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LIBOR Scandal: NY AG Takes Center Stage

Posted by Larry Doyle on August 16, 2012 9:37 AM |

One might only guess that New York Attorney General Eric Schneiderman and his colleague NY Department of Financial Services’ superintendent Benjamin Lawsky are not on the distribution list for the Wall Street-Washington Incestuous Regulatory Relationship mailings. That is a good thing.

Hopefully other state regulators and attorneys general might take a cue from these two.

On the heels of Lawsky playing hardball with the Standard Chartered – Iranian Laundromat, we now see Schneiderman doing the same with seven Wall Street heavyweights implicated in the largest financial scandal in history, that is, the manipulation of Libor. Which heavyweights? 

Deutsche Bank, Citigroup, JP Morgan Chase, Royal Bank of Scotland, Barclays, HSBC, and UBS.

Don’t look for this story in The Wall Street Journal (hmmmmm…??) but let’s navigate and review Financial Times’ coverage, Seven Banks In NY Libor Probe,

Mr Schneiderman’s demands for documents and communications – most of which were sent out in July or earlier this month – is part of a two-state probe he has launched with George Jepsen, Connecticut’s top law enforcement officer. The pair want to examine whether banks colluded to fix interest rates determined by Libor, damaging the states’ borrowers and investors as a result.

The state investigation comes on the heels of separate probes from prosecutors and regulators in countries including the UK, Canada, Japan and the US who are examining possible collusion by large financial groups to manipulate benchmark rates.

But what may set Mr Schneiderman’s probe apart is his ability to use the Martin Act, a 1921 New York law considered one of the country’s most powerful prosecutorial tools. The law allows Mr Schneiderman to investigate anyone doing business in New York and to bring cases without having to show that the accused intended to commit fraud.

While the Fed, Treasury, SEC, FINRA, CFTC, and DOJ slow walk this investigation, investors and consumers alike lose whatever confidence they had left in the game being on the up and up. These regulators may believe financial stability will take a hit if the investigation of this scandal is escalated. They are so wrong.

Financial stability, trust, confidence, and integrity in the system are predicated on the fact that wrongdoings will be addressed in exhaustive fashion and adjudicated accordingly. Accountability at the most senior levels of these banks must be brought into question. To do otherwise would be to shortchange capitalism and the American spirit of fair play. Wishful thinking? I call on each and every attorney general and state banking regulator in the nation to join forces with Schneiderman and Jepsen.

THERE SHOULD BE NO FINES.

If senior bank executives are exposed and dealt with appropriately, Wall Street will not only survive but be stronger for it. As will America and the world at large.

As for Ben Bernanke, Tim Geithner, Mary Schapiro, Rick Ketchum, Gary Gensler, and Eric Holder, why don’t you sit this one out and let Schneiderman and Jepsen represent America’s interests.

Related Sense on Cents Commentary
Libor Scandal: UBS Plays the “Most Dangerous Game” 
Libor Scandal: Trader Highlights  Manipulation in 1991

Barclays Libor Scandal: Naming Names
Barclays Libor Scandal: Wake Up, America!!
Barclays Libor Scandal: The Complicit Regulators
Barclays Libor Scandal: The Precedent
Barclays Libor Scandal: Holding Regulators to Account
Barclays Libor Scandal: “Diamond Lied”
Barclays Libor Scandal: Who’s Really to Blame? 
Barclays Libor Scandal: When Did Manipulation Start?
Barclays Libor Scandal: How Big Will This Get?
Barclays Libor Scandal: Reports Regulators Knew; Time for Independent Investigation and Eliot Spitzer
Barclays Libor “Price Fixing”: Collusion Is Illegal. . .
Barclays Libor Scandal: Prison Will Remedy

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Ron Larson

    I saw in the NYT this morning that Corzine is NOT going to be prosecuted for the theft of $1.5b of customers’ money. In fact the article hints that prosecutors are not going to charge anyone with any crime.

    I just don’t know what to say. Seriously. I have no words.

  • Larry

    I don’t really care if the financial institutions take a hit by an investigation, do you?

    Maybe if they did, and were faced with even more public embarrassment, (since the tiny fines won’t change anything) they might get their act together, and the likes of loud-mouth Jamie Dimon will go away and earn his millions tending the store, as he is supposed to.

