U.S. DOJ is building criminal cases in LIBOR rate-fixing

July 16, 2012 by · Leave a Comment
Filed under: Legal News 

Bottom-line, this type of crime has to be prosecuted to the fullest extent of the law.  The Libor rate is used in many financial instruments that use that interest-rate as the baseline in all kinds of contracts.    If you bid the rate up, then you forcing trillions of dollars of borrowers to pay more interest.   If you under bid, then you putting an artificial signal to the market that there is less risk than is truly their.   With these scenarios, you can see how this can become political and it could be used as a tool to shape perception.

Markets need market forces so it can do the job it does so well, indicate conditions in the market to borrowers and savers can make the best choice available with the information and signals available.  We continually mess with this basic function.   One of the biggest problems is that people just lose confidence in these indicators.   I believe that has happened and it is getting worst.   That will increase volatility in the market and creates an environment that you will see major swings that will hurt many.

Lets see if the DOJ can step up to the plate and actually put people in jail.  The American people are sick of continually reading about out of court settlements with no admission of wrong-doing.  We have to have accountability of all parties and people who abuse this most crucial trust need to be run out of the industry and should face stiff penalties to discourage any future wrong doers that want to engage in this reckless behavior.

If we do not step up and hand down punishments, some day we will wake and lose faith in the system and at that point, an amount of lawlessness will continue to seep into our society.  If the standard of our society is the we will do anything that is legal even though it is morally objectionable, then we will be in a society that people will not want to live in.   Just cause something is legal, doesn’t mean you should do it.  At some point people need to realize we still live in a community and you actions have an effect on everyone.   We need a fair system where the rules are handed down equally no matter who you  are, what class your from and who you know.  That is having back-bone and principle to stand for something.   Countries around the world look to us and try and emulate our culture, that means we need to set the standard and stick to it.  The standard needs to be much higher than where we are.

DealBook (NY Times) – As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.

The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission. Collectively, the civil and criminal actions could cost the banking industry tens of billions of dollars.

Authorities around the globe are examining whether financial firms manipulated interest rates before and after the financial crisis to improve their profits and deflect scrutiny about their health. Investigators in Washington and London sent a warning shot to the industry last month, striking a $450 million settlement with Barclays in a rate-rigging case. The deal does not shield Barclays employees from criminal prosecution.

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