How the LIBOR rate fixing scandal may affect you…

Do you have a mortgage? If so, the apparent fraud that is being revealed in the LIBOR rate fixing scandal, a scandal affecting hundreds of trillions of dollars of transactions, and potentially even more through its affects on the derivatives markets, may have influenced the interest rate you have obtained for your home mortgage. The Justice Department has taken note, and municipalities, such as Baltimore and Oakland, Ca., are seeking court relief from swap deals they entered into with banks involved with the LIBOR fixing scandal. These cases should be watched; court cases oftentimes reveal the rot infiltrating poorly supervised industries.

This Real News Network video is a good update on the Libor scandal:

More on the LIBOR scandal can be found at www.nakedcapitalism.com

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$800 Trillion, That’s Real Money…

“The CEO of Barclays, Bob Diamond, has resigned in disgrace…” writes Matt Taibbi of Rolling Stone. This scandal is all about manipulating the interbank exchange rate, LIBOR, on a grand scale since possibly as early as 2001, which the Wall Street Journal is calculating to effect $800 Trillion in contracts, with the express purpose of gaming the system to make the banks involved, including Barclays, lots of money. Barclays CEO getting called out is just the tip of the proverbial iceberg.

This manipulation has the effect of skimming money off the top of pension funds, State and local bond holdings, private and institutional investors, derivatives markets to the tune of hundred of trillions of dollars. LIBOR is described by The Guardian as: “The London interbank offer rate [LIBOR] is set each day at 11am in all the key currencies lent and borrowed in London. Each major bank submits the interest rate it is paying to the British Bankers’ Association and the average becomes the benchmark rate for most of the world’s loans and financial contracts. For example, there are some $554tn worth of so-called interest rate derivative contracts whose price is linked to Libor – manufactured products whose alleged purpose is to hedge the risk of unexpected interest rate changes in a world of floating exchange rates and free capital movements.” As the interest rate that so many other financial transactions are based off of, it is hard to estimate the reach this manipulation has had.

Robert Scheer, formerly a Los Angeles Times reporter, also writes about what he describes as “the crime of the century.”

“Study Casts Doubt on Key Rate” was the headline on the May 29, 2008, investigative report, which concluded: “Major banks are contributing to the erratic behavior of a crucial global lending benchmark, a Wall Street Journal analysis shows.” Even then, according to the report, it was known that the Libor rate was being manipulated “to act as if the banking system was doing better than it was at critical junctures in the financial crisis.”

And:

“As The New York Times editorialized: “The evidence, cited by the Justice Department—which Barclays agreed is ‘true and accurate’—is damning. ‘Always happy to help,’ one employee wrote in an email after being asked to submit false information. ‘If you know how to keep a secret, I’ll bring you in on it,’ wrote a Barclays trader to a trader at another bank, referring to their strategies for mutual gain. If that’s not conspiracy and price-fixing, what is?””

So, why is nobody (in the US) freaking out over the LIBOR banking scandal?

More here, and here.

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