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LIBOR Scandal Banksters Wealth & Greed
Tuesday July 10, 2012
“Dude, I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”
Barclays Trader’s email to fellow accomplice at another bank
This particular tasteless cause for celebration by Barclays Traders is certainly not a cause for celebration by the working and middle-class general public of the United Kingdom. It is this kind of attitude and greed by Bankers that caused the Global Credit Crunch in 2007, which only really became public knowledge in 2008.
If someone was given a gun and asked, would they shoot first, Adolf Hitler, if he had miraculously been resurrected, or a Banker, would most people answer The Banker, twice?
Since news broke of Barclays having to pay fines on 27th June, the general public in the UK have been outraged at the Banking sector, and this is evident by comments on bankers and even politicians on Twitter. Even senior politicians like Labour Party leader Ed Miliband have been assertively vocal for the culprits to be brought to justice and for radical reforms in the Banking industry, especially as London is the World’s centre for banking, insurance and financial transactions.
27th June, the announcement broke that Barclays had to pay fines of £290 million for its indiscretions in manipulating LIBOR rates.
  Actual Barclays advert at London Bus Stop Shelter
The US Regulatory body the CFTC / Commodity Futures Trading Commission, enforced a penalty of US$200 million USD on Barclays; the DOJ / US Department of Justice enforced an additional penalty of $160 million USD; and the UK's FSA Financial Services Authority a further £59 million GBP.
Fines, a mere token slap on the wrist
The fines have since increased to an estimated £450 million GBP or around $698 million USD. In short, the fines can be regarded as an insignificant punishment for Barclays. To put those fines in context, £450 million is 0.0000069% of the UK’s £6.5 trillion worth of financial products that comprise loans, mortgages and derivatives that are directly impacted by LIBOR rates based on the Bank of England’s base rate. Alternatively, put another way; multiply the fines to Barclays of £450 million by around 14.444 million to equal £6.5 trillion of transactions in the financial markets impacted by LIBOR. However, LIBOR rates affect approximately £225 trillion in global derivatives markets.
Shortly after the news broke of the fines, more controversy emerged that Barclays were marketing what some people have described as a scam, complex Shared Appreciation Mortgages; one example of which was when a British pensioner borrowed £15,000 that inflated to a scandalous £97,000.
The Casino’s House of Cards falls
1st July 2012 RBS has sacked 10 traders over the Libor-fixing scandal.
3rd July Bob Diamond resigns as CEO, despite initially disputing calls and protests for his resignation by the public, even politicians.
Dutiful daughter of Bob Diamond, Nell Diamond ‏comes out in support of Daddy on Twitter with:
“No one in the world I admire more than my dad. 16yrs building Barclays. Shame to see the mistakes of few tarnish the hard work of so many.” Very moving indeed...
Socialite Nell Diamond, 23, who it can be said was born with a Diamond Spoon in her mouth, has decided to follow in her father’s footsteps by working in banking at Deutsche Bank in New York. What is questionable is Nell Diamond’s qualifications; she graduated from Princeton University where she studied a joint major in English Literature and History of Art. Her thesis was title “The Cultural Myth of Female Hair in the Victorian Imagination”.
English literature might be useful for talking one’s way out of a scandal; and history of art might be useful when knowing which artworks to buy for the art collection with ill-gotten millions in Pound Sterling, Dollars and Euros. However, a person with such qualifications cannot be of any logical use in an Analyst position at a major investment bank like Deutsche Bank; or can they? One would think a Master’s Degree in Economics or Finance are the minimum requisites for the position of Analyst at a major investment bank; but, obviously not. In this instance young Nell’s qualification is the daughter of a prominent banking CEO, useful for banker social networks for insider knowledge, and possibly to coordinate inter-bank strategies and gambits. This raises three serious concerns in the banking industry: first, vetting the qualifications, aptitude and experience of senior staff at banks; second; the culture of banking which is obviously tainted with elitism, cronyism, and nepotism; third, the ethics of the banking sector.
Nevertheless, one digresses and should steer back on course with the LIBOR issue.
4th July, Barclays’ Bob Diamond is subjected to what can be best described as a warranted inquisition by British MPs comprising the Treasury Select Committee. One can be certain that many people would have loved to see something in more in the manner of a Spanish Inquisition.
Saturday 7th July the Serious Fraud Office launches investigation in LIBOR Manipulation.
The British public are so furious over the LIBOR Scandal, that there have been calls on Social Media sites like Twitter and on Blogs for the English Premier League to drop Barclays as its official title sponsor Barclays Premier League.
