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The Biggest Financial Fraud of All Time

Soulskill posted about a year and a half ago | from the go-big-or-go-home dept.

The Almighty Buck 470

An anonymous reader sends this excerpt from an article at Bloomberg giving an inside look at how the Libor scandal happened: "Every morning, from his desk by the bathroom at the far end of Royal Bank of Scotland Group Plc’s trading floor overlooking London’s Liverpool Street station, Paul White punched a series of numbers into his computer. White, who had joined RBS in 1984, was one of the employees responsible for the firm’s submissions for the London interbank offered rate, or Libor, the global benchmark for more than $300 trillion of contracts from mortgages and student loans to interest-rate swaps. Behind him sat Neil Danziger, a derivatives trader who had worked at the bank since 2002. On the morning of March 27, 2008, Tan Chi Min, Danziger’s boss in Tokyo, told him to make sure the next day’s submission in yen would increase, Bloomberg Markets magazine will report in its March issue. 'We need to bump it way up high, highest among all if possible,' [Tan wrote]. ... Events like those that took place on RBS’s trading floor ... are at the heart of what is emerging as the biggest and longest-running scandal in banking history. ... For years, traders at Deutsche Bank AG, UBS AG, Barclays, RBS and other banks colluded with colleagues responsible for setting the benchmark and their counterparts at other firms to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. UBS traders went as far as offering bribes to brokers to persuade others to make favorable submissions on their behalf, regulatory filings show."

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470 comments

Fundamentally... (2, Interesting)

hawks5999 (588198) | about a year and a half ago | (#42733597)

... this is no different than what Central Banks like the Federal Reserve, do every day.

Re:Fundamentally... (5, Informative)

swampfriend (2629073) | about a year and a half ago | (#42733673)

Except even the Federal Reserve has a little bit of a mandate to do what's in the best interest of America and long-term financial stability, whereas these people have no guiding principle but profit. I'm not saying the Federal Reserve is doing a great job with that, but there's a real difference between state-aligned central banks protecting their currencies and this kind of collusion.

Be that as it may... (1)

Anonymous Coward | about a year and a half ago | (#42733767)

...people, it would seem, are quite happy to cheat when given direct incentives to do so.

Re:Fundamentally... (3, Informative)

khallow (566160) | about a year and a half ago | (#42733801)

So the "mandate" is a bit different? And what is the Federal Reserve doing that is actually in the best interest of "America" and long-term financial stability? Last I checked, their big thing was buying up trillions of dollars in bonds from banks that should be going through bankruptcy court. Deed doesn't seem to be matching mandate.

Re:Fundamentally... (4, Insightful)

hairyfish (1653411) | about a year and a half ago | (#42733889)

Whenever I see comments about "What is the govt doing?" my immediate response is, try living in a country with no govt and see how it compares (Somalia, Afghanistan etc). Sure the govt is far from perfect, but if you live in a western country then it is probably providing a net gain for you as a citizen. What is your bank providing you?

Re:Fundamentally... (-1, Flamebait)

khallow (566160) | about a year and a half ago | (#42733993)

How about you just stop being stupid? That's my response to reading your post. Sure, we need some degree of governance to prevent Somalia-like conditions. That doesn't excuse your "far from perfect" government.

What is your bank providing you?

A bank is a place to store wealth and ease my monetary transactions. It's made my life a lot simpler. But you surely have used banks at one time or another and should understand the point of the bank. Anyone living in a modern society who has handled any sort of money should be able to answer this question for themselves. This is just another reason I think your post is quite stupid.

Re:Fundamentally... (0)

Anonymous Coward | about a year and a half ago | (#42734149)

In answer to both your questions, not a damn thing, a military industrial complex, and a hassle with the IRS. Oh yeah and their own lovely fee every time I want to use their electronic forms of transaction. A means of assholes directly controlling markets (wall street) Big Oil... the devaluation of barter.

If I had my choice I would go back to burying my wealth in chests in the ground.

Re:Fundamentally... (0)

Anonymous Coward | about a year and a half ago | (#42734161)

At best, banks are prepaid credit cards for most citizens They might be useful if you go into the realm of a CD or other type of high end investment with them, but they don't help the common man. The interest rates on savings accounts are worse than inflation. I maybe able to make a million bucks off of $10 deposited now by the end of my life time, but that would only be worth a cup of coffee.

The purpose to choose inflation is to ease the debt of citizens, companies, or government. The system has been rigged to provide a constant incentive to go into debt so we do as a whole. If inflation was capped and they decided to grow the dollar's value again the cultural norm will have a huge initial backlash, but it would promote people to save money once more. I'm in favor of deflation.

Re:Fundamentally... (5, Insightful)

lgw (121541) | about a year and a half ago | (#42733913)

The Fed buying up US bonds (for the past couple of years) has nothing to do with bailing out banks, and everything to do with printing money. And about half the nation thinks that printing money is a great idea - I don't, but hey, democracy, not dictatorship of lgw. For a while they were buying up securities, mortgage-backed stuff that it would be a real stretch to call bonds, but again that was not bailing out individual banks (other parts of the government did that, but not the Fed - the Fed shuts down individual banks, and was shutting down many each week during the downturn), but rather keeping financial infrastructure intact. Again, I don't think that was the right plan, but most experts disagree with me.

It's amazing how fast geeks will go off on a rant about imaginary banking scandals - c'mon slashdotters, don't be that crank with a firm opinion about a deeply technical subject that's he can't be bothered to actually study.

This libor scandal is the real deal. It's as dirty as it gets. The more you know, the more pissed off you will be about it. Instead of saying "oh yeah, well, this other imaginary stuff is worse" try a little research. This is the kind of cheating that makes even a libertarian like me say "maybe we should have some more government oversight of these fundamentally dishonest weasels."

