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BIG BANKS RIG LIBOR
Federal Reserve and Bank of England In On It
By Wayne Jett © July 11, 2012
This just in: LIBOR, the most watched and used benchmark interest rate in the world, is rigged by big banks. So are bids for large deposits of bond funds by local and state governments in the U. S. – again by big banks. So can we finally dispose of the old Wall Street shibboleth that conspiracies absolutely do not exist in the U. S. financial sector?
LIBOR is the London Inter-Bank Offered Rate – the interest rate charged by banks for overnight loans among themselves. The published rate has been determined, not by monitoring actual transactions among the banks, but by polls or surveys asking the banks what rates they charged or paid. In replying to surveys since 2005, says the U. S. Commodities Futures Trading Commission, Barclays Bank “pervasively” reported fictitious rates rather than actual rates.
The LIBOR Scam
CFTC says Barclays asked other big banks to assist manipulating LIBOR and Euribor interest rates, and helped other big banks manipulate LIBOR, Euribor and the U. S. dollar. Why did Barclays do this? CFTC’s press release states Barclays did so “to benefit the Bank’s derivatives trading positions” and “to protect Barclays’ reputation from negative market and media perceptions concerning Barclays’ financial condition.” CFTC ordered Barclays to pay a civil fine of $200 million and to cease and desist. Barclays paid $250 million more to British regulators.
Barclays’ activities with the other banks appear to be criminal racketeering under federal RICO statutes, which authorize victims to recover treble damages. CFTC charged no crime, provided no estimate of illicit gains by Barclays, and required no restitution to victims. But class action RICO suits by victims may be in the offing.
Central Banks: Regulators & Instruments of Big Banks
Top executives at Barclays resigned and promptly implicated the Bank of England (Britain’s central bank)
and then the Federal Reserve – specifically, the New York Fed, which really controls Fed operations. Timothy Geithner, currently Secretary of the Treasury, met with Barclays’ officials on critical dates while he was president of the New York Fed.
So, to summarize, the biggest banks and most important central banks in the world engaged in conspiracies to manipulate the most important market interest rates and the U. S. dollar. Damages to victims are immense.
But … But … What About … America?
If, as appears to be the case, the Fed engages in conspiratorial manipulation of market interest rates in London and Europe, what is the Fed doing here in the U. S. with domestic interest rates? Is manipulation of market interest rates in America as destructive and criminal as it is seen to be in Britain and Europe? Did the big banks rig LIBOR because messing with the Fed funds rate would be too dangerous or difficult?
Readers of The Fruits of Graft and reports on this website over the past five years know the answers already. The big banks and the Federal Reserve actually do manipulate the overnight borrowing rate in the U. S. They conspire to rig it. The Fed covers the manipulative conduct by falsely pretending to set a “target” overnight lending rate which will serve as a valve to regulate desired liquidity flow of money and credit.
As initially detected and reported here on September 4, 2007, evidence at the time implied that the Federal Reserve’s so-called “primary instrument of monetary policy” – the “target” interest rate for overnight lending of bank reserves – is essentially a cover story for the scheme to rig or fix the prime rate at which the big banks lend into the U. S. market. The scheme has nothing to do with serving the public interest by means of rational, beneficial monetary policy. It has much to do with ripping illicit gains from the pockets and accounts of helpless victims, just as the Barclays scheme did.
For example, during 2005-2006, the rigged overnight funds rate “target” was set at such a high level above market the yield curve on Treasury securities became inverted. This raised banking lending rates above market so bank credit was denied to traditional bank customers: small and medium-sized businesses. This caused severe contraction in employment while bank lending capacity flowed to hedge funds and investment banks. Again, if you have read The Fruits of Graft, you already understand how this aided the financial looting of 2008.
Amazing Breadth of U. S. Financial Fraud
Before concluding this horrid tale of financial oppression in America and globally, several additional markers of the landscape should be noted. Big banks have rigged bidding of interest rates on guaranteed investment contracts (“GICs”) for state and municipal government bond funds, robbing public treasuries of billions in additional return if rates were honestly competitive. Big banks are believed to conspire with the Federal Reserve to manipulate prices of gold and silver. Prosecutions almost never happen, and any penalty is a wrist-slap.
Compare what happens outside the financial sector. If Big Pharma evades the snares of U. S. Food & Drug Administration protocol to promote a life-saving treatment without approval, the penalty is severely proportional to profits gained (or losses of competitors). A case in point is the recent criminal and civil settlement of $3 billion imposed on Glaxo.
The Obtuse Fed Explained
Here is the bottom line. The scandal rocking Europe, Britain and the U. S. over the conspiracy to rig the LIBOR and other financial benchmarks illustrates why the Federal Reserve since 1971 has defied all logic and reasoning by insisting upon manipulating the overnight funds rate as its primary policy instrument. In doing so, the Fed sacrifices any prospect for stabilizing the dollar’s value, undercuts possibilities for economic growth, and destroys employment rather than fostering it. Why?
The Fed insists upon manipulating the bank overnight funds rate to enable financial thievery of similar nature, even greater in scale and more diverse, as the schemes put into play by Barclays Bank and its co-conspirators to rig LIBOR. ~