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Libor Scandal: Will Wall Street Run Out The Clock?

Posted by Larry Doyle on September 20, 2012 9:08 AM |

Dean Smith was a master practitioner as basketball coach at the University of North Carolina.

While many fans of the game may not have appreciated the style of ball played by Coach Smith, he was focused on one thing. Winning. What was Coach Smith’s signature style offensive strategy toward the end of games? The four corners.

College basketball during a large part of Coach Smith’s tenure operated without a shot clock so the team in possession of the ball often would spread the floor and  run the clock down during the final stages of the game. The North Carolina Tar Heels under Coach Smith ran this “keepaway” style to perfection.

We see a very similar version of this offensive “running the clock out” currently on Wall Street. How so? Let’s navigate and address current developments in what I view as the largest financial scandal in history, that is the Libor scandal.

The Wall Street Journal highlights the strategy being employed by the large financial titans in writing, Regulators Try To Beat Clock in Rate Probe,

U.S. prosecutors are seeking more time to complete their investigation of alleged interest-rate fixing, while banks ensnared in the probe are trying to turn the clock to their advantage as they battle lawsuits claiming damages from rate-rigging.

The Justice Department recently asked several banks to sign “tolling” agreements, in which the companies promise they won’t challenge any enforcement action on the grounds that the alleged wrongdoing occurred beyond the statute of limitations, people close to the investigation said. The Commodity Futures Trading Commission, which is leading the civil arm of the U.S. probe, asked the banks for tolling agreements earlier this year, people familiar with the matter said.

It isn’t clear how many banks have so far signed the Justice Department or CFTC agreements. A spokeswoman for the Justice Department and a CFTC spokesman declined to comment.

Even as prosecutors continue the criminal probe, U.S. officials have grown concerned that the investigation into whether banks manipulated the London interbank offered rate could be stymied by the statute of limitations. This can make it harder to punish firms or individuals for frauds that took place more than five years ago.

A few comments and questions:

1. There is evidence from traders “in the arena” so to speak that the manipulation of Libor went on as far back as the early 1990s.

2. Do you think that the banks are working together to formulate a collective settlement in which they neither admit nor deny culpability? That approach has been the standard modus operandi.

3. Why might regulators focus on individual traders when the enormous scope of this scandal would clearly indicate that senior executives within the banks had to have been aware of this manipulation?

4. This previous question begs a follow up. What degree of confidence do we have in those in the striped shirts, those being our regulators and elected officials, to truly pursue total truth, transparency, and justice in this scandal? Do you think the large monied interests on Wall Street are reminding the ‘zebras’ as to just how the game is played and officiated?

Tick . . . tick . . . tick . . . .

The clock may not only be running down on this scandal BUT make no mistake that with each and every perversion of justice the clock is running out on America as well.

Who amongst our regulators and elected officials are willing to play real defense on behalf of our country?

I repeat what I have written previously and what Chris Whalen addressed in a commentary I highlighted yesterday,

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.

I humbly resubmit these related Sense on Cents commentaries: 

Libor Scandal: New York AG Takes Center Stage

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.

  • LD

    Guessing the manipulation of Libor worked so well that the model was utilized elsewhere.

    The same lack of oversight that enabled traders to manipulate the London interbank offered rate plagues other benchmarks around the globe, according to a group of international securities regulators.

    Fewer than half of the benchmark interest rates surveyed in the U.S., Europe and Asia were based on actual transactions, according to a confidential International Organization of Securities Commissions discussion paper obtained by Bloomberg News. Instead, the rates were calculated by methodologies that were unclear, not transparent and only rarely subject to specific regulatory standards or obligations, the group said.

    Libor-Like Manipulation Possible In Other Benchmarks, IOSCO Says

    • fred


      Maybe we’re focused on the wrong thing.

      Rather than focusing on regulatory enforcement, which just isn’t happening, why don’t we focus on fixing things.

      Using LIBOR as an example, as mentioned above, why aren’t rates set based on actual transactions?

      Why are most “market rates” still set by a banking “collusionary” process, why not let “markets” set rates?

      All interbank loans (beyond the 18 banks), Forex (spreads), CDS (set up a central exchange), ETF’s (for most every occasion), etc., are all very deep and liquid markets that lending rates could be “pegged to”.

      After the repeal of Glass-Steagall, the opportunity for abuse is ripe for “bank” set rates.

      No offense intended towards our friends to the east, (chinese) firewalls work about as seemlessly as (chinese) firedrills.

  • Louis

    I contacted Chase and asked them for thirty minutes straight. What are you going to do about this fraud to my account?

    The employee talked back and forth with a manager and offered me the last three months of interest off my credit card account.

    At that point I said you have now admitted culpability in a fraud against this contract at this point the contract is null void and vacated. I canceled the card due to fraud by chase bank.

    The outcome is still pending but should be resolved within 24 hours as I have made that demand. I owe them nothing as no contract exists.

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