Re:Fundamentally... (1)

khallow (566160) | about a year and a half ago | (#42734111)

This libor scandal is the real deal. It's as dirty as it gets. The more you know, the more pissed off you will be about it. Instead of saying "oh yeah, well, this other imaginary stuff is worse" try a little research. This is the kind of cheating that makes even a libertarian like me say "maybe we should have some more government oversight of these fundamentally dishonest weasels."

I think the real question is who decided on using LIBOR in the first place? I'm sure there are other similar self-reported indices out there where the reporting entities can profit from tweaking their numbers (for example, governments' reporting of inflation, GDP, and employment). And I'm sure that the majority of such self-reported indices are indeed tweaked in a way that profits those reporting the numbers. It's just a pretty standard conflict of interest, resolved as these things usually are.

A true libertarian would understand those structural problems rather than attempt to slap the bandaid of "government oversight" on top. Reducing the conflicts of interest are a more effective solution than having corrupt government agencies watch harder.

Re:Fundamentally... (1)

alexander_686 (957440) | about a year and a half ago | (#42733945)

Yes it is.

The Fed has been given a tough job and they have been doing an honest job in an open fashion. We may debate their wisdom or their goals but I have not hear a case where they are trying to line their own pockets.

The Libor situation - that just greedy basters manipulating the market for their own pocket book. I am sadden so few people went to jail in the last crisis. I hope that is rectified here.

Re:Fundamentally... (1)

khallow (566160) | about a year and a half ago | (#42734033)

The Fed has been given a tough job and they have been doing an honest job in an open fashion.

"Open". Then who was on the other side of these Fed bond purchases? There's no report out there that describes what the Fed buys and who they bought it from.

The Libor situation - that just greedy basters manipulating the market for their own pocket book. I am sadden so few people went to jail in the last crisis. I hope that is rectified here.

Given how LIBOR is set up with banks self-reporting their activities, only a fool would be surprised at what happened. I think the real crime was to rely on these indices so much.

Re:Fundamentally... (1)

aliquis (678370) | about a year and a half ago | (#42733873)

mandate to do what's in the best interest of America and long-term financial stability

Got any source for such a claim? I don't say it's not true. But it would be interesting to read about it (preferably not too deep information), especially as an alternative to the bears of Marketwatch and Zerohedge.

Can we be sure they don't act to benefit themself, their buddies or get some return for doing what others want?

Re:Fundamentally... (1)

postbigbang (761081) | about a year and a half ago | (#42734087)

>Can we be sure..... ?

Of course they act to benefit themselves, but they have actual controls, although there are any number of citations to show that they have let a lot slide. Part of the reason for that: derivatives and other forms of obscured trades made a mess of things, and the entire US banking system was on the slide, not just one part of it-- the whole thing.

So they forced mergers, and they still do. Lots of banks were upside down in securities whose worth was unknown, not just questioned. It took a long time to unravel what derivates were asset-based, the worth of those assets, and the assets ratios and acid test-findings of various banks, big, small, and any sized.

Lots of people got off with no prosecution, especially compared to the S&L scandal of a couple of decades ago.

But the Fed can print money during deflationary cycles. So long as inflation is in complete check (and it was, as the derivatives and foreclosures and bad assets were discovered) to prop up the economy by offering low/no-interest loans, buying up bonds, and doing their job to keep it in balance.

Yeah, there's a lot amiss. But nothing compared to what RBS did. It wasn't just the US banks that were diddling with derivatives, Deutsche Bank, various Swiss banks, lots of them were caught in the cookie jar. A lot of the damage has been stanched. We still have a way to goes.

But the Fed members aren't lining their pockets in the way you're thinking. A lot of surviving banks have made staggering paper profits. They screwed a lot of people. But in the end, in 2013, we're still ticking and the bombshells haven't even dropped regarding what's going to happen to RBS, et al.

Re:Fundamentally... (0)

Anonymous Coward | about a year and a half ago | (#42734153)

(i'm not a murkin) isn't the Federal Reserve's first duty to the private banks that own it and generating profit for them?

Re:Fundamentally... (3, Interesting)

MatthiasF (1853064) | about a year and a half ago | (#42733675)

Central Banks make their targets public, are the sole source provider for their currency, sell the money at public auction and manage the currency for the public's interest.

The LIBOR scandal was a conspiracy among numerous banks to mitigate currency fluctuations and reduce loses (or produce profits) based off holdings in a variety of investments across several country's markets.

And you see a likeness, where?

Re:Fundamentally... (1)

abies (607076) | about a year and a half ago | (#42734103)

Poland had strange way of computing national debt expressed in foreign currencies - it was taking a snapshot of exchange rates from single day during a year. If debt breaches magic threshold, bad things happen (like having to make budget without deficit for next year, which would end up with civil war probably). So what government+central bank did? They have manipulated exchange rate on that particular date to make debt look smaller and avoid the problems. And while you can believe it was for 'people', I'm quite sure that people making the decisions were actually thinking about votes during next election.

So, drawing the parallels
Bank Government/CentralBank
traders politicians
personal monetary gains votes
shareholder gains citizens gains
manipulating LIBOR secretly manipulating FX secretly
trying to artificially reduce exposure trying to artificially reduce debt

Yes, private banks are more evil in most cases, but it is not that far fetched analogy.

Re:Fundamentally... (2)

mister2au (1707664) | about a year and a half ago | (#42733677)

How do you figure that?

In a practical sense, it results in the same outcome for sure ...

But fundamentally? Central banks move rates to drive national macro-economic outcomes whilst LIBOR contributors were contributing to a surveys for individual gain (either as a person or corporation) ... those fundamentals are quite different.

