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Libor Scandal et al: The True and Total Cost

Posted by Larry Doyle on December 12, 2012 8:29 AM |

Would it be even possible to measure the total cost of the manipulation of Libor? A basis point here, a few basis points there and nobody really gets hurt, right? No, not right.

The simple fact is the manipulation of the most widely tracked short term interest rate in the world comes with the same very real costs attached to all forms of corruption, including the money laundering scandals at HSBC, Standard Chartered and who knows how many other institutions.

What are these costs? 

Say what you want about former UN Secretary General Kofi Annan, but he laid out in spades the very real costs of allowing corruption to propagate within any society. Does anybody doubt that the Madoff, Stanford, mortgage fraud, Libor manipulation, money laundering, MF Global, insider trading, naked short selling,  . . . where do I stop . . . and other scandals within our financial and political spheres do not rise to the level of corruption? To believe that would redefine the term “naive.”

So, back to Mr. Annan. What are the costs of the Libor scandal and other corrupt practices? John Plender highlights Annan’s assessment the other day in a book review in the Financial Times. Annan leaves little to interpretation in stating:

“Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.”

Who in America right now does not believe that we are living in just such a society? Anybody?

Why and how has this corrupt, crony capitalism grown in the United States? People have not been held to account. The mere payment of fines or singular indictments/prosecutions for engaging in corrupt practices does not root out corruption, it emboldens it.

There are those who would maintain that the insider trading cases brought to date are evidence that our system of justice is working. I would respond, “Picking up crumbs, folks!!”

Sense on Cents/Libor Scandal

What happened to our country?

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.

  • fred

    LD,

    Leadership establishes culture. Our leaders have failed us, we need a whole new leadership class in this country.

    We need principles based leadership; “do as I say, do as I do”.

    We should immediately fire every member of the President’s Cabinet and replace them all with a Secretary of National Character, I nominate Stephen Covey.

    Be bold Mr. President, leadership starts at the top.

  • larry Levin

    Dear Mr Larry Doyle,

    Did you once write an article for a newspaper predicting dire consequences from the commodities modernisation act?

    • LD

      Larry Levin,

      In searching through my archives for commentary on “Commodity Modernization Act”, the only commentary that is referenced is one I wrote last July entitled, Barclays Libor Scandal, Who’s Really to Blame? in which I penned,

      In my strong opinion, the real blame for the manipulation of this rate (Libor) goes right through the top levels of each and every bank and beyond. Beyond where? Who is really to blame? How far back do we have to go to affix real blame? Let’s navigate back to the late 1990s and the testimony provided by a group of individuals who collectively derailed any sort of meaningful regulation of the derivatives markets. Who were these individuals?

      Larry Summers, Alan Greenspan, Robert Rubin, Arthur Levitt, and Phil Gramm with the support of others in Congress and the Wall Street lobby worked to pass legislation in February 2000 that overran then head of the CFTC Brooksley Born’s attempt to regulate the derivatives market. I believe that legislation provided the green light or, dare I say, the necessary cover for the ensuing manipulation of Libor.

      In hindsight, instead of writing “ensuing”, I should have written further or ongoing as I now believe and others inside Wall Street have written that the manipulation of Libor went back to the early 1990s.

      Hope this helps.

      • larry Levin

        Thanks that is very helpful.

        Thank you for taking the time to respond.

        only 4 congressman voted against the act, Ron Paul, Peter DeFazio, Nick Smith, Gene Taylor

        377 yea
        4 nay

  • Don Glen

    How does Phil Gramm get away with all this stuff. Mr. ENRON Phil is into everything. If you can’t convict Phil you can’t convict anyone.






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