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Libor Scandal: “Companies Do NOT Commit Fraud, People Do”

Posted by Larry Doyle on February 7, 2013 6:19 AM |

What does it mean when news that one of the world’s largest financial firms pays a $612 million fine for behaviors that clearly smack of racketeering and nobody even blinks?

I will tell you what it means. It means that free market capitalism is losing, and cronyism in the financial system is simply becoming more deeply embedded. Do you disagree?

I think most people would much prefer that regulators and justice officials forget the fines and simply collect and display the truth and all the truth. That is not likely to happen under our current construct of regulatory capture. How might it happen? Independent oversight provided by uncompromised individuals. Cronyism would not look kindly upon those developments, though.

For a whiff of how collusion works in our financial system, check out these e-mails highlighted by the WSJ: 

Best of RBS Libor Quotes
Senior Yen Trader: its just amazing how libor fixing can make you that much money

Senior Yen Trader: its a cartel now in london[.] they smack all the 1yr irs ..and fix it very high or low

Not a lot different than a practice commonly used in the carting business.

Yen Trader 1: can we lower our fixings today please [Primary Submitter]

Primary Submitter: make your mind up[,] haha , yes no probs

Yen Trader 1: im like a whores drawers

While that trader may compare himself to a ‘whores drawers,’ who is really getting screwed? Investors.

RBS Chairman Philip Hampton said Wednesday that the misconduct was limited to about 21 employees, all of whom have left the bank or been disciplined.

Wait a second. Did I somehow miss the memo when a bank was allowed to act as judge and jury in determining who gets what in terms of justice? Why do we have regulators and judicial officials then? What is their job? Think there might be other businesses that would like to inform the cops, “No, do not worry about it, we took care of the people involved in the massive scam . . . all good here now . . . but thanks for checking in.”

See, I do not buy for a second that a group of misguided traders and brokers colluded for who knows how many years to rip off who knows how much money from who knows how many investors. That line of bull$h!t does not come anywhere close to passing the smell test.

RBS can pay this $612 million fine and then every other firm on Wall Street will likely fall in line in similar fashion. Perhaps the domestic banks will look to craft a joint multi-billion dollar settlement so that their individual names might escape greater focus. What is so very wrong with this?

As a wise man once told me, “Companies do not commit frauds, people do.”

Real capitalism will remain on the ropes as long as real justice is neglected and hence denied.

Navigate accordingly.

Sense on Cents/Libor Scandal

Larry Doyle

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I have no 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.

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