Re:Fundamentally... (0)

Anonymous Coward | about a year and a half ago | (#42733731)

... this is no different than what Central Banks like the Federal Reserve, do every day.

That is an exceptionally stupid comment.

Re:Fundamentally... (0)

Anonymous Coward | about a year and a half ago | (#42733745)

No. It's not. It's not even in the same ballpark.

Get off your hate-boner for the fed. You benefit every day from the flexibility it allows, despite your inability to tell economy wide financial mechanisms apart from your checking account. Now, it's not perfect. Pretty much everyone openly admits that it need some reform and that lots of big companies exploit their ablity to borrow from it.. But it's better than not having it.

Hating on the fed is like hating in libor, when it's not libor itself that's the issue. It's the banks manipulating the libor.

Anyhoo, you're probably one of those gold standard nutters anyway so I'm probably wasting my breath.. On the other hand, I can see where you're coming. People that distrust banks (and advocates of gold standards) fear that they're somehow stealing all of your money.

Well, the libor scandal is pretty much exactly that. The banks really did conspire to steal your money and throw you out of your house. By playing with numbers they indirectly made your loans more expensive by leeching money out of the system illegally. (It has to come from somewhere)

Re:Fundamentally... (1)

magarity (164372) | about a year and a half ago | (#42733897)

Umm, no, unless the person to whom you're responding has huge reserves of foreign currency "Quantitative easing" not not benefit him every day. It will eat away at any middle class sized savings with inflationary and exchange pressures over the rest of his lifetime.

Re:Fundamentally... (1)

ahabswhale (1189519) | about a year and a half ago | (#42734041)

Really, where's all this inflation you speak of? This quantitative easing has been going on for years now and I'm not seeing the inflation. The inflation rate is actually quite low: http://www.tradingeconomics.com/united-states/inflation-cpi [tradingeconomics.com] . And here's a link for how all that "high inflation" is helping the economy: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CD0QFjAB&url=http%3A%2F%2Fwww.hlntv.com%2Farticle%2F2012%2F08%2F09%2Flow-inflation-pushing-us-toward-recovery&ei=EIQIUeKTD4ePrgH23IGQDQ&usg=AFQjCNGRXXnPWulOGPkxyd_0yEvcOCrWPg&sig2=hM2C_h2ubx3eXdzoqXAPzQ&bvm=bv.41642243,d.aWM [google.com]

And seriously, what fucking exchange pressures? You mean like the dow and s&p being at near record highs?

http://www.wgal.com/news/money/Dow-S-P-500-nearing-all-time-highs/-/9360224/18318560/-/115r051/-/index.html [wgal.com]

Re:Fundamentally... (0)

Anonymous Coward | about a year and a half ago | (#42733751)

This is completely different, and only the most retarded of Randroids would think otherwise.

Re:Fundamentally... (1)

jhol13 (1087781) | about a year and a half ago | (#42734049)

Take bribes? Collude with others for personal gain?
Yea, sure.

Re:Fundamentally... (1)

phantomfive (622387) | about a year and a half ago | (#42734121)

And furthermore, the regulators knew about it at the time. It's not like they were being secret about this.

Sheila Bair's quote says it all (5, Informative)

JoeyRox (2711699) | about a year and a half ago | (#42733603)

From the article: âoeWhen a bank can benefit financially from doing the wrong thing, it generally will,â

Re:Sheila Bair's quote says it all (1)

LordLucless (582312) | about a year and a half ago | (#42733949)

From the article: "When a company can benefit financially from doing the wrong thing, it generally will,"

FTFY. Hell, I'd even go as far to say, when a person can benefit financially from doing the wrong thing, they generally will. Especially when it comes to legislation and regulation - you need to take a worst-case perspective, same as security for a computer system. A legislative approach that relies on the entities it regulates "doing the right thing" is useless - it regulates the honest, who don't need it, and ignores the dishonest, who do.

Re:Sheila Bair's quote says it all (1)

TheRealMindChild (743925) | about a year and a half ago | (#42734047)

So blowing a random man on the corner for $10 (benefiting financially from doing the wrong thing) is a thing people will generally do?

Re:Sheila Bair's quote says it all (2)

LordLucless (582312) | about a year and a half ago | (#42734127)

You're not properly accounting for all externalities there - chance of disease, loss of reputation, actual distaste for the act itself, etc. Besides, it's not like banks would expose themselves to million-dollar potential fines for $10 either.

The quote, like most quotes, is an over-simplification. Banks, like companies, like people, make decisions based on the potential payout versus the potential risk by the chance of the risk being actualized, whether those risk/rewards are monetary, reputational, emotional, whatever. So while someone might not blow a guy for $10, raise that to $10 million and see how many would say no. It's just a case of thresholds.

Re:Sheila Bair's quote says it all (5, Insightful)

jhol13 (1087781) | about a year and a half ago | (#42734097)

The most worrying thing is that now the banks make deals and pay fines so that the executives can walk away with their bonuses. Instead of going into jail as they should. This means this will happen again.

Re:Sheila Bair's quote says it all (1)

pitchpipe (708843) | about a year and a half ago | (#42734193)

The most worrying thing is that now the banks make deals and pay fines so that the executives can walk away with their bonuses. Instead of going into jail as they should. This means this will happen again.

They view it as the cost of doing business. If this shit doesn't change I really fear that we are headed toward a revolution. Not the 'interesting times' that I would prefer to live in.

Money by fiat.... (-1)

Anonymous Coward | about a year and a half ago | (#42733643)

This is what it does. What do you expect? Money no longer represents actual human labor, we;ve automated all that jazz... What's left? If we cling desperately to the 40 hour "work" week for all, what can all these people do all day long?

TL;DR (0)

girlintraining (1395911) | about a year and a half ago | (#42733661)

I can summarize in two words: Management cock-up.