It is certain there will be greater public outrage over findings, when more is exposed over the coming months once investigations into LIBOR scandal intensify.
" This is not the rate at which banks lend to each other"
Sir Mervyn King, Governor of the Bank of England,
commenting on LIBOR in 2008
Why the hell do Banks need to borrow money in the first place?
LIBOR London Inter-Bank Offered Rate is a calculated rate that banks charge to loan money to other banks for fixed periods, from overnight, several weeks, or up to a year. Obviously, Traders make a transaction fee on each loan.
A growing general opinion now is that many Investment Bankers are self-serving greedy gits who work in an incestuous market, to make fellow bankers and the wealthy wealthier.
One interpretation can be that banks loaning each other money is good for business and churn; and traders make money transaction fees in a Money Merry-go-round. However, such traders do not think of the implications as every transaction has a compounding opposite reaction.
Nevertheless, one should have sympathy for Bankers and Traders. In a recent documentary, “The History of our Streets: Portland Road” on BBC 3, Bankers were interviewed on why Portland Road in London’s prestigious Notting Hill is such a desirable location to live. The documentary highlighted that Portland Road is OCCUPIED by Bankers, where homes are valued from £3 to £10 million. One poor Banker complained that being a Banker is so “expensive”; the tastes and social lifestyle demands of his wife were expensive; and how the best private schools for Bankers’ offspring are so expensive.
Although Portland Road is now regard as the typical London banker street, the road and its surrounding neighbourhood was once officially categorised as being the worst slum in London occupied by the 'vicious and semi-criminal'; one could argue that some things never change.
Who are the victims?
The biggest group of victims of the LIBOR manipulation is practically everyone with a mortgage, especially variable rate mortgages; anyone repaying a loan or credit card debts; to a certain extent, pensions; the price of goods and services.
Who Benefited?
Bankers, that’s who. But now to disseminate it into simple terms so your Granny can understand with one possible example.
Phase 1:
  1. Trader-A at Bank-A loans Trader-B at Bank-B £1 billion at the Bank of England Base Rate, currently 0.5%, plus an extra 2% interest rate; Trader-A & Bank-A nets a Transaction Fee.
  2. Bank-B then loans that £1 billion at an additional 2% on top earmarked for the Mortgages Markets, where interest rates for mortgages vary from around 4% to as high as 8%, depending on status of Mortgagee.
  3. Bank-B makes profits of around £2 billion from loaning to the Mortgage Market if Mortgage Interest Rates are fixed at 5%.
Phase 2:
  1. Trader-B at Bank-B then loans Trader-A at Bank-A at Bank of England Base Rate, so Bank-A can offset its initial loan to Bank-B; Trader-B at Bank-B also nets a transaction fee.
  2. Trader-A at Bank-A then loans £1 billion to a REIT [Real Estate Investment Trust], usually an offshore company, at the Bank of England Base Rate of 0.5, plus 2% interest on top. Such REITs are managed by Fund Managers, at Banks, or who have recently left a bank.
  3. The REIT through it offshore company, then invests the £1billion in an overseas or even local market in property development ventures such as hotels, shopping centres, luxury apartment buildings or mixed-use projects, something vulgar like the Shard Tower in London.
  4. The REIT nets revenues from sales and rent from units in its property ventures where ROI [Return On Investment] over 5-years can be around 550% or over 5.5 times of the initial investment, simply put, the REIT makes £4.5 billion profit.
  5. The REIT then pays back the £1 billion over 5-years at an interest rate of around 4.5%, paying as little as around £190 million in interest, where the project is refinanced at the end of each year, for a total of 5 to 7 years.
Phase 3:
  1. A Partner in the REIT, usually an ex-banker who all of a sudden has become very wealthier from the offshore property venture funded by the LIBOR based leveraged finance, then needs to avoid paying tax by keeping their money offshore where their £100 million of funds are accruing interest, funded by LIBOR mechanisms. They need to buy a luxury home in Kensington London to flaunt their wealth.
  2. Next, the Partner in the REIT goes to go Bank-A or Bank-B, gets a loan of £7-£10 million, to buy the home in Kensington, where they only pay interest rates of LIBOR+ 2% to 3%, as it is also tax efficient to have debt.
In summary, the ordinary working and middle class mortgage payers are subsidising the Wealthy and the Bankers. Wealthy banking clients are regarded as Quality Clients and there has been a push by certain banks to focus on what they regard as quality over quantity. Barclays Wealth is one entity that bends over backwards to pamper to the needs of High-Net-Worth-Individuals worth over £50 million.
