The Market Ticker – Janet Calls Out The Media
“Sometimes Being Responsible Means *****ing People Off”
By Janet Tavakoli – July 3, 2012
Last week, Gillian Tett of the Financial Times wrote how five years previously, she and her fellow journalists were intimidated into backing off of a huge story about banks manipulating LIBOR. This is the London Interbank Offered Rate set by a poll of leading banks to determine the benchmark interest rate referenced by many home mortgage loans, floating rate notes, collateralized debt obligations, and many other financial instruments:
“At the time, this sparked furious criticism from the British Bankers’ Association, as well as big banks such as Barclays; the word “scaremongering” was used. But now we know that, amid the blustering from the BBA, the reality was worse than we thought. As emails released by the UK Financial Services Authority show, some Barclays traders were engaged in a constant and pervasive attempt to rig the Libor market from 2006 on, with the encouragement of more senior managers. And the British bank may not have been alone.”
(“LIBOR Affair Shows Banking’s Big Conceit,” Financial Times, June 28, 2012.)
At the heart of the allegations is what appears to be a blasé criminal conspiracy within Barclays. Moreover, Tett is correct. Barclays is far from alone.
Unfortunately, the intimidation was a success. The BBA and Barclays chose their word carefully, because accusing journalists of “scaremongering” suggests they are irresponsible sensationalist hacks. In essence, through lies and intimidation, they threatened to ruin careers.
The Financial Times backed off. As a result, the best coverage of the ongoing scandal came from a controversial blog with mostly anonymous writers called ZeroHedge. It pounded on the story harder than mainstream financial media. Not only are other banks implicated in the scandal, the Bank of England, a bank regulator, is also implicated.
The Future of Finance
In December 2009, I participated in the Wall Street Journal’s Future of Finance Initiative in England along with Alistair Darling, then Britain’s Chancellor of the Exchequer, and Robert (“Bob”) E. Diamond, Jr., then President of Barclays PLC among others. The Wall Street Journal wrote a summary of the conference highlights. Allow me to highlight some things it missed.
Alistair Darling, Chancellor of the Exchequer, spoke on the opening evening. I asked him why massive financial fraud remained unaddressed. Darling appeared momentarily confused and seemed to suggest this was exclusively a U.S. problem to be handled by the courts. I pushed back on this notion. By the time one needs a lawyer, it is too late. I noted that we, the middle aged financiers in the room, are responsible for taking action. If we don’t face this issue head on, we will never restore trust in the financial system.
That was the last time the word “fraud” was mentioned at the conference, and my question and Darling’s answer and my rebuttal were not reported.
Bob Diamond defended financial innovation saying there is a real purpose for structuring credit for pension funds. He was probably unaware that state pension funds in the United States were damaged by the unintended consequences of a “AAA” rated structured credit product. The pension funds were wise enough to avoid investing in the product, yet as I explained in my February 2007 letter to the Securities and Exchange Commission, large fixed income pension funds were unintentionally harmed by the market distortions caused by this “financial innovation.”
This conference took place just over one year after the global financial meltdown. Diamond didn’t address malfeasance much less fraud. For example, he conveniently omitted Barclays’ business relationship with Bear Stearns’s hedge funds (Barclays sued over hundreds of millions in losses and later dropped the suit.)—among other unrelated problematic issues—and he was mum about Barclays’ LIBOR manipulation.
Today, Bob Diamond, CEO of Barclays, announced his resignation in the midst of the LIBOR scandal. There is speculation that Diamond was pressured to resign by the Bank of England after Diamond’s bellicose threats to expose embarrassing details about his interactions with bank regulators.
Threats are more effective against respected journalists whose careers you are threatening to ruin than against complicit regulators that can ruin yours.
How Many Billions in Unrecognized Losses?
So how did the “Future of Finance” work out for the British attendees? It worked out much as it had in the past. Malfeasance remains unchecked, unless something like the LIBOR scandal blows up. This isn’t the only problem with the British banks. Like their U.S. and European counterparties, the balance sheets need a thorough going-over to determine the true extent of the global financial debacle. The banks are not just lying about LIBOR.
Ed: The allegation has now been made that the UK government and/or BOE, and perhaps the Fed, were involved as well. What’s clear is that there were multiple people involved in an organized attempt to rig this market — the largest interest-rate market in the world — and that they did so with intent to profit. This was not a “one-off” event predicated by some government official; it was an on-going series of intentional acts.
But just as with the other scams of this sort, nobody has been indicted, prosecuted or jailed, and until they are, it simply is not going to stop. We the people of this nation and indeed of the world must decide if, and when, we’re going to stop allowing this serial financial******to be perpetrated upon us.
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All hell is breaking loose and not too soon as far as I’m concerned. If it were not for the non-typical media (CBS, NBC, etc.) none of the foreclosure fraud nor the tip of the iceberg (the whole ponzie scheme) would be revealed. I am so grateful to Michael & Lisa and this site for bringing forth the truth. With MERS going back 10+ years and this scandal going back 5 years heads will begin to roll! Just the other day while searching through public records I read a satisfaction of mortgage signed by MERS wherein MERS clearly stated that the borrower was indebted to the lender (MERS) on xx/xx/xxxx date secured by a mortgage of even date and ……hereby releases said mortgage upon full satisfaction of the promissory note. Hell, MERS isn’t a lender and now this borrower (owner) doesn’t even know that the whole thing is a FRAUD. What is even more ironic is that this person (owner) is just as scrupulous and manipulating as the banksters! Am I going to tell them? I will let KARMA take it’s course.
Everyone got schmoozed and it is continuing.The banks should have failed and what survived was the strongest and the fittest.My mom and dad grew up in the depression and nobody trusted the banks they tried to impart this to me and I didn’t listen.I really should have and never bought a house.