Want a few more? Irresponsible. Reckless. Stupid. This was institutional idiocy and ego, and that's it. No software glitch. No big conspiracy. No market "eating" the profits. Nope. Plain, simple, human stupidity.

Re:TL;DR (1)

Art Challenor (2621733) | about a year and a half ago | (#42733793)

I can summarize in two words: Management cock-up.

How do you figure that? The profit that was made(stolen), by individuals and institutions will never be repaid. There will be a trial and a few players, probably one big one - someone who made hundreds of millions - and a few bit-players will go to jail for a few year. Most will get off free. There'll be talk of major regulation but what will happen is this particular loophole will be closed - nothing fundamental.

A brilliant business plan, ready to be dusted off, slightly revised and reused in about 10 years or so (that's about the cycle). The profits massively cover the expenditure, no one (of consequence) gets hurt.

Re:TL;DR (0)

Anonymous Coward | about a year and a half ago | (#42733833)

Management cock-up? Irresponsible? Human stupidity? Isn't it really anything but these things? Both the banks as institutions themselves and the real human beings working for these banking institutions had financial incentive and motivation to commit this fraud. Restitution, if it ever happens, will never even begin to approach the true extent of the swindle, and in all probability the perpetrators will never be brought to any sort of justice (aren't banks above the law, anyway? [rollingstone.com] ). And -- of course -- even if the banks themselves are subjected to even meager penalty, the actual humans responsible will be insulted from any culpability.

The financial systems that run throughout so much of our world are rigged at every level to favour those who control them and the ongoing societal trend lines do not point to either reform or justice.

And the Goverment too (1)

alexander_686 (957440) | about a year and a half ago | (#42733991)

The British regulators encouraged the Bank of Scotland to lowball it's LIBOR figures. That made the bank look stronger then it was, preventing a run. That was a sad, sad day.

I don't understand... (0)

Anonymous Coward | about a year and a half ago | (#42733663)

What exactly were they doing,what it affected and how?

Re:I don't understand... (2)

NemosomeN (670035) | about a year and a half ago | (#42733915)

A lot of loans are indexed to LIBOR or the Fed Funds rate. Fed Funds rate is what interest the Fed demands be paid to lend money to banks. LIBOR is what interest rates banks in London say they will charge other banks to borrow money. It's a system that shouldn't even exist, since it is literally a daily survey. Each bank gives their answer, none are discarded as outliers, and the figures are averaged. I'm surprised it took so long to manipulate LIBOR to be honest.

Re:I don't understand... (0)

aliquis (678370) | about a year and a half ago | (#42734037)

LIBOR is a reference rate and then you can offer loans for say LIBOR + 1% or whatever and the rate will change with LIBOR.

I don't know what this was all about and haven't read the article but since yen is mentioned and I know the rate was manipulated I suppose they manipulated the reference rate which then changed all the other rates and as such the price of money so to speak. By regulating the price of money you can increase or decrease the value of the currency against another currency (for instance now I assume many has taken cheap lones in dollars and bought (stored into interest rate products (savings accounts, bonds)) things like earlier the yen, the sek, nok, aud, chf before they effectively locked it to the euro and so on, that will increase demand for those currencies and strengthen them + many of them have higher interest rates) so move own some currency, move the interest rate in whatever way, affect the valuation of the currency pair, buy or sell, move it again if you want to, .. Whatever :)

Re:I don't understand... (5, Informative)

alexander_686 (957440) | about a year and a half ago | (#42734063)

LIBOR is the rate that banks are supposed lend to each other, As a bond market index it is one of the biggest. This has replaced the old “prime rate” index that was published in the Wall Street Journal. Most floating interest rates are tied to this index.

The index is calculated by a person calling up the banks and asking them what rate they could borrow money.

On the plus side, because it is an opinion poll, it is not distorted by temporary technical issues that can affect the price of U.S. Treasuries.

On the down side, it is an opinion poll and people can lie though their teeth, which is what was done here.

Some of the lying was reporting a lower rate, making the bank look stronger then it was. Some of the lying was to nudge the rate slightly up/down so option contracts would end up in/out of the money. A small difference (less then .1%) could cause an option contract to be worth millions or nothing.

What the bankers said (0)

Anonymous Coward | about a year and a half ago | (#42733695)

I heard something about this on NPR a few months back, and one of the bankers explained why this scandal was so bad. It boiled down to "waah, we didn't make as much money as we thought we would!" Cry me a river!

While this is important news... (2)

Nutria (679911) | about a year and a half ago | (#42733697)

how is it nerdy in the /. realm?

Re:While this is important news... (1)

I Mean, What (2778851) | about a year and a half ago | (#42733817)

Economics is nerd territory.

Re:While this is important news... (2)

ColdWetDog (752185) | about a year and a half ago | (#42733965)

Economics is nerd territory.

OK, then we should be running threads on Astrology [slashdot.org] , Dowsing [slashdot.org] and Scientology [slashdot.org] .

Oh, Wait.

Re:While this is important news... (3, Informative)

anagama (611277) | about a year and a half ago | (#42733901)

Put it in the category of stuff that matters, even to Americans --- we just don't know it:

A sizable chunk of the world's adjustable-rate investment vehicles are pegged to Libor, and here we have evidence that banks were tweaking the rate downward to massage their own derivatives positions. The consequences for this boggle the mind. For instance, almost every city and town in America has investment holdings tied to Libor. If banks were artificially lowering the rates to beef up their trading profiles, that means communities all over the world were cheated out of ungodly amounts of money.

http://www.rollingstone.com/politics/blogs/taibblog/a-huge-break-in-the-libor-banking-investigation-20120628#ixzz2JQ77kD9d [rollingstone.com]

Matt Taibbi is doing some of the most in depth reporting on the recent financial crimes of any reporter anywhere. Don't be put off by the Rolling Stone source. Plus he's funny.