    I for one am pleased that the likes of Geitner and Holder, are upset with New York and their investigation. Personally, I believe they were running out the clock, and the New York investigators realized it.

    Thanks for staying on the issue.

    • LD

      Larry,

      I firmly believe we do not need more regulations but rather REAL regulators. If that were to happen then the cultural change needed on Wall Street would begin to occur and that would be healthy for our markets and economy.

      To that end, I hope senior individuals who have promoted the current unhealthy culture are exposed.

      Geithner and Holder are part of the problem.

      • Larry

        Follow the money. Contributions to both parties buys lots of insulation.

  • Russ

    Larry,
    It’s become painfully clear that NOTHING happens to the big guys as long as they are making campaign contributions. Corzine at MF Global… off the hook ($1.2 billion), JP Morgan…. off the hook. Barclays….off the hook. In the case of Madoff, all the insiders, Picower, JP Morgan, Shana Madoff, the kids, et al, off the hook.

    The SEC goes as far as to admit that they are virtually powerless against the big boys. It seems that the only people that are ever held accountable are the VICTIMS of the wrong doing by the big guys (see above) that are stealing their money.

    I believe that this country has hit the tipping point where big money buys the legalized victimization of the general population; those naive enough to place their trust in the system.

    As a Madoff victim, I have a front row seat to the levels of corruption in government. It goes from the very bottom (local zoning boards) to the very top (the Supreme Court). The corruption isn’t always quid pro quo (at the highest level anyway), it is often the acquiescence to the most expeditious politcally non-interuptive end. An example is the way the Supreme Court refused to hear the appeal on the definition of “net equity.” With the appeal left in place, a customer of a SIPC membered, SEC approved broker, does not know if there is insurance until AFTER the crime has occurred and the attorney for the insurance compay decides whether the insurance company wants to pay it or not (do insurance companies EVER want to pay)? Perhaps you saw that today the courts agreed that even AIG, which offered fraud insurance in their homeowners’ policies for EXACTLY the Madoff scenario, does not have to pay the stinking $30,000 to their few clients (probably less than 50) who have that coverage (I was one of them).
    Yes Larry, from my “front seat” perch, this country looks pretty similar to Cuba and Venezuela. I don’t know where we have any room to talk about justice.

  • Larry

    Its really depressing to watch our country degenerate into a bunch of crony politicians and criminal bankers. Everyone seems to be on the take but yet they want us to listen to them tell us to live by the rule of law and follow their decision making. It’s all a big scam and we’re the patsies. They’ve run this country into the ground–two money pit endless wars, bought off politicians, a DO-NOTHING FEDERAL GOVERNMENT, Trillions of Dollars in debt, sending our jobs and manufacturing base overseas, out of control energy prices, outsourcing “Government student Loans to crony credit companies, Corrupt Regulators who rather watch porn than keeping financial institutions honest, inept leaders, and it goes on and on and on…..What does it take for us to do something? We still keep electing the same greasy pigs to fix these problems when they are the ones keeping the game running………….Something’s gotta give……….

  • coe

    I’m not sure why the investigation stops at the big 7? Is it perhaps possible that af ew of the rest of the primary dealers played some sort of role in the LIBOR price fixing scandal? I bet they did.

    I brought this topic up at dinner the other night. In general, the impressions of my family members were at the 30,000 foot level – i.e. banks were in trouble for some involvement in “causing the mortgage and economic crisis”…They had no idea what LIBOR stood for or why they should care.

    And, if I may say, my family is all well educated and reasonably plugged into financial matters that affect their lives. It’s just too darn arcane.

    I guess my point is that when our society is more concerned about the Kardashians and that Paul Ryan may have driven the WeinerMobile in his past than we are of these matters, it’s no wonder the participants want and expect things to blow over.

    Where is the outrage? Where is the mainstream media? Where are the enforcement officials? Turning a blind eye to flagrant wrong and injustice for millions of everyday people, that’s where! I applaud the NY AG for taking a crack at it, but the cynic in me expects some lower level traders to be fired, bank leaders to pull out their checkbooks and say how much can I pay and how fast can I pay it to put this in the rearview mirror.

    And that is the way I expect it to play out. C’est la vie….until next month’s new scandal!






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