Libor reveals a rotten financial system - by Elizabeth Warren

The Libor scandal is more than just the latest financial deception to come to light. It exposes a fraud that runs to the heart of our financial system.

Libor, the London interbank offered rate, is a benchmark for a range of interest rates, and the misdeeds making headlines have to do with how those rates are set. If insiders can manipulate the basic measurement of a loan — the interest rate — there is rot at the core of the financial system.

Read more: Libor reveals a rotten financial system - Philly.com

The Netherlands: Dutch lender Rabobank fires 4 employees over Libor rigging

Dutch lender Rabobank has fired four employees between 2008 and last year over the manipulation of interbank lending rates, a scandal which has now engulfed a dozen or more major banks around the world, a Dutch newspaper reported on Friday.

The Dutch agricultural cooperative bank is a member of the panel that sets the London Interbank Offered Rate ( Libor), a benchmark for the rate at which banks lend to each other and which underlies financial contracts from mortgages to complex derivatives worth trillions of dollars.

Two of the employees were dismissed in 2008 following an internal investigation by Rabobank, and the other two late last year, Het Financieele Dagblad reported, citing sources in the financial sector.

Note EU-Digest: the solution is not in firing individual employees but in fixing a malfunctioning and corrupt global banking industry.

Read more: Dutch lender Rabobank fires 4 employees over Libor rigging - The Economic Times

Tim Geithner warns on Europe, fiscal cliff - by Jonathan Allen

The U.S. financial system has regained its footing since the crisis of a few years ago but is still threatened by instability in Europe and uncertainty about taxes and spending at home, Treasury Secretary Timothy Geithner will tell a House committee on Wednesday.

In offering his takeaway from the annual Financial Stability Oversight Council report, Geithner will highlight falling debt among financial companies and individual citizens, according to a copy POLITICO obtained of his prepared remarks for a House Financial Services Committee hearing. And he will challenge Congress to make policy choices sooner rather than later to give the financial sector a greater sense of stability.

But it is Geithner’s response to questions on Libor, the London interest rate benchmark, that will have Wall Street bankers and congressional overseers on the edge of their seats.

Rep. Randy Neugebauer, who sits on the panel, wrote a letter on Monday to Willam Dudley to ask what the New York Federal Reserve Bank did in 2008 about evidence that international banks were manipulating rates. Dudley is the New York Fed’s current president, and Geithner was its chief at the time.

Note EU-Digest : Mr. Geithner should look at how and why the economic problems in the US  caused the Global financial  meltdown before warning Europe or meddling in their business.

Read more: Tim Geithner warns on Europe, fiscal cliff - Jonathan Allen - POLITICO.com

EU to amend law to make Libor rigging illegal

Manipulating market benchmarks in the European Union would be illegal under a draft law being proposed next week after Barclays' admission of rigging the London-based Libor rate, the EU's executive body said on Friday.

The European Commission said it would extend its draft law on tackling market abuses which is currently awaiting approval from the European Parliament and member states.

"Next Wednesday the Commission will adopt amended proposals on insider dealing and market manipulation, to include specific provisions prohibiting the manipulation of market-based benchmarks, and to make such manipulation a criminal offence," Commission spokeswoman Pia Ahrenkilde Hansen told a regular briefing in Brussels.

EU commissioners Viviane Reding, in charge of justice, and Michel Barnier, who oversees financial regulation, will present the amendments on Wednesday to impose criminal penalties on manipulation.

Note EU-Digest: better late than never...

Read more: EU to amend law to make Libor rigging illegal | Reuters

LIBOR process flawed, U.S. regulator finds - Republican lawmakers object to creation of the office and its mandate

The process for setting a key global interest rate is flawed and poses a risk to the stability of financial markets, according to a report from the U.S. Treasury Department.

A British banking trade group sets the LIBOR every morning after international banks submit estimates of what it costs them to borrow money. The rate affects interest on many loans.

Banks are capable of manipulating the London interbank offered rate (LIBOR), the Treasury's Office of Financial Research said in the report released Friday.

The report cites other risks to financial stability: roughly 12 million U.S. homeowners who owe more on their mortgages than the value of homes; continued risk-taking by big financial institutions; and the European debt crisis. The report also said the agency may require financial companies to submit data on transactions and trading positions. The office says its needs to review that data to better understand what's happening in financial markets.

A number of major banks, including Citigroup and JPMorgan Chase, are also being investigated.

The Office of Financial Research was created by the 2010 financial overhaul law. Under the law, the agency can collect and analyze financial data so it can give early warnings to regulators of potential problems. 

Some Republican lawmakers have objected to creation of the office and its mandate. They say its power to collect confidential information from companies is too broad.

Read more: LIBOR process flawed, U.S. regulator finds - Business - CBC News

The LIBOR Fraud: More evidence we must break up the big banks - by Robert Reich

Just when you thought Wall Street couldn’t sink any lower, an even deeper level of public-be-damned greed and corruption is revealed.

Consider the most basic services banks provide you: You put your savings in a bank to hold in trust, and the bank agrees to pay you interest on it. Or you borrow money from the bank and agree to pay the bank interest on the loan.

We trust that the banking system is setting interest rates based on its best guess about the future worth of the money. And we assume that guess is based, in turn, on the cumulative market predictions of lenders and borrowers all over the world (including central banks) about the future supply and demand for the dough.

