LIEBORGATE
This is the
biggest financial scandal that has ever existed and the implications for
politicians and bankers alike, in the US
and UK
Very
simplistically, banks finance themselves on a daily basis, by borrowing from
other banks. Some sixteen Global Too Big to Fail banks provide information
about their cost of borrowing from other banks daily, to the British Bank
Association,(“BBA”). The BBA then “fixes “ independently the rate, which is
known as LIBOR (London Interbank Offered Rate).
This rate is the foundation for virtually all international financial
transactions globally.
These interest
rates are used on USD 10 Trillions of LIBOR based bank loans, and on some USD
350 Trillions of derivatives contracts. Thus if the rate is suppressed by even
0.1% (10 Bips), this has an impact of transferring USD 350 Billion per annum
from the lender to the borrower.
The lenders
can be pension funds, insurance companies, private savers, and the borrowers
and beneficiaries frequently the banks, who use
these rates to calculate the cost
of financing their own high risk bets in the derivatives markets etc.
Thus by
fixing a much lower rate, the banks favor their own books to the detriment of
every saver on the planet. Think of the possible implications for J P Morgan
with a derivatives book exceeding USD 70 Trillion.
It is not
possible for a bank to fix anomalous rates in isolation, as they all are in constant
touch, and there is a clear paper trail of actual rates, and only the all too familiar wilful blindness
of the banks concerned, the BBA and the regulators can make this possible.
The smoking
gun in this matter has been in existence at least since 2008 and despite many
appeals from aggrieved parties no investigation has been made.
Now, with
the departure of Mr Diamond at Barclays, and his lamentably unconvincing performance on TV, we have the tip of a gigantic iceberg
appearing. It will very soon engulf the Global banks, The Bank of England
They are
all running for cover and trying to line up scapegoats. but it is hard to
imagine that they will escape the wrath of the general public. They may understand
little about financial matters, but can
all understand that the banks robbed their savings account by cheating on the
interest rate paid.
I attach a
link to a very powerful interview on the subject:
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