To get an idea of the types of firms and high-flying individuals involved with global real estate investment that benefit from the types of funds associated with LIBOR, visit one of the event pages of the GRI Global Real Estate Institute website:
British Government Bank Bailout
October 2008, the British Government, under the Labour Government’s Chancellor of the Exchequer Alistair Darling, announced a bailout package of £500 billion; that’s around £8,030 per head of UK population. Would it not have been better to instead of giving that money to the banks, and give a major portion of those funds to people genuinely struggling with their mortgages as a direct result of failures and fraud by the banks?
The main banks that were recipients of the £500 billion Bailout by the British Government were HBOS, Lloyds TSB, Nationwide Building Society and RBS /Royal Bank of Scotland Group. However, in Barclays’ defence they refrained from being a recipient of the bailout: a guilty conscience perhaps for being the main instigator of the LIBOR scandal.
According to reports, 75% of the £500 billion of bailout funds earmarked for the banks were loaned by the recipient banks, directly and indirectly through LIBOR trades to REITs, owners and partners of property development entities. Allegedly, only 25% of the bailout funds were used for loans to small businesses and the working and middle-class public for mortgages.
The famous Barclays's Bikes of London & some dry British humour
Collusion Deception & Fraud
What has become even more self-evident since Barclays was fined 27th June is how amoral, out of touch, unethical and corrupt individuals in the upper echelons of the banking sector are; even inharmonious and dissonant with real world.
Barclays was first to blow the whistle with an internal investigation on which they allegedly spent £100 million; however this noble deed seems to have backfired on Barclays’ resulting in the resignations of Barclays’ Chairman Marcus Agius, and subsequently Bob Diamond, who has kindly decided to forego £20 million in bonuses, settling for a modest £2 million in severance pay. We should not feel too sorry for Bob Diamond Bob, as he certainly raked in the cash since 2006 with earnings of an estimated £120 in salary and bonuses.
Other than Barclays, who can one point the finger at? First, there is the BBA, British Bankers’ Association, a body that sets the LIBOR Rate in accordance with the demands of Bankers. The slogan of the BBA is “The voice of banking and financial services”. What about the voice of the people who have no choice but to use banks?
The British Bankers’ Association (BBA) sets the Libor rate, based on the numbers that other bankers decide to give them. It is important to note that the BBA is not regulated. However, a body that controls or even manipulates a rate that is crucial and fundamental to financial markets should in theory be regulated; which begs the question, why is it not?
So what is this motley crue of Banks that comprise the British Bankers Association that sets a rate, that has a direct and indirect impact on the price of practically everything we buy from food, to home??
British Banks:
  • Barclays Bank PLC
  • Hampshire Trust PLC
  • HSBC Bank PLC
  • Lloyds Banking Group
  • Standard Chartered Bank
  • The Royal Bank of Scotland PLC
NOT British Banks:
  • BNP Paribas –: France
  • Citibank NA – USA
  • Credit Suisse – Switzerland
  • Deutsche Bank AG: Germany
  • J.P. Morgan Europe Limited: USA
  • Santander UK: Spain
That’s six foreign banks that have considerable influence over the LIBOR Rate; one of them being J.P. Morgan, a bank currently involved in considerable controversies, vast losses, legal issues and on-going investigations.
The Blame Game
Almost every day, there are new reports on the LIBOR scandal, which points fingers at who is involved, who should have been more responsible, who is to blame, and who is guilty.
Bob Diamond, who repeatedly stated his “LOVE” for the fine institution of Barclays in his statements at the Treasury Select Committee, blamed the “REPREHENSIBLE” actions of Gung-ho rogue traders at Barclays for manipulating the LIBOR Rate, under his watch.
The current Conservative led Government is putting the blame on the Labour Party as the LIBOR rates were being manipulated under their watch from 2005 to 2009. MP George Osborne, the Chancellor of the Exchequer, said in an interview with The Spectator magazine that MP Ed Balls [former Chancellor of the Exchequer and former City Minister] “HAD QUESTIONS TO ANSWER”. It is important to note that key people at the top of the Conservative Party are very protective of the Banking Elite in the City of London.
The Labour Party Leader Ed Miliband and Ed Balls Shadow Chancellor are blaming the current Government, as the LIBOR Scandal was exposed under the current Conservative led coalition Government. Shadow Chancellor Ed Balls demanded an apology from George Osborne for his remarks in one of the most heated debates in Parliamentary history.
