The Biggest Banking Scam Ever … British bank Barclays (LSE: BARC.L – news) is dead centre of a storm involving the manipulation of inter-bank lending rates, particularly Libor (the London Inter Bank Offered Rate). What is truly breath-taking is the sheer scale of this fraud. According to one estimate, around $350 trillion (£223 trillion) of lending and derivatives is priced off Libor. That’s enough to pay for the whole of UK Government spending for around three centuries at current levels. Thus, if misconduct by banks caused Libor to increase by a mere one tenth of one basis point (0.001%), this amounts to $35 billion (£22 billion) a year in extra interest – that’s roughly the UK’s annual budget for transport and close to as much as council tax brought in last year. One official claims that 20 other banks helped to rig interest rates and that Barclays is poised to ‘blow the whistle’ on wrongdoing at its co-conspirators. It’s also likely that criminal charges could be brought against the ringleaders of this worldwide fraud. – YahooFinanceUK
Dominant Social Theme: The sky is falling and we need to regulate the banks.
Free-Market Analysis: We’ve written two articles about the LIBOR scandal and yet we haven’t had a bit of impact! How surprising is that?
Well … not very surprising. Nor are we surprised. The Internet Reformation is not based on individual revelations. It is a process not an episode. It is an accretion of misaligned facts, a gradual buildup of cognitive dissonance that is engendered by the free flow of information on the web.
With investors around the world are wondering which direction markets will head next, today King World News interviewed 25 year veteran Caesar Bryan. Gabelli & Company has over $31 billion under management and Caesar Bryan has managed the gold fund since its inception in 1994. Here is what Ceasar had to say regarding what is happening around the globe: “Since we last spoke, Eric, there was the summit between the countries in the eurozone. They agreed to separate the bank debt from the sovereign debt, but that doesn’t fix the problem because the debt is still there. There are two issues, and the first one is too much debt and who is going to take the losses?”
“The second is the issue of competitiveness in some of the peripheral countries in the eurozone. That issue also remains unsolved. It was interesting because yesterday we had a number of central banks make moves. As an example, the ECB cut interest rates and they also lowered their deposit rate to zero.
Despite the easing of collateral standards, ECB Margin Calls surged last week by their most in over 9 months (ex-Greece). As yields rose (and prices fell) pre-summit, so the collateral that European banks have lodged with the ECB fell in value and thus, the banks had to find cash to cover those margin calls. The rally from Friday may have eased that strain a little but today’s give-back of all those gains (and in fact to a worse level) suggests that these margin calls will continue to rise and put further liquidity stress on cash-strapped European banks. Most critically, the ECB (while extending some of its collateral) reduced banks’ ability to self-reference and post ponzi-bonds as collateral (i.e. a Spanish bank cannot get a government guaranteed issue off and then turn round and pledge it with the ECB). Between negative Swiss interest rates (and Denmark), stressed basis-swaps, and now rising ECB margin calls, things are going from bad to worse behind the scenes in Europe – no matter what reflexive perspective an equity market rally is telling you.
Welcome to Capital Account. Central banks issue the command to keep the easy money flowing. The ECB cut its benchmark interest rate to a historic low, the Bank of England agreed to more QE, China’s central bank unveiled a surprise interest rate cut, and the Danish Central bank went one step further and entered NIRP territory, a negative interest rate policy. The US is under anesthesia already. Reggie Middleton will explain why no amount of money printing can create wealth.
And, just as people looked to the concept of a nuclear winter to ponder the cost of human destruction, is that what we are looking at when it comes to asset prices? Reggie Middleton, Entrepreneurial Investor and author of Boom Bust Blog, will explain why any amount of interest rate cutting or money printing cannot prevent a nuclear winter of real asset prices.
Also, former Barclays CEO Bob Diamond testified before members of British parliament over the LIBOR scandal. It has been deemed a preview of what may lie ahead for other big lenders under investigation. However, we will take a look back, as it seems the real pattern of repetition is collusion between authorities and the big banks.
In this episode, Max Keiser and co-host, Stacy Herbert, discuss bankers doing ‘the ultra violent’ on the global financial system and propose the Keiser Technique to remedy the asymmetric approach to financial justice. In the second half of the show Max talks to Reggie Middleton of BoomBustBlog about whether or not French banks are next to collapse and about the flashing fraud warnings on Libor that were always there in the credit default swaps market.
via: TheIndependent
by: Oliver Wright & James Moore
July 4, 2012
Banks across the world were fixing interest rates in the run-up to the financial crisis but regulators failed to take action to stop it, the former head of Barclays claimed today.
Giving evidence to Parliament Bob Diamond said Barclays had raised the issue of banks ‘under-reporting’ the true amount they were having to pay to borrow money but were ignored.
He declined to say that the regulators “were asleep at the wheel” but added: “There was an issue out there. (It) should have been dealt with”.
But Mr Diamond denied that the Bank of England told him specifically to ‘fix’ interest rates during a phone conversation during October 2008.
He told the Treasury Select Committee he “didn’t believe” he had “received an instruction” from Deputy Governor Paul Tucker about the fixing of interest rates.
A few days ago we noted that the ECB may well be contemplating the monetary neutron bomb, which would see it lower rates to below zero, ushering in a Negative Interest Rate Policy. Today, Mario Draghi cut such speculation short promising the ECB has not discussed this. Yet one bank which certainly has is the Danish Central Bank, which just lowered its Discount Rate to 0%, joining China, England, the ECB, and, of course, Kenya in easing, but also went one step further and cut its deposit rate tonegative 0.2%. Keep a note of this: NIRP is coming to a central bank, and shortly thereafter to a bank deposit branch, near you very soon.
A few days ago we noted that the ECB may well be contemplating the monetary neutron bomb, which would see it lower rates to below zero, ushering in a Negative Interest Rate Policy. Today, Mario Draghi cut such speculation short promising the ECB has not discussed this. Yet one bank which certainly has is the Danish Central Bank, which just lowered its Discount Rate to 0%, joining China, England, the ECB, and, of course, Kenya in easing, but also went one step further and cut its deposit rate tonegative 0.2%. Keep a note of this: NIRP is coming to a central bank, and shortly thereafter to a bank deposit branch, near you very soon.