Re:While this is important news... (1)

anagama (611277) | about a year and a half ago | (#42733999)

Here's another Taibbi explanation of why you should care:

Taibbi said in the "Democracy Now!" interview that ordinary Americans are victims of the Libor scandal because lower interest rates probably contributed to forcing state and local governments to slash spending.

"If you live in a town that had a budget crisis, that had to lay off firemen or teachers or policemen, or couldn't provide services or textbooks in their schools, you know, that might be due to this," Taibbi said. "Basically, every city and town in America, to say nothing of the rest of the world, has investments that are pegged to Libor."

http://www.huffingtonpost.com/2012/07/20/matt-taibbi-libor-cnbc-larry-kudlow_n_1688797.html [huffingtonpost.com]

Biggest financial fraud? (0)

clarkkent09 (1104833) | about a year and a half ago | (#42733703)

Bigger than the Federal Reserve unconstitutionally counterfeiting money for the last 100 years?

Re:Biggest financial fraud? (1)

MatthiasF (1853064) | about a year and a half ago | (#42733733)

Unconstitutional you say, so why then did the Founding Fathers and the First Congress of the United States create a central bank?

http://en.wikipedia.org/wiki/First_Bank_of_the_United_States [wikipedia.org]

You'd think they would know what's constitutional, since they wrote it.

Re:Biggest financial fraud? (1)

the eric conspiracy (20178) | about a year and a half ago | (#42733847)

Lots of people were opposed to it including Jefferson and Madison. Both claimed it was unconstitutional.

Re:Biggest financial fraud? (0)

Anonymous Coward | about a year and a half ago | (#42734059)

Jefferson and Madison, the original "strict constructionists", thought the Louisiana Purchase was probably unconstitutional too, since the federal government has no specifically enumerated power to make such a purchase. As you may have heard, President Jefferson and Secretary of State Madison made the purchase anyway. So since 1803 the whole "strict constructionist" view of the Constitution has been hypocritical nonsense.

Re:Biggest financial fraud? (0)

Anonymous Coward | about a year and a half ago | (#42734107)

So since 1803 the whole "strict constructionist" view of the Constitution has been hypocritical nonsense.

Rather earlier than that.

Regardless, the fact that we haven't always lived up to the brilliant government our Founding Fathers planned doesn't mean we should give up striving toward it.

Re:Biggest financial fraud? (0)

Anonymous Coward | about a year and a half ago | (#42734155)

the fact that we haven't always lived up to the brilliant government our Founding Fathers planned doesn't mean we should give up striving toward it.

So we should return the Louisiana Purchase?

Re:Biggest financial fraud? (1)

clarkkent09 (1104833) | about a year and a half ago | (#42733907)

They would include it in the constitution if they wanted it. It's kind of a big thing to forget to mention, don't you think?

Re:Biggest financial fraud? (4, Funny)

MightyMartian (840721) | about a year and a half ago | (#42734027)

He's a libertarian. You don't think he's actually read the Constitution do you?

Re:Biggest financial fraud? (1)

the eric conspiracy (20178) | about a year and a half ago | (#42733923)

Congress has the power to create money. No question about it. Article 1 Section 8. There is no particular reason they can't delegate that power to whoever they want.

Re:Biggest financial fraud? (1)

clarkkent09 (1104833) | about a year and a half ago | (#42734099)

In which article and section exactly does it say that the Congress has the power to create a central bank? Back then "creating money" meant real money, backed by gold or silver. It is irrational to believe that founders would have wanted to see a private unsupervised agency printing arbitrary quantities of paper and calling it money.

Limited Government and Unlimited Companies. (2)

140Mandak262Jamuna (970587) | about a year and a half ago | (#42733713)

For years we have been fed the myth of limited government, a notion that the Government is the biggest threat to our liberty. The shills were blatant, they openly longed for the government small enough to be drowned in a bathtub. But the moment the government becomes weaker than a strong person, he will promptly drown the government. Don't forget, companies are people my friend. At that point the greatest threat to our liberty would be those ungovernable companies. They are too big to jail. They can do anything they want and you can't do anything about it.

Free markets moderated by Democracy. B 4th July 1776. D Oct 2008. RIP.

Re:Limited Government and Unlimited Companies. (1)

khallow (566160) | about a year and a half ago | (#42733943)

The advocates of limited government can point out many historical examples of governments that went out of control (classic examples such as the Wiemar Republic under the Nazis). You on the other hand haven't pointed to one case of corporate overstep due to limited government, though I guess you do imply that somehow the LIBOR scandal is supposed to be such a case.

My view is that I'd love to live in a world where the greatest threat comes from business rather than government.

Don't forget, companies are people my friend.

They aren't. Not even in the US. Amazing how so many people fly off the deep end due to a single US Supreme Court decision.

At that point the greatest threat to our liberty would be those ungovernable companies. They are too big to jail. They can do anything they want and you can't do anything about it./quote? You can't do anything about it other than the obvious solutions from the legal ones such as lawsuits and boycotts to the illegal, such as sabotage and targeted assassination of business leaders.

Re:Limited Government and Unlimited Companies. (0)

Anonymous Coward | about a year and a half ago | (#42734067)

>> Don't forget, companies are people my friend.

> They aren't.

They are treated as such. Splitting semantic hairs over a set legal precept, isn't convincing.

> My view is that I'd love to live in a world where the greatest threat comes from business rather than government.

You do. The fact the government directors are a proxy for seasonal corporate interests, doesn't change the nature of the mandates.

Re:Limited Government and Unlimited Companies. (1)

khallow (566160) | about a year and a half ago | (#42734171)

They are treated as such. Splitting semantic hairs over a set legal precept, isn't convincing.

