Posted on Jul 6, 2012
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| AP/Mark Lennihan |
Robert E. Diamond Jr., newly resigned as the CEO of Barclays.
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Forget Bernie Madoff and Enron’s Ken
Lay—they were mere amateurs in financial crime. The current Libor
interest rate scandal, involving hundreds of trillions in international
derivatives trade, shows how the really big boys play. And these guys
will most likely not do the time because their kind rewrites the law
before committing the crime.
Modern international bankers form a class
of thieves the likes of which the world has never before seen. Or,
indeed, imagined. The scandal over Libor—short for London interbank
offered rate—has resulted in a huge fine for Barclays Bank and threatens
to ensnare some of the world’s top financers. It reveals that behind
the world’s financial edifice lies a reeking cesspool of unprecedented
corruption. The modern-day robber barons pillage with a destructive
abandon totally unfettered by law or conscience and on a scale that is
almost impossible to comprehend.
How to explain a $450 million settlement
for one bank whose defense, in a plea bargain worked out with regulators
in London and Washington, is that every institution in their elite
financial circle was doing it? Not just Barclays but JPMorgan Chase,
Citigroup and others are now being investigated on suspicion of
manipulating the Libor rate, so critical to a $700 trillion derivatives
market.
Caught as the proverbial deer in the
headlights, Barclays Chairman Robert E. Diamond Jr. resigned this week
and offered a plaintive defense to the British Parliament that he
learned only recently that his bank was manipulating the index on which
so large a part of international trade is based. That is plausible only
if we assume he was paid $10 million a year to be deliberately ignorant.
The Wall Street Journal had exposed this scandal fully four years ago
but his bank continued to participate in it nonetheless.
“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.”
Fast-forward four years to Diamond’s testimony before Parliament this
week in which the CEO claimed his recent discovery of a pattern of
interest manipulation by Barclays had made him “physically sick.” Who
was to blame? According to the executive, subordinates acting behind his
back.
The American-born banker, who has dual
citizenship in the United States and Britain, is well versed in
financial chicanery, having started by putting together derivatives
packages at Credit Suisse First Boston back in 1996. He was compelled
under parliamentary questioning Wednesday to admit that “I can’t sit
here and say no one in the industry [knew] about the problems with
Libor. There was an issue out there and it should have been dealt with
more broadly.”
He couldn’t deny widespread chicanery
within his bank because, as in the collapse of Enron a decade ago,
investigators had uncovered an email record of market manipulation so
glaring that if the top executives were unaware, it was because they
didn’t want to know.
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?”
The U.S. Justice Department made a deal
with Barclays, and although it may prosecute some individuals in the
scam, it agreed not to go after the bank itself. “Such an agreement
makes sense only if that cooperation will allow prosecutors to nail
other banks that have been involved in setting the rates, including
potential cases against Citigroup, JPMorgan Chase and HSBC ... ,” the
Times editorial said.
Both Citigroup and JPMorgan Chase were
reported by The Wall Street Journal years ago to be suspected of rigging
the Libor interest rate. The leaders of those banks, despite such media
exposure, clearly remained confident enough to continue on their merry
way.
The sad reality is that they will probably
get away with it. The world of high finance is by design as obscure and
opaque as the bankers and their political surrogates can make it, and
even this most recent crack in their defense of deception will soon be
made to go away.
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Click here to check out Robert Scheer’s new book,
“The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.”
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