Liberal Democrat MP Vince Cable [Secretary of State for Business Innovation & Skills] spoke bluntly, insisted on a criminal investigation into bankers involved in manipulating the LIBOR Rate, and subsequent prosecution of Bankers for committing criminal offences. Furthermore, Vince Cable was forthright against Bob Diamond receiving any kind of bonus after his resignation form Barclays.
The Bank of England is blaming Barclays for aggressively misinterpreting in turn abusing policy.
The entire LIBOR Scandal Blame Game reminds one of naughty children that have been caught in the act of mischief by a teacher in a school playground; though it is fun to watch.
In the coming months, possibly years, the LIBOR Scandal is likely to be the biggest scandal in history as the investigations widen in the UK, the US and banks throughout the world. So far, allegations by various parties have cited collusion and involvement and by “Undisclosed Senior Whitehall figures”, The Bank of England itself, the US Federal Reserve other executives at Barclays and other Banks. There has also been criticism of the lack of action by Regulatory bodies like the FSA [Financial Services Authority] which was called “a bunch of toothless incompetents” by one former Banker.
Ultimately, the culture of Greed amongst Bankers and Traders is to blame; as is the impotence and inefficiency of regulatory bodies such as the FSA and the SEC by allowing the banks to run rampant playing with Other Peoples’ Money.
A New Hope
DON’T PANIC, there could be hope yet. Gary Gensler Chairman, of the U.S. regulatory body Commodity Futures Trading Commission CTFC, could be regarded as a Crusader against Banking Fraud. He stated in a recent interview that the investigation into LIBOR rates was prompted by news in the Media; he also stated, “There has to be honesty”. Another point Gensler emphasised that Banks that manipulated the LIBOR rate and helped other banks in the LIBOR scandal were “AIDING AND ABETTING” financial crime. Gensler also stated, "The LIBOR Rate is critical to people around the world", as “markets [financial] are interconnected”. In the US alone, LIBOR Rates directly affect 36 million mortgages. In the UK an estimated 13 million properties have mortgages that are also directly affected by LIBOR Rates; that is half of the UK property market where there is an estimated 25 million properties.
Citizens Taking Action
Mortgagees in the UK can now be technically, legally and officially categorised as victims of criminal fraud by the banks involved in LIBOR manipulation. Under these circumstances, any person with a Mortgage in the UK can press criminal charges against the Bank they got their mortgage from, even make a Citizen’s arrest of Bob Diamond and the irresponsible Traders who are responsible for the unlawful LIBOR trades.
Putative Violations of Treason
One other point; the impacts of the Traders, Bankers and other individuals involved in the LIBOR “Manipulation” scandal, can be deemed as undermining and threatening the Economic Security of a nation, which in theory could be interpreted by legal and constitutional experts as putative crimes of “TREASON” against the state.
Justice for All…
During the England Riots in August 2011, around 2,700 people were arrested of which around 1,500 people were prosecuted and sentenced with either probation, community service, suspended sentences or custodial sentences. A majority of those prosecuted were disaffected unemployed teenagers and people in their early to mid-twenties. The offences ranged from Burglary, Theft and Vandalism to Social Disorder. The sentences ranged from six-months for someone who stole a case of bottled-water from a supermarket, 4-years prison sentence for two people prosecuted for using Facebook to encourage disorder, and seeking to organise criminality.
According to reports, courts were instructed deal harshly with offenders in the riots by superseding usual sentencing guidelines and pass heavy sentences. However, unlike the crimes of the Rioters, the indiscretions and crimes by Bankers and Traders have vastly significant wide-reaching long-term global implications.
Irrefutably, ordinary working and middle-class people feel there are double standards in the government as Bankers have for far too long gotten away with too much. The general public now want to see more severe justice enforced on Bankers than was enforced on offenders in the UK Riots of 2011. The general overwhelming vibe is that decisive criminal prosecutions are demanded by the masses, who want to see Government authorities act punitively, to ensure the retrospective recouping of bonuses received by Bankers and Traders, who are implicated in the LIBOR manipulation; even seizures and disgorgements of their assets.
Maybe only then will the general-public have trust and confidence restored in Government and the Banking System. Moreover, people want to see a strongly regulated Banking sector, where Banking Executives do not reward themselves with six even seven figure bonuses; and where Banks that conduct business with accountability and an unbreakable code of ethics.
Related Links:
Barclays Bank UK
Bank of England
British Bankers Association
CTFC Commodity Futures Trading Commission (US)
FSA Financial Services Authority (UK)
Serious Fraud Office (UK)
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"Rather fail with honour than succeed by fraud." - Sophocles
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