It doesn't have to be convincing, just merely correct. The idea of corporate personhood is widely acknowledged by the courts to be a legal fiction, a mechanism when dealing with corporations for resolving issues (such as who to sue in a breach of contract or whether certain speech is constitutionally protected) that would otherwise be unresolved.

You do. The fact the government directors are a proxy for seasonal corporate interests, doesn't change the nature of the mandates.

In a world with weaker government, there would be no such, so-called "proxies".

Re:Limited Government and Unlimited Companies. (1)

clarkkent09 (1104833) | about a year and a half ago | (#42734173)

Private company's power rests on pleasing their customers by providing real products that the customers voluntarily choose to buy.. If Starbucks makes a loss this quarter because not enough people want to buy their coffee it doesn't have the power to send armed people to my house and demand that I pay them more money. The government does. I can't believe you don't see the difference.

NB4 too much regulation (5, Insightful)

TubeSteak (669689) | about a year and a half ago | (#42733715)

I just want to post in this thread before all the free marketeers try to talk up the joys of unregulated capitalism.

The USA has a 140 year history of regular banking panics and collapses, inspite of the institution of regulations.
And there are those who would still insist that the industry is over regulated, in the face of flagrant and widespread fraud during the last 6 years.

"Free" markets do not lead to competition.
They consistently and repeatedly lead to fraud and monopolies.

Re:NB4 too much regulation (1)

MatthiasF (1853064) | about a year and a half ago | (#42733809)

I'm not against regulation, since it is the swiftest method to correct problems, but there are ways that the markets could be fixing these problems themselves but many financial products used today have not matured enough to be "market monitored".

For instance, most publicly traded stocks and commodities require certain amounts of public information sharing in standard formats and regular intervals, but newer instruments like mortgage backed securities and credit default swaps do not have such standards or openness to allow the broader market (through research or statistical/heuristic analysis) to judge the products.

Most of the people buying them are putting a lot of ignorant faith into their purchase that as everyone has noticed was very misplaced.

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42734011)

... there are ways that the markets could be fixing these problems themselves but many financial products used today have not matured enough to be "market monitored". ... newer instruments like mortgage backed securities and credit default swaps do not have such standards or openness to allow the broader market (through research or statistical/heuristic analysis) to judge the products.

Which is exactly why Wall St. is so fond of inventing new, absurdly complex and opaque instruments. The appropriate acronym to describe this is "SCAM", and it's much easier to implement if your customers can't figure out the products. Yes, in an ideal world the customers would refuse to buy them if they didn't understand them and/or they weren't transparent, but that ideal world has nothing to do with reality. When everybody else is seemingly making good coin by buying CDO's, etc. there is enormous pressure on even the most prudent (retirement fund or whatever) manager to do likewise. Sure he could refuse to do so, and if he held his position long enough, would be proven right. But he would be pushed out long before he could be proven right.

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42733855)

Actually its the limited liability protection governments provide to those investing in companies that causes this. Limited liability is anti-free market since it artificially limits the downside of investing in a business. If investors were directly liable for a companies actions they would either do a better job of ensuring their agents didn't commit torts (or get wiped out by lawsuits if they didn't).

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42733909)

dude, limited liability was one of the things that caused the capitalist explosion in Western Europe. Every other place if you invested in some bogus shit you could get wiped out so anyone with money is just going to buy a bunch of farmland and charge peasants rent to use it....getting rid of limited liability would end capitalism as we know it. Capitalism is not a "natural" system any more than feudalism, communism or Islamism is. It requires a lot of government intervention, which is not bad thing. These knee-jerk anti-government people are ridiculous.

Re:NB4 too much regulation (1)

metlin (258108) | about a year and a half ago | (#42733877)

"Free" markets do not lead to competition.
They consistently and repeatedly lead to fraud and monopolies.

I'm at best Keynsian, but the result that you speak of is often the result of collusion with politicians and a consequence of political influence, and not an economic one. It is important to distinguish between the two.

There have been several case studies conduct on both corrupt corporations and monopolies -- corrupt corporations almost always fail in the long run, either due to mismanagement or because the market realizes that the management is not trustworthy, and everyone shorts the hell out of them. And monopolies only stay in power for so long, but a good many of them continue to stay in power because they buy legislation.

Remember, civic freedom (e.g. right to own and protect property) is necessary for economic freedom but economic freedom is not necessary for civic freedom. That's a very, very fundamental difference. So, economic systems are always at the mercy of political systems, and will therefore try and control the political systems that "own" them.

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42733969)

So how come no one figured out Goldman Sachs wasn't trustworthy and short the hell out of them? Oh, right, because without regulation only an insider would know this...great plan dude.

Re:NB4 too much regulation (2)

metlin (258108) | about a year and a half ago | (#42734079)

Your argument is fallacious.

Who said Goldman Sachs isn't trustworthy? GS is an audited and publicly traded company with pretty clean books -- at least compared to some of their competitors.

Being unethical is not the same as being corrupt -- there's a difference.

Even so, remember what happened during the credit crunch? The banks lost access to capital markets because the markets did not believe in them. Remember when even GS was trading at 46 or even lower? What do you think people were doing then?

The only reason they survived was because the *government* propped up GS and pretty much most other banks (remember when Lehman crashed?). In a real free market, that would not have happened. If investors had lost confidence in a given bank (either because of bad debt or because of unavailable credit), then that bank would have fallen. However, the state stepped in and lent them all money, as a stopgap (remember TARP?).

Ditto for the insurance companies (who, btw, are some of the biggest asset managers in the world). Had we let the market take its toll, these banks and insurance companies (e.g. AIG) would have crashed and burned.