But suppose our assumption is wrong. Suppose the bankers are manipulating the interest rate so they can place bets with the money you lend or repay them — bets that will pay off big for them because they have inside information on what the market is really predicting, which they’re not sharing with you.

That would be a mammoth violation of public trust. And it would amount to a rip-off of almost cosmic proportion — trillions of dollars that you and I and other average people would otherwise have received or saved on our lending and borrowing that have been going instead to the bankers. It would make the other abuses of trust we’ve witnessed look like child’s play by comparison.
Sad to say, there’s reason to believe this has been going on, or something very much like it. This is what the emerging scandal over “Libor,” or the London interbank offered rate.

Libor is the benchmark for trillions of dollars of loans worldwide — mortgage loans, small-business loans, personal loans. It’s compiled by averaging the rates at which the major banks say they borrow.

So far, the scandal has been limited to Barclays, a big, London-based bank that just paid $453 million to U.S. and British bank regulators. Barclay’s top executives have been forced to resign and its traders’ emails give a chilling picture of how easily they got their colleagues to rig interest rates in order to make big bucks.

But Wall Street has almost surely been involved in the same practice, including the usual suspects — JPMorgan Chase, Citigroup and Bank of America — because every major bank participates in setting the Libor rate, and Barclays couldn’t have rigged it without their witting involvement.

Read more here: http://www.kansascity.com/2012/07/10/3699288/robert-reich-more-evidence-we.html#storylink=cpy

Read more: Robert Reich | More evidence we must break up the big banks - KansasCity.com

Canada: Competition Bureau discloses names in global bank probe

Canada's Competition Bureau continues to probe a mushrooming international scandal that has already ensnared a venerable British bank and forced the resignation of its chief executive.

Documents filed in an Ontario court suggest the bureau is investigating a possible Canadian link to the scandal that's rocking the world of global banking: financial skullduggery involving the manipulation of a key international interest rate known as the LIBOR rate.

One of the named parties — the Canadian branch of the Royal Bank of Scotland — has filed a court challenge on the grounds the bureau's actions are unconstitutional and well beyond the scope of its mandate. But the investigation hasn't stopped, said bureau spokeswoman Gabrielle Tasse.

"I cannot speak to the investigation because we have to conduct our work privately, but our investigation is ongoing," Tasse said.

Read more: Competition Bureau discloses names in global bank probe - Business - CBC News

The Banking Industry/Regulators Time-Bomb - by Sy Harding

For four years the financial industry has successfully lobbied to water down and delay the new regulations. The previously too big to fail financial firms have become even larger and more ominous through mergers suggested and abetted by the regulators as part of the rescue effort from the 2008 crisis. No one has gone to jail, most of the same ‘masters of the universe’ that ran the firms before are still running them (and still drawing down unconscionable salaries and bonuses).

We were shocked to read the other day that the 5-year statute of limitations for the SEC to bring charges related to the 2008 meltdown will soon run out, and SEC officials are ‘concerned’ that they won’t make the deadline on some cases on which they supposedly want to file suits.

The costs of the 2008-2009 bailout that prevented the country from plunging into another Great Depression, are still hanging over the rest of us in the form of a weak economy, record government debt, record budget deficits, and the so-called ‘fiscal cliff’ to be faced in 2013.

So, is the financial industry ashamed of its former activities and pitching in to help? No sign of that.
The latest scandal is the manipulation of the Libor (London Interbank Offered Rate). And it’s a beauty.

The Libor influences hundreds of trillions in financial contracts around the world, including mortgages, corporate loans, loans to individuals, and interest-rate swaps. The 16 major banks that set the rate are under investigation by authorities in the U.S., Canada, Europe, and Asia, suspected of manipulating the rate.

Read more: The Banking Industry/Regulators Time-Bomb! - Business Insider

EU Prepares Tougher Bank Regulation in Response to Barclays Libor Scandal

Banks in the European Union may face a fresh wave of regulation as lawmakers respond to the Libor scandal that led to the resignation of the three most senior managers at Barclays Plc. (BARC).
 
Michel Barnier, the 27-nation EU’s financial services chief, said today that he would examine whether the manipulation of the London interbank offered rate had exposed “gaps” in the bloc’s laws. At the same time, legislators in the European Parliament are seeking to bolster plans unveiled last year to toughen sanctions against market abuse.

The resignations at Barclays came after the bank was fined a record 290 million pounds (euro 265 million) by regulators in the U.S. and U.K. for attempting to rig Libor. The bank admitted that it submitted false Libor information to benefit derivatives trades and bolster its own positions.

The Barclays fine provoked renewed calls for tougher oversight of the financial system and pushed regulatory probes of interbank lending rates to the top of the political agenda. De Rynck said Barnier is “following developments” with the commission’s antitrust department, which has a related probe into Libor and Euribor rates.

Arlene McCarthy, the lawmaker leading work in the EU parliament on the draft law on market abuse, said she and Barnier discussed how the bloc’s rules should be extended to ensure that manipulation of interbank lending rates is treated as a criminal offense.

The EU needs to “give regulators the tools they were asking for to be tougher” on market abuse, she said. 

EU Prepares Tougher Bank Regulation in Response to Barclays LiborScandal - Bloomberg