and I agree with the prescriptions of the author too. Nationalize the fucking big banks without compensation is the answer, but he's right. It won't happen in Congress. It'll only happen with pressure from the streets.

[freshwest]

19. Hell, I wanna nationalize every damn thing. If it's so important that we are in hock to it, if we

Have sent people to die for it, or work their lifetimes for it, no matter how we may now look with a jaded eye, it's ours. And as the native people have said over and over, and the mentally enslaved Europeans came over here to escape their own entrapment, this remains true:

How can you buy or sell the sky, the warmth of the land? The idea is strange to us. If we do not own the freshness of the air and the sparkle of the water, how can you buy them? Every part of the earth is sacred to my people. ~ Chief Sealth

Who owns this now? And from some of the Founding Fathers, some more quotes:

While it is a moot question whether the origin of any kind of property is derived from Nature at all... it is considered by those who have seriously considered the subject, that no one has, of natural right, a separate property in an acre of land... Stable ownership is the gift of social law, and is given late in the progress of society. 
~ Thomas Jefferson

Private property... is a Creature of Society, and is subject to the Calls of that Society, whenever its Necessities shall require it, even to its last Farthing, its contributors therefore to the public Exigencies are not to be considered a Benefit on the Public, entitling the Contributors to the Distinctions of Honor and Power, but as the Return of an Obligation previously received, or as payment for a just Debt. 
~ Benjamin Franklin

All property, indeed, except the savage's temporary cabin, his bow, his matchcoat and other little Acquisitions absolutely necessary for his Subsistence, seems to me to be the creature of public Convention. Hence, the public has the rights of regulating Descents, and all other Conveyances of Property, and even of limiting the quantity and uses of it. All the property that is necessary to a man is his natural Right, which none may justly deprive him of, but all Property superfluous to such Purposes is the property of the Public who, by their Laws have created it and who may, by other Laws dispose of it. 
~ Benjamin Franklin

I think this is what may evolve for the masses of men, and woe be it to us if the Commons are removed. And I'll quit ranting after this one:

Now, the Libertarian Party, is a *capitalist* party. It's in favor of what *I* would regard a *particular form* of authoritarian control. Namely, the kind that comes through private ownership and control, which is an *extremely* rigid system of domination -- people have to... people can survive, by renting themselves to it, and basically in no other way... I do disagree with them *very* sharply, and I think that they are not..understanding the *fundamental* doctrine, that you should be free from domination and control, including the control of the manager and the owner. ~ Noam Chomsky

[99th_Monkey]

8. Geithner apparently was so shocked he could not even pick up his telephone

to call the New York Times or Associated Press or CNN
about how "aggressively concerned" he was in 2008.

poor fellow.

[woo me with science]

14. ^^^^^^^This^^^^^^

Have we had enough of the charade yet, America?

Are we awake now?

[xchrom]

9. Du rec. Nt

[woo me with science]

15. K&R

[patrice]

17. "new"?

Starting out, any reform movement as a lobbying exercise is a complete dead end.

It will take an independent mass social movement to exercise the necessary force to abolish this kind of financial fraud. When the streets are regularly filled with millions united in protest accompanied by strike action aimed at helping the vast majority of working people, the roadblocks to reform are pulverized.

[Octafish]

21. Good point. Here's something old and new: The SHAH of Iran was instrumental in starting LIBOR.

Participation by the late BFEE moneybag is news to me.

A Greek banker, the Shah and the birth of Libor

By Kirstin Ridley and Huw Jones
Wed Aug 8, 2012 5:01am EDT

Aug 8 (Reuters) - Minos Zombanakis, born 86 years ago on a Greek island, remembers the birth of the interest rate benchmark now at the heart of a global rigging scandal well.

"I was, more or less, if you excuse the lack of modesty, the one who started the whole thing," he laughs, speaking by telephone from his village among citrus orchards in Crete.

Zombanakis was running the newly-opened London branch of Manufacturer's Hanover, now part of JPMorgan, when the bank organised one of the first syndicated loans pegged to what he dubbed a London interbank offered rate (Libor) in 1969.

The $80 million loan, for the Shah of Iran, embodied the way cross-border financial markets that had been effectively closed since 1929 were being prised open - sowing the seeds for London to flourish as a global financial centre.

The ambitious bankers of that era had little idea that the rate they were using to price these loans would become a central cog in the global financial system and a benchmark for $550 trillion in contracts ranging from interest rate derivatives to home loans and credit cards.

CONTINUED...

http://www.reuters.com/article/2012/08/08/banking-libor-change-idUSL6E8J848X20120808

This, along with cartoons, show why newspapers are important for democracy. Without the truth, no matter how old or new, We the People can't tell What's What or Who's Who. Now if only printing presses, ink and paper weren't so darn expensive...

[woo me with science]

23. Kick

[woo me with science]

25. Kick

[Octafish]

28. The Libor Investigation Has Turned UBS Into A War Zone

Not that it makes me feel better, but perhaps Justice got a step closer to meeting Just-Us:

The Libor Investigation Has Turned UBS Into A War Zone

Larry Doyle, Sense on Cents|Aug. 10, 2012, 9:10 AM

EXCERPT...

Can you further imagine selected employees wondering whom they can trust and what they might say not knowing how the information might be used. I can only think that some employees may want to have their lawyer present or on call when approached for a conversation.

What makes this situation even more challenging and unsettling for both past and current employees? The fact that UBS has already negotiated an institutional settlement with selected departments and regulators. Do you think those settlements might protect the senior executives within the organization? You think? As the WSJ highlights,

UBS itself has disclosed in regulatory filings that it secured leniency deals with the Justice Department’s Antitrust Division and competition regulators in Switzerland and Canada.

How does any leniency deal occur in light of the fact that,

. . . the company has fired or suspended about 20 traders and managers as a result of the four-year inquiry, another person familiar with the investigation said.

If 20 traders and selected managers at UBS have been fired for their involvement in the largest financial scandal EVER, are we supposed to believe that the most senior executives within the institution were not aware — or failed to supervise and should have been aware — of the manipulation as it occurred over many years. To accept that premise would take naivete to the extreme. Yet the institution is allowed a leniency deal and assuredly a fine as the rank and file “get hunted.”

CONTINUED...

http://www.businessinsider.com/libor-scandal-ubs-plays-the-most-dangerous-game-2012-8

Now if the police can get Phil Gramm to talk... Oh! But he was the police.

[1-Old-Man]

29. So what they did, actually, was turn your wealth into their income