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42734205)

Who says Goldman Sachs isn't trustworthy? Why don't you ask anyone who bought bogus securities from them? Ever heard about what they did to the developers of Dragon Naturally Speaking? They'll tell you how trustworthy Goldman Sachs is...

But the point is having catastrophic collapses of the banking system every couple years for the sake of shaking out the corrupt banks is not the most efficient way to run a capitalist economy...

Re:NB4 too much regulation (1)

hairyfish (1653411) | about a year and a half ago | (#42733919)

Closed markets don't work very well either. The trick is finding that happy middle ground of just enough 'free' to thrive, but not too much to be corrupt.

Re:NB4 too much regulation (1)

abies (607076) | about a year and a half ago | (#42733967)

Centralized, controlled market (think eastern block before 1989) leads to even worse fraud and monopolies. And somewhere in the middle you have European Union, which tries to do both at same time and has biggest bureaucracy machine ever. And there are as many frauds as in any other system (way the EU funds for development of regions are being manipulated is just mind boggling), maybe just bit less monopolies. And carrots are now fruits, instead of vegetables, due to a lobbing from one carrot-jam producing country.

It is not a fault of free market, communism or bureaucracy that bad things are happening. It is just a nature of people. We like to take advantage of each other. Empathy generally works only on local scale - people who will not cheat a cashier at local shop for 10 cents he has forgotten to take, often won't have issue with screwing half of foreign country by manipulating exchange rates at proper moment.

I don't think there is a solution, unless you want to get back to living in small disconnected communities (300 people) where everybody can be held accountable for his actions by local chieftain with a big club.

Re:NB4 too much regulation (1)

ahabswhale (1189519) | about a year and a half ago | (#42734143)

Actually, the economic state of the US has been very stable since the regulations that were passed as a result of the "Great Depression" (like Glass-Steagall). Yes, we had some recessions but they were very minor by comparison to what came before it. The US used to be a hot-bed of panics, depressions, and recessions prior to these new regulations. We were all doing quite well until the late 90's when a lot of deregulation took place like the introduction of CDSs and passing the GLBA (which basically killed Glass-Steagall). After deregulation, everything went to shit pretty fast. Since this latest recession (which could have very easily turned into a depression), none of the regulations that gave us so much stability have been returned. In ten years (maybe less), we'll be right back where we were in '09 (if not worse because banks are even bigger now).

It's the nature of wealth to concentrate and you have to be very vigilant to prevent it or you will most definitely get fucked. I simply don't accept your cavalier attitude about there being no solution when we had EXACTLY that for many decades.

For reference: http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States [wikipedia.org]

Re:NB4 too much regulation (1)

mister2au (1707664) | about a year and a half ago | (#42734009)

But in this case it was not the US markets at play ... but I do tend to agree with the general point

However, I think the bigger problem is asymmetric risk/reward these markets provide to the individuals vs the corporations. For the most part, these guys are playing with other people's money and a win results in big bonuses, while a loss really has limited consequences to the individual - it really is set up to encourage individuals to push the boundaries.

It's really the same lesson as Lance Armstrong ... don't break the rules and you'll be a nobody - do break the rules and there is untold riches, as well as a pretty good chance you'll never be caught ... even if you do get caught, you are still better off than if you hadn't broken the rules to start with ...

Only two solutions really - reduce the rewards or increase the cost of getting caught ... either requires regulation.

Re:NB4 too much regulation (1)

EmagGeek (574360) | about a year and a half ago | (#42734039)

The USA has a 140 year history of regular banking panics and collapses, BECAUSE of the institution of regulations.

There, fixed it for you.

Re:NB4 too much regulation (2)

phantomfive (622387) | about a year and a half ago | (#42734117)

How about we stop talking about 'too much' or 'too little' regulation, and start saying, 'X regulation is good' and 'Y regulation is bad'.

It's entirely possible for an industry to be both over-regulated and under-regulated at the same time.

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42734135)

The collapse was COMPLETELY due to Fannie Mae/Freddie Mac buying ANY mortgage a bank would write up. It became a joke and the banks knew they could write any mortgage and it would be bought by the govt backed Fannie Mae. It appears in this case it was the regulation of Fannie Mae that cause the collapse. The government forced them to buy anything that way the poor, who shouldn't be buying a house, would be able to get a loan. We regulated ourselves into a bubble that instead of letting it pop we propped it up even more. Had we just let it collapse, we would have fully recovered by now (The average bear market lasting 16 months, the last one lasted 4.5 years)

Talk about regulation all you want, it just causes problems. My investment strategy now is find out how they corrupted the system and take the money from there. Currently it is the Fed printing $80 Billion a month, half going into the stock market. You'll notice it is currently near record highs yet every other indicator shows a weak economy.

Regulation = fail

s/6 years/40 years/ (1)

SpaceLifeForm (228190) | about a year and a half ago | (#42734137)

Go back to JFK.

The fascists have been attacking for longer than that.

Money is just a tool for the fascists.

It is *ALL* about control of society.

There be cylons there. They don't care about *you*.

Re:NB4 too much regulation (0)

Anonymous Coward | about a year and a half ago | (#42734141)

> "Free" markets do not lead to competition.
And you'll notice no economist ever claimed they did. Quite contrary, Adam Smith has shown that you need to start with perfect competition first (among other conditions) and only then Invisible Hand can be shown to exist.

But people mix it up....

Money is the best measure of virtual dick length (0)

Baldrson (78598) | about a year and a half ago | (#42733741)

You've just got penis envy because you got screwed.

When even money itself has a price (0)

Anonymous Coward | about a year and a half ago | (#42733755)

and that price can be manipulated, you know, there's something fundamentally wrong with the world we live in.

