The news that U.S. and European regulators are investigating manipulation of LIBOR rates in 2008 raises an important question. by Walt Thiessen
(libertarian)
Thursday, March 24, 2011
It hasn't been getting a lot of attention from the major media. So far, it's been a story buried in the back pages of the leading newspapers. In fact, most of the world isn't even aware of it yet. One thing is certain, though. By the time the investigation is done, if the allegations prove to be true, the whole world will know.
Many in the major media can't even agree on who is being investigated, but here's the list as well as I've been able to put it together so far, as itemized by Bloomberg:
Bank of America
Barclays PLC
Citigroup
Deutsche Bank AG
J.P. Morgan/Chase
UBS AG
I won't be surprised to see that list expand in the coming days and weeks by adding some more names from among the biggest banks in the world. Five of the six above are among the 10 biggest banks of anywhere. Missing from the list (so far) are BNP Paribas of France, Royal Bank of Scotland, HSBC, Credit Agricole of France, and Mitzubishi UFJ of Japan. The only one on the list not in the top 10 is Citigroup, and they're still very, very big.
It all started (publicly) with an article from May 2008 that appeared in the Wall Street Journal, alleging that manipulation was taking place to force LIBOR rates to be lower than they should have been. Since then, both the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) have issued reports that claimed that no manipulation took place.
However, regulators took a closer look. At this writing, they are interviewing key employees from the named banks. It's now past a simple regulatory investigation, however. Many news services, including Bloomberg, are now reporting that the U.S. Justice Dept. is involved in the investigation. That makes it a criminal matter.
The allegations are important, because if validated, they raise some intriguing possibilities. The first and most obvious is that if the biggest banks in the world manipulated the LIBOR rates in 2008, what's stopping them from manipulating rates now?
LIBOR rates are used to calculate whether or not the interest rates on most adjustable rate mortgages go up, down, or remain the same, usually on an annual basis. LIBOR rates are considerably lower now than they were in 2008, and many analysts who dismiss the idea of a second financial crisis and a double-dip from mortgage resets in 2011 point to the low LIBOR rates to defend their position.
But what if the current LIBOR rates are deliberately understated? If they are, that could mean that big bank and central bank collusion is preventing the LIBOR rates from appearing to be high, which would prevent a huge onslaught of remaining adjustable rate mortgages (ARMs) from adjusting upward and creating Financial Crisis II.
In other words, it's possible that big bank collusion, led by central bankers (including the Fed, the European Bank, the IMF, and the BIS) could be conspiring to prevent the infamous "double dip" recession from happening by intentionally reporting LIBOR rates lower than they actually are.
I must stress that, so far, there is no proof. It's all just allegations and innuendo. Given the fact that the banks involved are the ones that by-and-large run the financial world, it stands to reason that we may never find out. However, the fact that so many major government regulators both here and abroad are looking into the matter certainly raises the question of whether smoke indicates fire.
Add in the allegations about illegal precious metals market manipulation by J.P. Morgan and HSBC, as well as known manipulations such as the concerted effort to devalue the Yen after the tragic earthquake, tsunami, and nuclear saga in Japan, and a pattern emerges. It would not be a long stretch to conclude that the biggest banks of the world are colluding in order to continue to convince the world that inflation is not a concern while they continue to create new money out of thin air like there's no tomorrow.
Here's what I can tell you for sure. I'm very long on silver, and if I had the money to invest, I'd be long on gold as well. In fact, I'd be long on every resource commodity on which I could get my hands...if I weren't so poor at the hands of the big banks already!
Did you like this article? If you did, Thumb It! 4
thumbs so far
The views expressed
in this article are those of Walt Thiessen only and
do not represent the views of Nolan Chart, LLC or its affiliates.
Walt Thiessen is solely responsible for the contents
of this article and is not an employee or otherwise affiliated
with Nolan Chart, LLC in his/her role as a columnist.