Re:When even money itself has a price (0)

Anonymous Coward | about a year and a half ago | (#42733765)

Hmmm, the captcha for the above submission was "extort". How fitting...

Danziger persuaded White? (0)

Anonymous Coward | about a year and a half ago | (#42733775)

Paul White's job at Royal Bank was to submit the lending/interest rate for libor . Neil Danziger was a derivatives trader who worked in the same room as Mr White. Mr Danziger's boss, Tan Chi Min, wanted his employee to raise the rate the Royal Bank submitted for libor

What does this all mean? Is this saying that Danziger persuaded White to submit a higher rate? (using beer and hookers?)

Also, it states that Mr White "was one of the employees responsible for the firm's submissions for the London interbank offered rate". In a normal situation at the bank, Who usually gave Mr White the rate for submission to libor... the ghost of Christmas past?

Re:Danziger persuaded White? (2)

alexander_686 (957440) | about a year and a half ago | (#42734113)

Paul White was supposed to give an unbiased opinion – LIBOR only works if it is an unbiased opinion. There should have been a thick china wall between him and Neil Danziger.

In short, White provided the market with false data (i.e. knowingly lied) to manipulate the market for Danziger gain. That's fraud, insider trading, etc.

Why this pisses me off... (5, Interesting)

Grumpinuts (1272216) | about a year and a half ago | (#42733797)

I'm Scottish, and while I was growing up RBOS had a branch in every Main Street in Scotland. They had a history hundreds of years old of being a solid reputable institution with a high degree of social responsibility and integrity that ensured that in the global finance world, my small country of 5 million people could punch above its weight. The word Scotland was synonymous with prudence and fiscal excellence and businesses such as RBOS were large profitable concerns employing many thousands of my fellow countrymen. The actions of individuals such as these have dragged the good name of my country into the dirt. Part of the collateral damage is that many blameless employees of the bank have lost their livelihoods, and the damage done to reputations will take generations to expunge. But what really pisses me off is that RBOS have the gall to hijack Flower of Scotland, the semi official Scottish National Anthem on one of their radio adverts. After all the damage that's been done they try to appeal to our patriotism (apparently they sponsor the 6 nations rugby competition ). Sorry but in RBOS' s case I feel anything but proud and patriotic.

Re:Why this pisses me off... (1)

ColdWetDog (752185) | about a year and a half ago | (#42733981)

Oh stop. The only reason Scotland was able to punch above it's weight was Whiskey.

Re:Why this pisses me off... (1)

jmd (14060) | about a year and a half ago | (#42734179)

are sure you aren't thinking of the irish?

*disclaimer* I am 1/2 scottish

Scrooge McDuck (0)

Anonymous Coward | about a year and a half ago | (#42734197)

Thanks for your comment, now I understand why Scrooge is Scottish.
He was my favorite character growing up. :)

35 years in jail? (5, Interesting)

khchung (462899) | about a year and a half ago | (#42733835)

So, which one of them is going to be threatened with charges up to 35 years in jail in order to squeeze out a plea bargain?

Re:35 years in jail? (1)

Anonymous Coward | about a year and a half ago | (#42733961)

None of them. They're magical "job creators" so the rest of us need to kiss their asses.

The price of money is rigged? (1)

OhANameWhatName (2688401) | about a year and a half ago | (#42733917)

and their counterparts at other firms to rig the price of money

OMG! Who would have imagined that the global banking system is anything but a collection of honest people working hard for the betterment of society??

Re:The price of money is rigged? (1)

berashith (222128) | about a year and a half ago | (#42734071)

give a man a pistol and he can rob a bank, give a man a bank and he can rob the world

Why... (1)

Jetra (2622687) | about a year and a half ago | (#42733921)

does this make me think of The Girl with the Dragon Tattoo

Many would argue... (1)

jmd (14060) | about a year and a half ago | (#42733935)

Capitalism has got to go.

BTW... stories like this hitting the mainstream media is in part why there is such a push to limit the flow of information. Those who have become corrupted seek to silence the flow of information. While now we are slaves to debt, soon we'll be slaves because we are just plain ignorant of the world around us.

Don't forget to hug a "hacktivist" today. :)

Why should we believe in long-term growth? (1)

dorpus (636554) | about a year and a half ago | (#42733977)

There's no reason to suppose the economy will somehow keep growing, if the current trend continues of automation throwing everyone out of work. The whole scam of "investing in your future" only works if other people keep buying into it.

Tie these swine to a tree, and gut them (0)

Anonymous Coward | about a year and a half ago | (#42734035)

And then walk away while they die slowly, in great pain.

It's the least we can do for those who would suck the blood of
hard-working people who trusted them.

Missing Information (2)

the eric conspiracy (20178) | about a year and a half ago | (#42734061)

This article is missing a very important point. A lot of the LIBOR manipulation was done to artificially LOWER the rate for trading purposes or to make a bank look stronger than it actually was.

This lower rate benefited borrowers, just as much as the higher rate hurt them. It depends in detail what kind of loan was involved.

Some municipalities are actually suing based on the idea that they received artificially low interest rates on their bonds because of LIBOR manipulation.

Dont worry! (1)

ahabswhale (1189519) | about a year and a half ago | (#42734159)

No one in the financial sector will get any jail time. We can't have any of that. Sure, if you steal a car you can get 10 years but if you rip of billions, it's no big whup.

Not even close. (2, Interesting)

jcr (53032) | about a year and a half ago | (#42734163)

When it comes to fraud on a massive scale, this doesn't even come close to the theft of the people's gold by the government and the banks when FDR decided to renege on the promise to redeem US dollars for specie.

-jcr

Huh... (1)

Just Brew It! (636086) | about a year and a half ago | (#42734201)

People with money, power, and lax oversight behaving badly. Who could've seen that coming?
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